Yesterday was another stomach churner having to watch Obama thump his chest about GM. If he hadn’t had the courage to step up to the plate when nobody thought it would work, what would have happened? Well, for one, we wouldn’t have sidestepped the bankruptcy laws. GM would have had to actually conform to the normal bankruptcy process. Liquidate their assets, reorganize under bankruptcy protection and re-emerge with their debts retired. Instead, the taxpayers picked up the tab to the tune of nearly $110 billion. GM received $50.7 billion and Chrysler $15.5 billion. $14 billion was set aside for the GM and Chrysler financing arms including GMAC. The auto suppliers also got into the mix with $5 billion set aside for them. Let’s not forget the $25 billion Congress allocated for “Advanced Technology Vehicles”.
You won’t hear Obama spouting off about the total cost of these bailouts. Nor will you hear him promote the fact that the taxpayers didn’t have the cash either, so he went ahead and borrowed it on our behalf. Thanks, pal. Sure wish I would a say in that. He also won’t tout the fact that the original investors and debt holders of GM were kicked to the curb and bumped by his union cronies. They were left behind with the old GM, now known as Motors Liquidation Company which has a stock price of under a buck currently.
Now, I do want to say I’m not pulling for the new GM to fail at all. I live in Michigan and we are still joined at the hip with the automakers. A successful trio of GM , Ford and Chrysler bodes well for our local economy. I have many friends that have suffered greatly, lost their homes and jobs and badly need GM and Chrysler to recover. What I do question is was it worth it? Putting taxpayers on the hook for potentially for over $100 billion along with completely wiping out the shareholders and bondholders versus a standard bankruptcy.
Had we simply let GM and Chrysler fail, they would have done much the same with the caveat being the union wouldn’t have jumped to the front of the line. The bondholders would have been paid first as they should followed by any scraps left over for the shareholders. As is done everyday in this country. Some type of consortium of investors or even another auto company would have come in and purchased their assets. It’s likely they would have also retained the GM brand for its iconic value and brand recognition. And it wouldn’t have cost the taxpayers a dime!
Instead, we did spend billions. Politics played their usual role here. The unions helped mightily to put Obama in office. He paid them back in spades by trashing the bankruptcy laws and putting them to the front of the line. It’s possible whoever would have bought out GM in a standard bankruptcy would have eliminated the unions. Obama wouldn’t allow that and he wouldn’t let a little technicality such as the rule of law stand in the way.
We are also backed into a corner now. If we allowed a standard bankruptcy and the new GM couldn’t make it again a few years from now, we could just let them go under. However, since we now have such a massive investment in them through the bailouts and lines of credit, we can’t allow them to fail again. We won’t. Should they get into trouble again, the government will be right there with our checkbook again before it ever gets to the bankruptcy stage. We have too much invested to allow them to fail. They, of course, know this. Does anyone think they will practice sound fiscal policy knowing they have that wildcard always in their back pocket? Why should they? Take some risks. Make some shady investments. Heck , do whatever the heck they feel like doing, they have a get out of jail free card. I’ll put my money on it. It may take quite some time, but it’ll happen. Thanks to Obama, you and I will be there for them.