The federal government just cashed out on our General Motors shares and the final tally is a $10.5 billion loss. Many could still argue that this cost was worth it, but it is different from what has been represented to the public that we would lose no money on the deal. Indeed, the article below says that the White House delayed the final sale until after the election due to the implications of an over $10 billion bath. My concern is the lack of clarity and honesty surrounding the bailout. The public might still have supported the plan but it was not sold as an over $10 billion walkaway bailout.
U.S. Treasury Secretary Jack Lew confirmed that a $10.5 billion loss on the $49.5 billion bailout.
Notably, Treasury sold its stake in Chrysler Group LLC in July 2011 with a $1.3 billion loss on a $12.5 billion bailout. That is a total of $11.8 billion loss on these two companies.
Notably, the Administration decided not to require GM to repay its entire bailout and swapped the loans for the 60.8 percent ownership. It then bailed on its shares before recouping its losses after pushing the sale past the election. In hindsight, the decision to take shares instead of repayment looks like a politically useful way to forgiving debt while leaving the appearance of a public “investment” in the company.
Source: Detroit News
I mean this bailout is dwarfed by the financial industry bailout.
Lying is the stock and trade of this govt. As a people we are kept in the dark by the “most transparent administration ever–registered trademark”.
I agree with Elaine that this bailout dwarfs the financial sector (although it is important to note that GM is also in the financial sector through various subsidiaries, so they partook of that part of the bailout as well), it cannot be said that this bailout was done on behalf of ordinary people. The bailout was a way of enriching the already rich who had knowingly gambled, lost and understood they would be made whole (and then some) by their friends in this govt. After all, these are Obama’s savvy businessmen friends–guys who ripped off their customers and stole billions from the taxpayers. Nice friends! Very savvy of them to buy up the president and Congress!!
I want to add one more egregious lie to the list: “Investigative journalist Seymour Hersh joins us to discuss his new article casting doubt on the veracity of the Obama administration’s claims that only the Assad regime could have carried out the chemical attacks in the Damascus suburb of Ghouta earlier this year. Writing in the London Review of Books, Hersh argues that the Obama administration “cherry-picked intelligence to justify a strike against Assad.” The administration failed to disclose it knew Syrian rebels in the al-Nusra Front had the ability to produce chemical weapons. Evidence obtained in the days after the attack was also allegedly distorted to make it appear it was gathered in real time.”
http://www.democracynow.org/2013/12/9/seymour_hersh_obama_cherry_picked_intelligence
“Taxpayers have ended up in the black on the crisis-related bailouts. It has recovered $433 billion from the Troubled Asset Relief Program after initially investing about $422 billion.” – U.S. Treasury Secretary Jack Lew
no one can honestly believe that the corporation did not know this was going to happen.. actually i will go one step further and say they made sure this happened. we the people didnt lose 10.5 billion the elites stole 20+ billion of the taxpayers money. for their bank accounts. much the same way they’ve managed to keep getting richer while we the people keep getting poorer…..
“In a new report released Monday, the Center for Automotive Research (CAR) reckons that the federal government bailout of General Motors Co. (NYSE: GM) saved 1.2 million U.S. jobs and preserved $34.9 billion in personal income and social insurance (Social Security, Medicare) payments. The bulk of those jobs and tax payments would have been lost in 2009 and 2010 and would have recovered (mostly) by now without federal intervention, but the U.S. auto industry would look considerably different had both GM and Chrysler been allowed to go under. …
… Ford Motor Co. (NYSE: F) did not accept any federal bailout funds, but CEO Alan Mullaly said last year, “If GM and Chrysler would’ve gone into free-fall, that could’ve taken the entire supply base into free-fall also, and taken the U.S. from a recession into a depression. That is why we testified on the behalf of our competitors even though we clearly did not need precious taxpayer money.” Chrysler received $1.9 billion in federal funds before being taken over by Italy’s Fiat SpA.
