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The failure of the GM bailout.
Posted By Paul Gleiser On December 20, 2012 @ 5:32 pm In Featured Articles,Fox 51 Primetime | 2 Comments
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One of the things that Democrats do to great effect is to say something over and over until it becomes accepted truth irrespective of its actual real world speciousness. One example that was on display throughout the Democratic National Convention in Charlotte was the line, “Osama bin Laden is dead and General Motors is alive.”
Mitt Romney was caricatured as a soulless Gordon Gekko-type that would have shut down General Motors and put thousands of workers on the unemployment line. Democrats capitalized on widespread ignorance concerning bankruptcy law, taking shots at Romney saying, “Romney would have let General Motors go bankrupt.”
News flash: Barack Obama let General Motors go bankrupt. The only difference between Romney and Obama is that Romney would have let GM go into Chapter 11 bankruptcy without infusing taxpayer money into the effort and without dictating the preferences given to specific stakeholders (read: the unions).
But because the Obama administration used TARP funds to buy the government a seat at the table in GM’s bankruptcy case, Obama takes credit for “saving” General Motors.
Fast forward to this week. The Treasury Department announced to little fanfare that it will begin selling off the 26.5 percent stake in GM that was purchased with your money (assuming that you are one of the bare majority that still pays taxes).
Maybe I’m just an irredeemable cynic, but I find the timing interesting. The announcement was made in the week before Christmas when people are naturally distracted and it was made in the immediate wake of the Newtown, Connecticut school massacre when that story is still occupying a disproportionate percentage of the daily news hole. With respect to GM, is it possible that the administration is wanting to attract as little attention as possible? If that is the case, a look at the numbers helps one understand why.
In a word, the government is going to take a bath on its “investment” in GM. Treasury currently puts the figure at $25 billion. That number is certain to be revised upward. The Treasury plans to immediately sell 200 million shares of GM back to the company at $27.50 a share. To get all of our money back, the Treasury will have to sell its remaining 300 million shares at $70, nearly triple what the company is worth on the open market today.
President Obama cited the GM bailout as a triumph of his first term and went on to say, “…what we did with the auto industry, we can do in manufacturing across America.”
God help us if that ever happens. GM still has the highest wage and cost structure in the auto industry, something that bankruptcy is supposed to fix. But because of the government’s use of your money to elbow its way into GM’s bankruptcy, and because the government always has the strongest negotiating position, the Obama administration was able to rig GM’s Chapter 11 for the benefit of the unions at the expense of bondholders. other senior creditors and, worst of all, future stakeholders in the company. The Obama-supporting United Auto Workers union came out smelling like a rose. Everyone else came out smelling like… well, let’s just say it didn’t work out so well for everyone else.
Those of us who opposed the GM bailout, such as Mitt Romney, did not wish to see GM consigned to oblivion. We did not wish to see a million plus workers put on the street.
Opposition sprang from the real world experience of a government that has waged a war on poverty and failed, waged a war on drugs and failed and cannot make even one decision toward mitigating the cash hemorrhages currently underway at Amtrak and at the postal service.
We who opposed the GM bailout did so because we reject the premise that it is the government’s place to bailout any business – to prop up any company that can’t stand on its own.
GM will no doubt be glad to get rid of the moniker “Government Motors.” But save for GM’s lavishly paid and well-cosseted union workers, everyone would have been better off if the company had never acquired such an epithetical name in the first place.
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