Ask the Best and Brightest: Will Uncle Sam Write-Off GM's $22.8 Billion "Loans"?

Robert Farago
by Robert Farago
ask the best and brightest will uncle sam write off gm s 22 8 billion loans

OK, it’s pretty clear how this is going down . . . On June 1, GM will file for Chapter 11. The Presidential Task Force on Automobiles will help the company split into “good” GM and “bad” GM. The “good” GM will probably consist of Chevrolet and Cadillac, including the factories and management that produce some (all?) of the brands’ models. It will raise money from a public equity sale ($15 billion?) and investment banks ($10 billion?). It will use the money to buy the cherry-picked assets from the diseased company. The “good” GM will get up and running in a relatively short time; TTAC’s Ken Elias makes it 90 days or so. The owners of the “bad” GM—abandoned dealers, the United Auto Workers, suppliers, etc.—will squabble over their payouts into perpetuity. So, Ken and I have a bet. I say the PTFOA will direct that US taxpayers get a share of the new, good GM, as compensation for “our” $22.8 billion worth of worthless loans. Ken says Uncle Sam will write if off. Legally, Ken’s right: the feds can’t jump to the head of the creditors’ queue. But I say they will. What say you?

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  • Wsn Wsn on Apr 14, 2009
    Pch101 : April 14th, 2009 at 1:22 pm Communism, in terms of economics, is all about state planning and operating industries And you might notice that the US is not operating the entire automotive industry, but is attempting to prevent a specific company that is considered to be “too big to fail” (i.e. it can’t fail without creating ripple effects that go well beyond the company itself) from dragging down the rest of the economy. -------------------------------------------- What I notice is that the US government is operating the entire automotive industry. The government now decides which company receives TARP, which CEO to kick out, which brands to cut, which cars to buy with public funding, which cars are (supposed to be) green ... That is about to which extend China did/doing. Do you truly expect Obama personally assembling cars for the US government to be "operating the entire automotive industry." --------------------------------------------- The scope is different, the motivation is different, and the end game is different. -------------------------------------------- Whether it's in China or in the US, the scope is the same: to protect inefficient domestics from fierce foreign or private competitions. The motivation is the same: to protect auto jobs for social stability and more importantly to protect the financial interest of the elite class (no, not the bondholders, think of the CEOs). The end game is the same: they will die out. Before they completely die, they will keep on producing cars that nobody wants to buy. They will either slash the price, or force agencies to buy, or deny foreign companies access to the market.

  • Wsn Wsn on Apr 14, 2009
    Pch101 : April 14th, 2009 at 1:22 pm -The Nazis built superhighways and supported private car ownership -The United States builds superhighways and supports private car ownership -Therefore, Americans are Nazis. ---------------------------------------- Your analogy is flawed. Car ownership is not unique to the Nazis. It can happen in any social systems. So, yeah, it's wrong to say a system that allows car ownership is Nazis. However, a government owning, planning and operating an industry is a unique, defining characteristic of Communism. Thus, I have rightly stated that what the US did to GM is a Communist action. The US is not a Communist state yet, because it's other actions are not entirely Communist. But should what's happening at GM serve as a precedence for future dealings, the US would become a Communist regime in no time.

  • Pch101 Pch101 on Apr 14, 2009
    Car ownership is not unique to the Nazis. That was the point of the metaphor. What the US is doing currently is not unique, either. The US and other western democracies have done similar things before, particularly during times of crisis. If this was a communist country, it would have seized control of every auto company operating in the United States, created a permanent centralized planning program over 100% of US vehicle production, and limited our choices to a few awful selections. It would have also created a government-controlled sham union designed to create the illusion of an empowered workforce. And it would have done it a long time ago; it wouldn't have waited for the greatest meltdown in seven decades to start. None of that has happened. Your analogy therefore fails. Find a less polarizing, more accurate comparison, your current one isn't working.