What U.S. taxpayers avoided, according to CAR, was the loss of about $105.3 billion in transfer payments plus the loss of personal and social insurance tax collections to the tune of 768% of the net investment of $11.8 billion in GM and $1.9 billion (none recovered) in Chrysler. Including jobs related to the auto industry, the federal bailout preserved 2.6 million jobs in the U.S. economy in 2009 alone and $284.4 billion in personal income in 2009 and 2010.
As we have already noted, the CAR report suggests that many jobs would have been recovered eventually, but the gains would have been made mostly in the southeastern United States, where foreign carmakers like Toyota Motor Corp. (NYSE: TM) have been building manufacturing capacity. The CAR report notes that the results of such a migration would have had severe consequences in the long term and that unemployment rates in the upper Midwestern states would likely still be in double digits.” USA Today
Politicians seem to assume (incorrectly) that those who become CEOs, serve on BODs, and own majority interests large companies, are by definition worthy of all the corporate welfare they request, even though many of them got where they are through inheritance and name recognition, rather than any level of merit and competence. Corporate welfare might make sense if corporate leaders were actually the best and the brightest, the “makers”, rather than destructive, reckless “takers” which most of them seem to be.
$10.5 billion? That’s chump change compared to what Wall Street got in the bailout.
*****
Secrets and Lies of the Bailout
The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come
By Matt Taibbi
1/14/13
http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104
Excerpt:
It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?
Wrong.
most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.
But the most appalling part is the lying. The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in, official feature of the financial rescue. Money wasn’t the only thing the government gave Wall Street – it also conferred the right to hide the truth from the rest of us. And it was all done in the name of helping regular people and creating jobs. “It is,” says former bailout Inspector General Neil Barofsky, “the ultimate bait-and-switch.”
The bailout deceptions came early, late and in between. There were lies told in the first moments of their inception, and others still being told four years later. The lies, in fact, were the most important mechanisms of the bailout. The only reason investors haven’t run screaming from an obviously corrupt financial marketplace is because the government has gone to such extraordinary lengths to sell the narrative that the problems of 2008 have been fixed. Investors may not actually believe the lie, but they are impressed by how totally committed the government has been, from the very beginning, to selling it.
THEY LIED TO PASS THE BAILOUT
Today what few remember about the bailouts is that we had to approve them. It wasn’t like Paulson could just go out and unilaterally commit trillions of public dollars to rescue Goldman Sachs and Citigroup from their own stupidity and bad management (although the government ended up doing just that, later on). Much as with a declaration of war, a similarly extreme and expensive commitment of public resources, Paulson needed at least a film of congressional approval. And much like the Iraq War resolution, which was only secured after George W. Bush ludicrously warned that Saddam was planning to send drones to spray poison over New York City, the bailouts were pushed through Congress with a series of threats and promises that ranged from the merely ridiculous to the outright deceptive. At one meeting to discuss the original bailout bill – at 11 a.m. on September 18th, 2008 – Paulson actually told members of Congress that $5.5 trillion in wealth would disappear by 2 p.m. that day unless the government took immediate action, and that the world economy would collapse “within 24 hours.”
To be fair, Paulson started out by trying to tell the truth in his own ham-headed, narcissistic way. His first TARP proposal was a three-page absurdity pulled straight from a Beavis and Butt-Head episode – it was basically Paulson saying, “Can you, like, give me some money?” Sen. Sherrod Brown, a Democrat from Ohio, remembers a call with Paulson and Federal Reserve chairman Ben Bernanke. “We need $700 billion,” they told Brown, “and we need it in three days.” What’s more, the plan stipulated, Paulson could spend the money however he pleased, without review “by any court of law or any administrative agency.”
The White House and leaders of both parties actually agreed to this preposterous document, but it died in the House when 95 Democrats lined up against it. For an all-too-rare moment during the Bush administration, something resembling sanity prevailed in Washington.
