Just recently the US Government sold its remaining equity stake in Chrysler for a $1.6 billion loss, according to CNN today. That’s on top of $4 billion in US government loan forgiveness and a $3.2 billion loan outstanding from the Dept. of Energy.
One suspects the final close-out of Uncle Sam’s stake in GM will be equally unsuccessful; just to break even, GM needs to sell its ownership at $54 per share. It’s running just under $30 today.
I keep hearing progressives crow about “all the loans being paid back,” but money is fungible. Subsequent TARP funding and off-the-radar loans like the Dept of Energy’s are simply misleading bookkeeping conventions which eventually will surface (although business and accounting wonks, like me, can easily figure out what’s going on.)
So despite the progressives’ proclamations of success, it’s looking like GM will end up costing the American taxpayer. Additionally — and I don’t know their basis but am assuming it’s similar the US government’s — I suspect the value of the UAW’s ownership will be slammed as well, likely affecting their pension and retiree benefit trusts.
I’m curious to hear the BMG loyalists defend this costly bailout. By my calculation, we could have simply paid all of the GM workers 1 year severance, given bondholders a slight haircut, and let GM slip beneath the waves for one-third to 1/2 the funds they received. Why wouldn’t this have been a better plan?
because I don’t really care whether or not your hypothesis — that we won’t make all our money “back” — is correct. Had GM and Chrysler gone under, we would have lost over a million extra jobs, all across the country, and the tax dollars that went with it. Those jobs would never have come back and an entire American industry would have been dead. Such a catastrophe would have been far worse than taking relatively modest losses on loans to sell them off (assuming what you’ve said is true, though you’ve offered not a single shred of evidence proving it is true).
So, yeah, you may have been perfectly happy to see another million+ Americans lose their jobs, and see the Great Depression have become the Second Great Depression… but I doubt very many people would agree with you, and shame on anyone who would. We need big thinking and more jobs, not the sort of policy that has us resort to shooting ourselves in our own foot.
I don’t know where to begin. “…an entire American industry would have been dead”? Flat wrong. On 2 counts.
First, GM and Chrysler do not comprise “an entire American industry.” For 2010, GM accounted for 19% of domestic unit sales, and Chrysler 11%. Ford was 17.2%. Hyundai had US production of 4.6%, Toyota 10.2%, and so on. So bankruptcy of GM and Chrysler would not have resulted in the death of the American auto industry.
Secondly, bankruptcy of GM and Chrysler doesn’t mean plowing under all their factories and putting all employees permanently out of work. It would have meant financial restructuring, new labor agreements, and disposition of some assets (like GM’s profitable European and Asian division.) I’m sure there would have been some employment disruption but, as a taxpayer, I would have preferred to create an special unemployment fund for those workers.
This likely would have been CHEAPER than the TARP subsidy. All this administration did was to transfer the loss of value in GM and Chrysler onto the back of the taxpayers and bondholders and many, many retirees holding GM stock while at the same time making a huge transfer payment to the UAW (not that you mind.)
All in all, there was a better and cheaper way to right GM and Chrysler but I guess this falls outside of your idea of “big thinking and more jobs”: you think only government can do that.