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The government IS NOT ahead where GM is concerned. The government was still billions of dollars short of recovering their investment as of the end of April, and effectively would have needed a stock price of $72 to do that. This morning, GM is expected to open at $36.25
I know you threw that out as a cheap shot but what you say does reflect upon you.
Your view is another repeat of the zombie claim that there has been a huge expansion in the federal government under Obama.
Let's look at the, what do they call them again? ....oh yea, facts.
Federal Expenditures: Notice how Obama has flattened Federal Spending?
Federal Employment: Where's the Big Rise in Federal Employees?
One way to address this claim is to ask, where are the huge new federal programs? The Affordable Care Act is just kicking in and that reduces Federal expenditures; the stimulus, such as it was, long faded out; where is this big government that Obama critics claim he built?
The reality, of course, was that the past few years of deficits were caused by lower revenues, not a spending spree and those deficits are declining sharply as the economic downturn subsides and more tax revenue comes in.
The government IS NOT ahead where GM is concerned. The government was still billions of dollars short of recovering their investment as of the end of April, and effectively would have needed a stock price of $72 to do that. This morning, GM is expected to open at $36.25
Except that only includes the actual loan amount. What I am including is the the cost avoidance a GM (and auto industry) bankruptcy would have cost the government. GM going bankrupt would have also killed the supplier chain, harming other companies, like Ford.
There also were other savings by bailing out GM:
Quote:
The U.S. would have lost $28.6 billion in spending on social services and missing tax revenue if not for the bailout of GM, its former lending arm and Chrysler Group LLC, according to a study released Nov. 17 by the Center for Automotive Research in Ann Arbor, Michigan.
“GM ends up an economic contributor to the U.S. economy,” said Barry Ritholtz, author of “Bailout Nation” and chief executive officer of New York investment research firm FusionIQ. “It’s manufacturing products, it’s creating jobs, it’s buying wholesale parts, it’s doing what an industrial company is supposed to do.” GM: The Most Successful Bailout Bankruptcy | The Big Picture
What Mr. Ritholtz also argued was that the government should have done the same thing to the banks, take an equity position just like GM.
Yeah, because saving the American auto industry wasn't important. That was millions of jobs plus the supply chain. And even today, the govt's ahead.
Quote:
Originally Posted by Finn_Jarber
Yep, that's what the chart on the OP says.
Right, but the implication from the above post is that "the govt's ahead."
They are not, and likely will never be, as far as the GM bailout is concerned. GM is likely never going to hit $72, because Zora Arkus Duntov, John DeLorean, and Harley Earl aren't coming through that door anytime soon.
Except that only includes the actual loan amount. What I am including is the the cost avoidance a GM (and auto industry) bankruptcy would have cost the government. GM going bankrupt would have also killed the supplier chain, harming other companies, like Ford.
There also were other savings by bailing out GM:
What Mr. Ritholtz also argued was that the government should have done the same thing to the banks, take an equity position just like GM.
What's important to understand is that had GM entered into a "normal" bankruptcy, they would have worked things out with their creditors, like any "normal" bankruptcy. GM was still SELLING vehicles at the time -- it's not like they had shut down production. They were simply a poorly-run company that needed to restructure. The supplier chain would have worked with them, and yes, it would have involved some compromise.
But that's what bankruptcy is all about. Two parties working things out. The suppliers didn't want to see GM go under, because then they were dead. GM wouldn't have gone under, because it still had sales. GM had cost issues, and unfunded liability issues, and retiree benefit issues. But those are GM's problems, not Uncle Sam's problem.
I do not believe in "too big to fail", because it encourages irresponsible corporate behavior. GM was, at the heart of it, a poorly run company. Why should they have been entitled to a government bailout? You basically told GM, "Listen, we don't care that you've been producing junk for nearly 30 years. We don't care that you didn't pay attention to shifting industry trends. We don't care that your management was inept, and your executives overpaid. We don't care that your labor costs are not in line with the rest of the industry. No matter WHAT YOU DO, WE'LL BAIL YOU OUT."
What our government did was reward incompetence. It's that simple.
The S&L crisis of the 80's occurred due to deregulation, reckless lending and fraud by hundreds of thrift institutions. Wall Street goosed some of it with junk bonds and it took down the then largest investment bank in the world, Drexel Burnham. At the heart of it all was Michael Milken who had contempt for government, laws, rules and regulation that stood in the way of making money.
The government created the Resolution Trust Company ( RTC) in 1989 to wind down about 750 thrift institutions and dispose of their assets, primarily real estate. That was about a $1.2 Trillion ( in current USD adjusted for inflation) bailout financed by tax payers. Many lessons learned in that mess did not stick and were not portable to commercial banking.
It is generally believed that RTC eventually kind of/sort of broke even.
What's important to understand is that had GM entered into a "normal" bankruptcy, they would have worked things out with their creditors, like any "normal" bankruptcy. GM was still SELLING vehicles at the time -- it's not like they had shut down production. They were simply a poorly-run company that needed to restructure. The supplier chain would have worked with them, and yes, it would have involved some compromise.
But that's what bankruptcy is all about. Two parties working things out. The suppliers didn't want to see GM go under, because then they were dead. GM wouldn't have gone under, because it still had sales. GM had cost issues, and unfunded liability issues, and retiree benefit issues. But those are GM's problems, not Uncle Sam's problem.
I do not believe in "too big to fail", because it encourages irresponsible corporate behavior. GM was, at the heart of it, a poorly run company. Why should they have been entitled to a government bailout? You basically told GM, "Listen, we don't care that you've been producing junk for nearly 30 years. We don't care that you didn't pay attention to shifting industry trends. We don't care that your management was inept, and your executives overpaid. We don't care that your labor costs are not in line with the rest of the industry. No matter WHAT YOU DO, WE'LL BAIL YOU OUT."
What our government did was reward incompetence. It's that simple.
Memories are short. Back in 2008/2009 GM owed billions and suppliers were not shipping out of fear of being stiffed. That sort of would have hampered building new cars. Also, they tried to sell the Saturn division and couldn't get any takers.
Chapter 11 was not an option in a recession nearly as big as the Great Depression.
The Bush and Obama Administrations both provided bailouts. I would have liked more strings attached to the bank bailout but the general idea is worthy.
So, Bush AND obama are responsible for saving the world?
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