So Paulson came up with a more convincing lie. On paper, the Emergency Economic Stabilization Act of 2008 was simple: Treasury would buy $700 billion of troubled mortgages from the banks and then modify them to help struggling homeowners. Section 109 of the act, in fact, specifically empowered the Treasury secretary to “facilitate loan modifications to prevent avoidable foreclosures.” With that promise on the table, wary Democrats finally approved the bailout on October 3rd, 2008. “That provision,” says Barofsky, “is what got the bill passed.”
But within days of passage, the Fed and the Treasury unilaterally decided to abandon the planned purchase of toxic assets in favor of direct injections of billions in cash into companies like Goldman and Citigroup. Overnight, Section 109 was unceremoniously ditched, and what was pitched as a bailout of both banks and homeowners instantly became a bank-only operation – marking the first in a long series of moves in which bailout officials either casually ignored or openly defied their own promises with regard to TARP.
Corporate welfare is supported by both corrupt political parties, but people welfare is considered dirty and lazy, and unbecoming producing dependency.
And regarding the auto bailout, don’t forget the $3 billion cost of Cash for Clunkers, which was a true giveaway to the auto industry.
How about taxing GM executives. Workers won’t get much of that bailout money. How about making corporations actually pay their taxes?
Reblogged this on Brittius.com.
How much did GM contribute to both political parties last election cycle? According to OpenSecrets.org, $193,990. Seems like that ROI really worked out for GM.
Any questions as to why corporations should not be allowed to participate in electoral or legislative processes or allowed to lobby beyond simple petition?
Anyone?
Here’s a new investment strategy: Short what the gov’t buys.
I wonder if the gov’t did a private placement with the stock which GM then converted to treasury stock. Good for GM I guess but bad for taxpayers.
I hope this capital loss was offset by higher income tax revenue from workers that would have been laid off and paying unemployment benefits.
Selling the taxpayers short against the ballot box.
@Dredd “I mean they could bail out GM but not the working class who honestly worked for Detroit?”
A bit of a tangent, but in regard to the mortgage crisis and the bank bail out, I always wondered about the feasibility of bailing out the home owners, which would have made the securitized mortgages sound, which would have shored up the banks.
I don’t know that it would have worked. But it seemed, to me, to be an obvious alternative that I have not seen discussed – except in moralistic terms that when it comes to bail outs, we should not reward the bad judgment of home owners.
I suppose the bad judgment of CEO’s and wall street tycoons is more deserving of bail out than the bad judgment of home owners with ordinary jobs.
Lends credence to the one party theory.
The theory that there is only one political party, “the business party.”
I mean they could bail out GM but not the working class who honestly worked for Detroit?
The war on honest working class people moves forward unabated.
It is the modern dinosaur story (The Homeland: Big Brother Plutonomy – 9).
$11.8 billion lost? Did anyone expect anything different?
Legal Question(s): Do we-the-people have the right to sue the Federal Government (O’Bama Administration and Congress) for a form of insider trading or ponzi-type scheme from this action, per se? If you really look at this ‘deal’, then it is no different from a ponzi scam or maybe a form of insider trading? Do we-the-people have enough evidence to prove that the Feds knew that they would not be recieving a ROi from this deal, and therefore, purposely misused ‘our funds’ (tax dollars) to keep the major shareholders wealthy and prevent the GM executives from losing their jobs? What’s the difference between what the Feds did with our funds, and what the Enron executives did with the Enron workers’ retirement funds?
As I wrote here on this blog back in 2011:
Re Chrysler: many are of the view that the government also cheated Chrysler’s bond holders.
“My concern is the lack of clarity and honesty …”
The Obama Administration is going to be in power for several more years… I’d expect that to be an ongoing concern.
Ba-dum-dum 🙂
Ouch, that’s a decent number. I’m trying to think back… but I’m doubtful about whether anyone realistically expected much different though…
“pushing the sale past the election.”
I’m not keeping a tally or notes or anything, but it does “feel” like I’ve seen that kind of phrase pretty often this year… *shrug*
Reblogged this on The International Blogspaper.
Reblogged this on AConservativeEdge.