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Politics : Liberalism: Do You Agree We've Had Enough of It? -- Ignore unavailable to you. Want to Upgrade?

To: Kenneth E. Phillipps who wrote (95728)	11/20/2010 8:00:16 PM
From: chartseer	1 Recommendation Read Replies (1) \| Respond to of 224729

Well let me see. Under a normal bankruptcy GM would be owned debt free by it's creditors. The union contracts and pension liabilities would also be gone. Is that what you wanted to hear? comrade chartseer

To: Kenneth E. Phillipps who wrote (95728)	11/21/2010 10:09:41 AM
From: TideGlider	1 Recommendation Respond to of 224729

GM: A Successful IPO Does Not A Justifiable Bailout Make Nov. 18 2010 - 5:20 pm \| 1,396 views \| 0 recommendations \| 3 comments Posted by Dan Ikenson Image via Wikipedia There seems to be a lot of confusion about the meaning of GM’s IPO. A common narrative in today’s media is that GM’s return to the stock market affirms the wisdom of the auto bailout. Some tougher customers in the media insist on a higher threshold being met—that taxpayers get back the entirety of their $50 billion investment in GM—before declaring “mission accomplished.” And then there are the rabid partisans who—in their seething animosity toward the Obama administration—reach conclusions devoid of logic and rich only in conspiratorial-mindedness. For example, yesterday I was contacted by a media outlet vetting this conclusion: “The IPO is evidence of the failure of the bailout because taxpayers were excluded from buying shares at the IPO price and, therefore, denied the opportunity to get their money back.” Huh? All of those analyses are wrong. Let me dispense with the last one first, as it simply betrays a gross misunderstanding of how taxpayers are on the hook. By divesting of GM (i.e., selling its shares), the government is beginning to make the taxpayer whole. But just as there were no checks written directly from taxpayers to GM, there will be no checks written to taxpayers, as the Treasury liquidates the public’s share of GM. Whether main street Americans could participate in the IPO has nothing to do with making the taxpayer whole. And, by the way, IPOs typically limit sales of shares at the initial price to a chosen few. So let’s just shelve the canned indignation on this claim. It’s a distraction. Here’s the real issue. Today’s IPO is nothing more than testament to the fact that the government threw GM a lifeline, enabling the company to expunge most of its debts and firm up its balance sheet on terms more favorable than a normal bankruptcy process would have yielded. That enabled GM to partake of the cyclically growing U.S. auto market in 2010 and turn a profit through the first three quarters. So what? Did anyone really think that a chosen company so coddled and insulated from market realities couldn’t turn a short-run profit? Yes, even GM, under those favorable conditions should have been expected to turn a profit this year. But at what cost? That answer—even the question—seems to be elusive in the public discussion of the IPO. The cost was not only $50 billion—the amount diverted to GM in the first place. Nor was it that $50 billion minus the proceeds raised in today’s IPO (and minus the proceeds raised later when the government divests entirely of GM – it will still hold 33% of GM after today). In other words, making taxpayers whole does not absolve the Bush and Obama administrations for the auto intervention. Recouping the $50 billion only gets us partially out of the hole. (And I’m not even sure who “us” includes because the costs are so far reaching.) Yes, GM is making sales and accounting for market share, but only at the expense of the other automakers. Had GM been forced to severely atrophy or liquidate, the other automakers would have had greater revenues, more market share, and probably higher profits). They would have been able to attract GM’s best engineers and line workers. They would have more money to invest in R&D and to lead the industry into the future. Instead, by keeping GM in the mix, some of those industry resources remain misallocated in a company that the evolutionary market process would have made smaller or extinct. The auto industry wasn’t rescued with the GM bailout. GM was “rescued.” By rescuing GM, the government overrode market forces, and there are significant costs to assign for that. Witness the stagnant economy with 9.6 percent unemployment. Is it not plausible that businesses are sitting on their cash and not investing or hiring because of the fear inspired by the government interventions starting with the bank and auto bailouts? It’s more than plausible. The regime uncertainty that persists to this day was spawned by the GM bailout and other interventions. What about the weakening of the rule of law? Doesn’t the diversion of TARP funds by the Bush administration, in circumvention of Congress’ wishes and in contravention of the language of the law, represent a cost? How about the property right of preferred bondholders who were forced to take pennies on their investment dollars under the Obama bankruptcy plan? Any costs there? What about U.S. moral authority to dissuade other goverments from meddling in their markets or indulging industrial policy? That may be costly to U.S. enterprises. And with the government still holding a third of GM, its hard to swallow the idea that public interest will be the driver of policies affecting the auto industry. And that suggests even more costs. But don’t mistake this blog post for an anti-IPO rant. I’m in favor of the IPO. It couldn’t have happened sooner. But I suspect the investment bankers, the administration, and the other members of GM’s Board of Directors reckoned that, with the hype over the new Chevy Volt and the recent newsleak of GM’s $43 billion in unorthodox tax deferrments on the balance sheet, now was the perfect time to go public. blogs.forbes.com

