Was The Government's Divestment of GM Stock Insider Trading?

was the governments divestment of gm stock insider trading

Back in 2004, perfectionist homemaker and well known TV personality Martha Stewart was charged with insider trading. As presented, the facts in the case were simple. Martha owned stock in a medical research company called ImClone and, like a lot of people who invest in tech firms, she was hoping for a big payout when their product, a promising new cancer treatment, went on the market. Unfortunately, the FDA chose not to approve the drug and the value of the stock looked set to take a beating once the decision was announced. According to the charges initially brought against her, Martha and many of the company’s top executives learned of the FDA’s decision though their inside connections the day before it was publicly announced and were able to sell their shares before they crashed. That’s against the law and many of the people caught up in the scandal, including Martha who was convicted on the charge of making false claims to a federal investigator, ended up going to jail.

The above case is a useful example because it offers a clear cause-and-effect pattern and plays out along such a short timeline. Despite Martha’s protestations that she was innocent, the dots here appear to be easily connected. Most insider trading cases, however, require a little more imagination. The connections aren’t always so clear cut and sometimes the cases play out over a period of years. Take, for example, the US Government’s recent divestment of its massive amount of GM stock and the subsequent recall debacle that now threatens to drive that company’s stock prices through the floor. Coincidence? Some people think not.

Last December, the US Government sold its remaining shares in General Motors and ended a controversial bailout program that ultimately cost the American taxpayer something on the order $10 billion. At the time, the move puzzled many investment experts who argued that the government could have lessened its losses by simply holding onto the stock, which was trending upward at the time, and selling when its value was higher. It makes sense, right? The USG bought high and then sold low, even a novice investor like me knows that’s the opposite of what you’re supposed to do, so why not simply wait?

The move that looked so stupid then looks like genius today. In February of this year, just a couple months after the sale, GM announced the recall of 1.4 million cars for faulty ignition switches. In the months since, more GM vehicles have been recalled for other problems and, if you have been following the reports here on TTAC, you know that that the number of vehicles involved now exceeds GM’s total sales for the past 5 years! The question is did the government have inside knowledge that this was on the way? Well, evidence is emerging that GM had data going back to at least 2007 that the ignition switches were failing to function properly and the government’s own safety watchdog, the National Highway Traffic Safety Institute (NHTSA) shows the company was actively investigating the problem during the 2009 bailout. At some level, then, the government did know.

Whether or not the timing of the stock sale rises to the level of insider trading, however, remains to be seen. The US Government is bigger and more complex than most of us will ever know and the individual agencies don’t always communicate with one another with the efficiency we might expect. The NHTSA has an entirely different focus than the Treasury Department and the chances of their reports coming across the desk of the person charged with maintaining that portfolio are extremely small. Still, the appearance of malfeasance is enough to send the tin foil hat wearers into a frenzy and damage the public’s confidence in the markets. The matter needs to be looked into.

Thomas Kreutzer currently lives in Buffalo, New York with his wife and three children but has spent most of his adult life overseas. He has lived in Japan for 9 years, Jamaica for 2 and spent almost 5 years as a US Merchant Mariner serving primarily in the Pacific. A long time auto and motorcycle enthusiast he has pursued his hobbies whenever possible. He also enjoys writing and public speaking where, according to his wife, his favorite subject is himself.

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  • PWarren4 PWarren4 on May 23, 2014

    "Was The Government’s Divestment of GM Stock Insider Trading?" Well DUH.

    • Highdesertcat Highdesertcat on May 23, 2014

      Of course it was! The public will never know the ins and outs of what information passed between GM management and the US government prior to the sale of the GM stock, but the US government didn't want to be even remotely associated with an innuendo of owning any part of GM. GM stock may not have been affected as of this date, but confidence in GM is not exactly at an all-time high either. To the US government's divestment? "Smooth move, Exlax!"

    • Landcrusher Landcrusher on May 24, 2014

      Summers is wrong on several counts. 1. His time line is insufficient. There should be some standard agreed upon on what success looks like, and not just still in business a couple years later. 2. There are plenty of leaders of big companies that have learned precisely the wrong lessons on what risks to take and not take. 3. No matter how much he attempts to suck up by trying to appear reasonable, the leftist elites will never let him back into their inner circle.

  • Master Baiter The D-bag elites like Al Gore demanding that we all switch to EVs are the type of people who don't actually drive. They get chauffeured around in black Yukon Denalis. Tesla does have a good charging network--maybe someday they will produce a car that doesn't suck.
  • MRF 95 T-Bird As a Challenger GT awd owner I lIke it’s heritage inspired styling a lot. There’s a lot of 66-67 as well as 68-70 Charger in there. It’s refreshing that it doesn’t look like a blob like Tesla, Volt/Bolt, Mach-e BMW I whatever etc. The fact that it’s a hatch makes it even better as a everyday driver thus eliminating the need for a CUV. If it’s well built and has a reliable track record I can see trading up to it in a few years.
  • Jbawden I thought sedans were dead? Coupes even more so. The core Charger/Challenger buyer is in it for the Hemi. To whom is this and the presumed EV Camaro marketed to? The ICE versions of these cars have a LOT of shortcomings, but rear drive, a V8, and a Tremec 6 speed made all that disappear. If you're forcing me into a 1,000hp appliance, then give me some visibility and practicality while your at it. And for the love of all things holy, please allow me to maintain a little dignity by leaving off the ridiculous space jam sound effects. What out of touch focus group think approved that? It's almost as embarrassing as the guy who signed off on the Pontiac Aztec.
  • Jalop1991 The simple fact is, America and Americans excel at building complex things (bridges, for example) but absolutely SUCK at maintaining them. We're too busy moving on to the next new shiny thing that a politician can get good airtime for. Fixing the bridge? Not sexy. Cutting the ribbon at a new EV charge site? Photo-op worthy. Demanding that the owner of said charging site be accountable and not let his site become the EV equivalent of a slum? Hard and not a newsworthy event.I have a PHEV and once tried some sort of public charging, just to see what happens. Failed miserably. We'd all be riding horses today if gas stations performed like EV charge stations do.
  • SCE to AUX Apps like PlugShare prove a few points:[list][*]Tesla's charging network is the best, almost always earning a 10/10.[/*][*]Dealer chargers are the worst, often blocked (ICE'd) or inaccessible behind a locked gate.[/*][*]Electrify America chargers aren't bad; my few experiences with them have been quite good. But they are also very new.[/*][*]Calling the help line is nearly useless.[/*][*]There are still charging gaps in high-travel flyover areas, which coincidentally have a lot of "Trump" flags waving in them.[/*][/list]As an EV driver and engineer, I don't understand how public chargers get so screwed up. They are simple devices. My home charger is 10 years old and has never missed a beat, but it only gets one cycle a day and lives indoors.
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