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Title: GM's Bailout Is a Financial Disaster
Source: FNC
URL Source: http://www.foxnews.com/opinion/2010 ... ms-bailout-financial-disaster/
Published: Nov 19, 2010
Author: John Lott
Post Date: 2010-11-19 09:35:18 by Badeye
Keywords: None
Views: 7680
Comments: 13

GM's Bailout Is a Financial Disaster By John Lott

Published November 18, 2010 | FoxNews.com Only the government would consider it a success to buy stock at $43.84 a share and sell it at $33. -- But President Obama and those who supported his bailout of General Motors and Chrysler are claiming just that today.

First, the alternative to the government bailout wasn't to "give up" as Obama claimed on Thursday at his press conference. Bankruptcy didn't mean that all jobs were going to be lost. It didn't mean that all the factories producing cars would be closed.

Yet, the president made that claim in his announcement again today and he continually misstates what would have happened in a normal bankruptcy. Courts don't just close down bankrupt companies. In fact, that rarely occurs. Any part of a company that can continue operating profitably continues to do so.

Some are pointing out that just a year and a half ago GM stock was trading at just $1 a share and claim that today's closing price of $34.19 is proof of the bailout's success. It simply doesn't account for the over $50 billion in direct bailout funds and the tens of billions of dollars in other breaks President Obama gave the company and its unions.

It also ignores that GM's stockholders and particularly its bondholders had their wealth stolen from them when the government took over ownership of the company. Traditional property right protections were shredded by the Obama administration, making corporate investments in America riskier as a result.

The president also has to take responsibility for the fact that today's stock price wasn't higher and that the government lost as much money as it did.

The Obama administration strictly limited stock sales to less than half of what the government owned in the company, not only delaying the day when the government control of GM will end but also depressing what GM's stock was sold for on Wednesday. -- The reason is very simple, with continued government ownership, politics, not standard business practice, will continue to determine many of GM's decisions.

GM Chairman Edward E. Whitacre Jr. resigned in August over frustration in government interference in business decisions. But continued government ownership, along with the continued government interference, is keeping stock prices lower than they would have to be.

Fully privately owned companies simply work better and earn more than those that are publicly or partially publicly owned. That is not very surprising as they have less reason to engage in political compromises.

Politics has indeed entered into everything -- from where the company's headquarters are located in Detroit to where cars will be assembled. Individual congressmen such as Barry Frank (D-Mass.) intervened in whether a car plant in Massachusetts would be closed.

The administration claims that stock sales had to be limited because GM was just trying to get "higher fees for the bankers." That's obviously just more of President Obama's class warfare claptrap. If he really believed that the bankers were charging too much, there was a simple solution: make sure that there is a competitive process in setting up this stock sale.

Nor does should the government wait to sell its shares just on the hope that stock prices will rise. The administration hopes that if GM's stock can rise from $33 per share to $52.79, a 60 percent increase, the government will be able to break even.

But the Obama administration is not anywhere near as good at predicting future car sales as private individuals who have their own money at stake. The current stock price already reflects what those future sales are expected to be.

There is no reason for the federal government to continue owning 37 percent of GM's stock.

Hopefully, the new Republican controlled House of Representatives can help push to sell off these remaining shares as soon as possible.

The Obama administration’s class warfare rhetoric exposes how weak its arguments are. The administration has no right to squander so much of our country’s wealth on taking over companies to benefit the president’s political supporters.

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#1. To: Badeye (#0)

There is no reason for the federal government to continue owning 37 percent of GM's stock.

Remember, the Canadian government owns 12.5% of GM and the UAW owns 17.5%. Add them all up and majority control is still with government and the union. Who in their right mind would invest in a company whose decisions will be politically motivated? Not me.


"To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves is sinful and tyrannical." -- Thomas Jefferson

jwpegler  posted on  2010-11-19   9:57:06 ET  Reply   Trace   Private Reply  


#2. To: Badeye (#0)

Yes. Now move a Quantum Level up to the 120 year old FedRes Bankster EROEI Ponzi. 8D

mcgowanjm  posted on  2010-11-19   9:58:57 ET  Reply   Trace   Private Reply  


#3. To: jwpegler (#1)

Dubai now owns a health chunk of GM stock. Funny, I don't hear Chuck U Schumer wailing in front of every camera on the planet ABOUT THAT.

Remember his ranting and raving about Dubai and the port deal?