  • Geeber Geeber on Apr 15, 2009
    BDB: While supporting quotas for Japanese imports and instituting protectionist measures to save Harley-Davidson. That's the beauty - or flaw, depending on your perception - of the American political system. Namely, that a politician can backtrack from his or her core beliefs when necessary to stay in office. The quotas on Japanese cars staved off something worse - namely, tariffs or domestic content legislation. Of course, they also encouraged the Japanese to move upmarket (if they could only import so many cars, they were going to import more profitable ones) and set up an American production base. Both of which ended up hurting the domestics in the long run. Harley Davidson? That's called effective lobbying. I'm sure that, over Obama's term, we will find areas in which he takes actions that don't fit what he said he would do, or that deviate from leftist orthodoxy. That doesn't mean he is a conservative - unless he governs completely from the right. Which is highly doubtful. BDB: Don’t even confuse early-20th Century progressives with modern day liberals. It’s like confusing the Republican Party of the 1860s with the modern day one. Can't buy that. (And was I just imagining all of the praise for Franklin Delano Roosevelt by the left during the campaign, and constant pointers to his "first 100 days" when Obama was elected?) Many liberals have been supportive of an interventionist foreign policy and strong U.S. military. They just want to make sure that they - and not Republicans - are running both. Unless Hillary Clinton, for example, is not longer a liberal... BDB: The “unions” Hitler replaced the real Unions with were a farce and window dressing. They didn’t mean anything, anymore than the fact the Soviet Constitution guaranteed free speech. The industrialists got to dictate working conditions, work rules, etc, by fiat, and the right to strike was outlawed. The national “Labor Front” was just window dressing and a rubber stamp for whatever the owners of the corporations wanted. The Strength Through Joy program was not just window dressing. It was a very far-reaching program that did bring benefits to workers' lives. People, especially many Germans, don't like to admit it, but if Hitler had stood for re-election in early 1939, he would have won in a landslide - especially among the working class. Pch101: It was more than that. Reagan wanted oligopoly in certain areas because it was believed that small US companies facing larger US competitors would not be able to compete as the economy globalized. That’s pro corporation, without a doubt. That contradicts your earlier statement: “When it comes to economic matters, true right-wing ideology most closely resembles libertarianism, which does NOT favor corporations.” That seems to me to be more of a pro-business outlook than a pro-corporate outlook. Businesses need to be organized as corporations to compete in world markets. Whatever the type of business, Regan wanted as many obstacles removed for them as possible. If a mom-and-pop operation had a thriving export business, Reagan would have supported it, too. But that doesn't mean he would have necessarily bailed out corporations when they failed. That is the ultimate test of whether a leader or government is "pro-corporation." (And I don't think that first Bush and then Obama bailed out GM and Chrysler because of their exports or that they are competing in world markets.) pch101: All libertarians are conservatives, but that does not stand to follow that all conservatives are libertarians. The absence of regulation, open borders and isolationist foreign policy views of textbook libertarianism are rejected by most who are on the right. This is true, but that doesn't mean that some libertarian ideas have not had a major influence on conservative thought. pch101: I’d avoid the delusions of grandeur that some libertarians engage in. Libertarianism just isn’t that popular, and conservatives tend to pick and choose the bits that they like from the libertarian camp while avoiding the stuff that they don’t. In other words, most of it. Certain aspects libertarian ideology have a had an impact on thinking. It's the more mundane stuff that blocks their path to success (or elected office). In this point, they are like communists and committed socialists. The latter two have many ideas, they inhabit think tanks and universities, and rarely, if ever, end up getting elected to office. But one cannot say that some of their ideas do not bubble up in the mainstream - but such ideas are always cleaned up, watered down, and presented by a more "respectable" person or official. pch101: That’s wrong. If you are discussing political ideology, then you need to address one’s ideological motivations for a particular position. When it came to building super highways, the motivation of Roosevelt was the same as that of Hitler. He believed in roads for rapid movement of troops. That is why he supported the construction of the Pennsylvania Turnpike - in addition to putting people to work, but putting people to work was also part of Hitler's reason for building the Autobahn. The main reason he didn't need to build as many roads was because the states had traditionally taken on this role (in Pennsylvania, for example, Governor Gifford Pinchot had earlier instituted a program to pave country roads to "get farmers out of the mud.") pch101: It traditionally is. The right-left axis began in the French parliament, where the monarchists who favor state institutions sat on the right, while those who favored popular rule sat on the left. The military and monarchy were closely associated, as the former used force to defend the latter, and that tradition remains. Militarism was a hallmark of the Soviet Union, and Putin appears to be promoting the same as he consolidates power in Russia. Even France - which is hardly a right-wing country - has maintained a strong military regardless of which party was in power and does not hesitate to use it when necessary. (The idea that the French are "cheese-eating surrender monkeys" is nonsense. They can be tough when the need arises, and do no hesitate to aggressively protect their national interests with military force.)