To: Kenneth E. Phillipps who wrote (95728)	11/21/2010 10:14:04 AM
From: TideGlider	3 Recommendations Respond to of 224729

General Motors Now Admits It Didn’t Repay Bailout Money by Hans Bader September 20, 2010 @ 9:16 pm ShareThis PrintThis EmailThis Tags: auto bailouts, bailouts, General Motors Contrary to its claims in TV ads earlier this year, General Motors has now admitted that it did not repay its government bailout. In light of this new admission, the Competitive Enterprise Institute today filed a supplemental complaint with the Federal Trade Commission, drawing attention to this new information. CEI’s original deceptive advertising complaint to the FTC, filed in May, noted that General Motors misleadingly claimed in a national TV ad that the company had paid back taxpayer bailout loans. On September 16, 2010, General Motors admitted to the media that it did not in fact repay what it received from the government, and that its repayment of its bailout may take years: It will take a couple of years for taxpayers to get back the billions they spent bailing out General Motors, but the company has a goal of returning the money, GM’s new CEO said Thursday. CEO Daniel Akerson told reporters that the government won’t be repaid with the company’s initial public stock offering, which could happen later this year, but couldn’t answer more specific questions about the sale. In its original complaint, CEI urged the FTC to investigate the 2010 GM ad campaign entitled “GM Repaid Government Loan Ahead of Schedule.” The ad featured GM’s then-Chairman and CEO, Ed Whitacre declaring that “we have repaid our government loan in full, with interest, five years ahead of the original schedule.” That claim, CEI explained in the May complaint, “gives the false impression that GM has used its own funds to pay back all the bailout money that it received from the federal government. In fact, GM has only repaid a fraction of those funds—barely ten percent. Moreover, GM apparently repaid its loan by using other federal funds.” Such misleading claims could dupe consumers into having excessive confidence in GM and its products and warranties. CEI urged the FTC to investigate GM’s advertising claim, to “serve the American public on this issue of major consumer and taxpayer importance [and] “discourage other beneficiaries of government bailouts from falsely misrepresenting their status.” > View the CEI Complaint of Deceptive Advertising by General Motors Company > View the GM Ad on YouTube To date, General Motors has “repaid” only $7 billion of the $50 billion it got from taxpayers — and used taxpayer money to make the purported “repayment.” The only reason GM had enough government money to do that is because of Toyota’s recent safety issues and recalls, which drove car buyers away from Toyota to GM and Ford. But that turning away from Toyota may only be temporary, now that the Toyota crashes turn out to have been caused by driver error. In addition to the $50 billion, GM received billions in additional handouts through programs like the incredibly wasteful Cash for Clunkers (which cost taxpayers and used-car and car-parts businesses billions), and $17 billion given to its finance arm, GMAC — which no one expects GM to ever repay. Ironically, GM would never have needed a bailout if it had just received relief from costly regulations such as CAFE rules (which wipe out at least 50,000 jobs) and dealer-franchise laws. That’s so despite GM’s self-inflicted wounds from mismanagement, excessive union wages and benefits (worth up to $70 an hour), and rigid union work rules. The Obama administration left those wasteful work rules and excessive benefits largely intact, and gave the United Auto Workers Union (UAW) a big chunk of General Motors’ stock, even though the UAW helped bankrupt the company, and the company has value today only because the federal government pumped billions of taxpayer dollars into the company (and engineered the wiping out of General Motors’ bondholders, some of whom were non-union employees who had invested their life savings in the company). Veteran political commentator Michael Barone called the Obama administration’s treatment of Chrysler and GM bondholders “gangster government.” Law professor and bankruptcy expert Todd Zywicki called it an attack on “the rule of law.” Back in 2008, Zywicki warned that a bailout might prove worse for the auto industry than for automakers to quickly file for bankruptcy without first seeking a bailout. Zywicki noted that by enabling automakers to get rid of expensive union contracts and red tape, a “Chapter 11 bankruptcy filing will likely result in a stronger domestic industry.” It would provide “a mechanism for forcing UAW workers to take further pay cuts, reduce their gold-plated health and retirement benefits, and overcome their cumbersome union work rules.” Nobel Prize winning economist Gary Becker also argued that a bankruptcy filing would have been better than a bailout in achieving “needed reforms.” But the federal government ignored their wise advice, and chose to embark an incredibly costly bailout instead. The federal government used money from the $700 billion bank bailout for the auto industry bailout. Legal scholars at the Heritage Foundation, Clinton administration Labor Secretary Robert Reich, and many other commentators have argued that using the bank-bailout money for auto bailouts was illegal. « CEI in Europe: Travelblog 6–Berlin, GermanyDistracted Driving Kills, But What About Dysfunctional Policy? »