American Elephants

U.S. Sells Off the Last of Its General Motors Stock— At a $10.5 Billion Loss by The Elephant's Child


On March 30, 2009, the president of the United States told an anxious nation “Let me be clear: The United States government has no interest in running GM.” Just another whopper from the presidential book of lies. The day before, he had fired General Motors Chief Executive Officer Rick Wagoner. Where is it written that any president has the authority to take over a private business? This unprecedented hostile takeover of a former American manufacturing giant demonstrated that the basic social contract between the U.S.  government and private business was being torn up on live television. Vladimir Putin can get away with this sort of thing. Was the American media so ignorant of the rule of law in this country and such a complete doormat for the president that it was perfectly fine?

Does the wilfulness of this president allow this White House to seize any company that it deems a “systemic risk” without regard to the law, basic economic principles, and simple restraint? The president used TARP funds, (Troubled Asset Relief Program) signed by President Bush in October of 2008, to buy mortgage-backed securities and other “toxic assets” from financial institutions. The TARP law specifically referred to financial institutions, not car companies. American Bankruptcy law successfully allows companies to reorganize, regroup, and might have allowed GM to tackle the basic cause of their problems, out of control union contracts.

U.S. taxpayers no longer own any of General Motors. The Treasury sold the last of its remaining 31.1 million GM shares yesterday. The $10.5 billion loss for taxpayers is supposed to be regarded as a success for the Obama administration. The Treasury had put $49.5 billion of taxpayer money into illegally bailing out GM. It recovered $39 billion from selling the stock.

The administration emphasizes that the loss it took on GM shares is far less costly than had BM been allowed to fail.

Inaction could have cost the broader economy more than one million jobs, billions in lost personal savings, and significantly reduced economic production,” Treasury Secretary Jacob Lew said in a statement announcing that Treasury had sold all its remaining shares.

Excuse me, there is a standard procedure called bankruptcy, an enormously successful way of allowing companies to reorganize and regroup free of immediate pressure from the holders of their debt. But standard bankruptcy would have tackled overgenerous union contracts, bondholders would have had first claim on assets according to the law. The union got a big share of ownership of GM because Obama gets big funding from unions. The bondholders got shafted.

It’s no use pondering “what might have been”— there’s no way of knowing. The administration would prefer that you don’t think about it. And what’s another $10.5 billion loss — we have so many, and $10 billion is just chump change in terms of today’s debt.

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