Obama's first all-by-his-lonesome budget, btw, calls for a $1.17 trillion deficit.

Badeye  posted on  2010-11-19   9:59:24 ET  Reply   Trace   Private Reply  


#4. To: Badeye (#3)

Dubai now owns a health chunk of GM stock.

The Chinese government owns 1% as well.


"To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves is sinful and tyrannical." -- Thomas Jefferson

jwpegler  posted on  2010-11-19   10:00:23 ET  Reply   Trace   Private Reply  


#5. To: jwpegler (#4)

Yep...but small investors were not allowed to purchase the stock from what I understand...via one of the internet based services like E Trade?

WTF?

Obama's first all-by-his-lonesome budget, btw, calls for a $1.17 trillion deficit.

Badeye  posted on  2010-11-19   10:27:01 ET  Reply   Trace   Private Reply  


#6. To: Badeye, jwpegler (#5)

Yep...but small investors were not allowed to purchase the stock from what I understand...via one of the internet based services like E Trade?

As usual, Badeye's facts are wrong. 20% of the IPO was allocated to retail investors, and GM increased the size of the IPO to meet demand. As with any IPO, underwriters get first dibs.

http://www.reuters.com/article/idUSTRE6AG4CB20101118


On January 3, 2011 the GOP assumes responsibility for deficit spending.

go65  posted on  2010-11-19   12:09:40 ET  Reply   Trace   Private Reply  


#7. To: Badeye (#0)

Philosophical victory for conservatism is that liberals admit tax breaks for mega corps are needed.

GM Could Be Free of Taxes for Years

-----------------------------------------------------------
Barrack Hussein Obama
President of the United States of America said that some Americans ; "They can come for the ride, but they gotta sit in back."

WhiteSands  posted on  2010-11-19   12:46:09 ET  Reply   Trace   Private Reply  


#8. To: go65, Badeye, jwpegler (#6)

Can the stock be purchased via E trade?

-----------------------------------------------------------
Barrack Hussein Obama
President of the United States of America said that some Americans ; "They can come for the ride, but they gotta sit in back."

WhiteSands  posted on  2010-11-19   12:47:24 ET  Reply   Trace   Private Reply  


#9. To: go65 (#6)

Yep...but small investors were not allowed to purchase the stock from what I understand...via one of the internet based services like E Trade? As usual, Badeye's facts are wrong.

Ah...no, I"m not wrong in what I STATED.

Did you buy GM stock via E Trade yesterday?

NOPE. Could you have? NOPE.

Obama's first all-by-his-lonesome budget, btw, calls for a $1.17 trillion deficit.

Badeye  posted on  2010-11-19   13:24:23 ET  Reply   Trace   Private Reply  


#10. To: WhiteSands (#7)

(laughing) Good point.

Obama's first all-by-his-lonesome budget, btw, calls for a $1.17 trillion deficit.

Badeye  posted on  2010-11-19   13:24:46 ET  Reply   Trace   Private Reply  


#11. To: WhiteSands (#8)

Can the stock be purchased via E trade?

NO, not as of yesterday at any rate. Cavuto had a segment on it.

But hey, GO65 is good friends with the dwarf, and we all know he's a big time investor on Wall Street....(laughing)

Obama's first all-by-his-lonesome budget, btw, calls for a $1.17 trillion deficit.

Badeye  posted on  2010-11-19   13:25:53 ET  Reply   Trace   Private Reply  


#12. To: Badeye (#9)

What you said:

but small investors were not allowed to purchase the stock

The truth is that 20% of the stock sale was reserved for small investors. Your facts, as usual, were flat out wrong.

Really, you need to stop listening to Glenn Beck and Dick Morris.


On January 3, 2011 the GOP assumes responsibility for deficit spending.

go65  posted on  2010-11-19   21:59:34 ET  Reply   Trace   Private Reply  


#13. To: go65 (#12)

The truth is that 20% of the stock sale was reserved for small investors. Your facts, as usual, were flat out wrong.

Goodmorning, Congressman Grayson!

As usual when backed into a corner, you change the parameters.

Where, exactly did I say 'small investors'?

I didn't. I said you couldn't purchase the stock via E Trade and the like.

Obama's first all-by-his-lonesome budget, btw, calls for a $1.17 trillion deficit.

Badeye  posted on  2010-11-22   9:32:27 ET  Reply   Trace   Private Reply  


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