Tea Partiers Eat Crow As General Motors Becomes The New Wall Street Darling
This [GM bailout] is somewhere in between Baghdad and fixing the flood in Louisiana. Obama has decided to take this over. He now owns it.
~ GROVER NORQUIST
I was all over the place on the Obama administration's decision to bail out General Motors because the executives who had thunk up the years of butt-ugly, rust-prone and unreliable crapmobiles that had pushed the once mightiest automaker to the brink of insolvency did not deserve a cent of my money. Or yours. But I eventually decided that the workers who made those cars didn't deserve to be thrown out into the cold, anti-union Republican rhetoric notwithstanding, nor could the Rust Belt stand another belly blow.
And so 16 months after Obama took over ownership of the General's shaky future, GM is the new Wall Street darling with an initial public offering expected to raise at least $16 billion.
But while tens of thousands of assembly line workers will be celebrating, the IPO is a bittersweet turn of events. This is because while you and I have recouped about $7 billion of the $49 billion bailout from the Troubled Asset Relief Program, will get back billions more in the coming months and make billions in interest on those billions, the entirety of the original bailout will never be repaid.
Although GM sales are way up, its product line is dramatically improved after it took the ax to several of its redundant model lines and it is the leading automaker in China, the world's biggest emerging market, the automaker has still has not completely turned the corner. But I too will be celebrating as Tea Partiers, Grover Norquist and their no-bailout ilk chow down on a big plate of crow.
Forget all those retirees that lost their retirment when GM Bonds were made worthless as a result of Obama's bastardizing the bankrupcty process.
ReplyDeleteClaims that 1 million jobs would have been "lost" ignore the demand factor for automobiles and the fact that somebody else would have made these cars.
This sets a precedent for anyone that makes widgets but makes them of poorer quality and more expensive than his competitors - he is entitled to a bail out I guess.
IF the auto industry was not bailed out, would the demand for cars at the time simply stopped? NO!
ReplyDeleteWould those car companies simply cease to exist? Again, no!
More than likely, somebody would have bought the companies at firesale prices, and the companies would have continued on and would have been reorganized under the new owner/s.
And even if, lets say Chrysler would have gone down, the demand for cars would have been the same, and buyers would have gone someplace else for their cars.
Its not the existence of car companies themselves that employs people, its the demand for the products they sell.
Technically, when the government "bailed out"/stole the auto industry, they didn't save the incomes of 1.4 million. They took income away from others, and gave it to the failed companies unions.
And doing thus, technically took away money that the others MIGHT have spent on cars, or housing, or whatever. In essence still costing the jobs they were "supposed" to save.
Since the government spent money it didn't have. It just deferred the job losses to a later time, when the borrowed money will have to be paid back.
If GM and Chrysler went under, there is no guarantee that anyone would have purchased those companies or a substantial amount of the assets at "fire sale" prices. There are no guarantees in a bankruptcy, especially as to sale of assets of an aged, huge company like GM.
ReplyDeleteIn addition, I have yet to see any report of ANY retiree who was stupid enough to be 100% invested in GM bonds; so the 9:16 comment seems more like a conservative urban legend than fact.
You can call the threat of 1 million layoffs to be "hypothetical" if you like; but that is one of the problems with bankruptcy: unless there is a deal going in, you have no idea how things are going to turn out.
What DO we know: going in there was a risk of all the GM jobs, all the dealerships, parts suppliers interests, etc., being in jeopardy. We have no idea how bad the meltdown could have been, or how many millions of jobs were in jeopardy. The Bush administration first floated the idea of a bailout and the Obama administration executed it. We DO KNOW that we did not get the resulting millions of layoffs in the auto industry and foreign owned auto companies how have more competition than they might have had. Those millions were not added to the unemployment, Medicaid, and delinquent property tax rolls. We do know that both companies survived. Had we not done the bailout, no one knows how bad it might have been.
I recognize that there are those among us who wanted the auto companies to fail on Obama's watch. He would get the unemployment numbers and he would get the blame, while more auto sales demand would be shifted to non-US producers located in the GOP dominated, weak union, low per capita income South. I know that was why the GOP was basically saying "Screw the US auto producers" -- it would have benefited them politically. Luckily, the Bush administration did not buy into that and the Obama administration did not follow the GOPer cons' lead.