Government Motors (GM)

[Ed W]

Excerpts from USAToday, this morning's issue:

...With the government's sale last week of $20.5 billion of stock in troubled insurance giant AIG, the much-maligned TARP is inching closer to the break-even point. When the remaining equity holdings are sold, a modest profit from TARP is now almost certain.

Put simply, the bailouts worked. True, in some cases the government did not do a very good job with the details, and taxpayers are out $142 billion in connection with the non-TARP takeovers of housing giants Fannie Mae and Freddie Mac. But it's time for the economic purists and the Washington cynics to admit that government can occasionally do something positive, at least when faced with a terrifying crisis. And it's time for voters to look back at who got it right and who got it wrong. For those keeping score at home, here's where the main sections of TARP stand:

•Banks....In fact, a $20.6 billion profit has already been realized on a $245.1 billion investment.

•AIG....needed a $112 billion loan from the Fed even before TARP was enacted. Once passed, AIG got an additional $70 billion in equity investments. Today, the Fed loan has been repaid, with interest. After the $20.5 billion stock sale, the government claims a $15.1 billion profit. And it still owns 22% of the company's common stock.

•Detroit. Not only did GM and Chrysler survive the credit crunch, the bankruptcy restructuring they were forced through made them much more competitive. On the downside, the government showed little spine at the bargaining table. As the financier of last resort to the two automakers (plus Ally Financial, the former GMAC), Washington should have gotten paid back before other creditors. That didn't happen. Taxpayers are still $38.9 billion in the hole on a $79.7 billion investment. But future stock sales will recoup some of that money. And had the carmakers imploded, the costs of guaranteeing pensions and paying jobless benefits would have been enormous.


http://www.usatoday.com/news/opinion/editorials/story/2012-09-16/TARP-bailouts-AIG-financial-crisis/57791550/1

So let's ignore the parts of the Troubled Asset Relief Program that actually worked as intended, and instead, focus on the part that hasn't worked...yet. 

[erfalf]

I'm not sure how one could say that TARP was a success with a straight face.

For politicians maybe, but I would hardly use return on investment as a measure of success. If that was the case, I could think of tons of ways for the government to make money.

TARP was a wreck for us (the people) in pretty much every way imaginable. The only people that TARP was good for in the end was big banks. It more than likely saved a handful of banks, and definitely helped many more as well. However, with the extreme swiftness with which the returned to profitability, it is hard to believe they were in as bad as shape (not all of them) as they were portrayed.

http://business.time.com/2011/03/30/former-tarp-official-on-tarp-a-big-fat-failure-mostly/

http://www.nytimes.com/2011/03/30/opinion/30barofsky.html?_r=1&ref=opinion

Generally speaking TARP maybe wasn't the worst idea on the planet, but it is far from what I would call a resounding success. And it flew in the face of the whole Democratic Party platform of helping the little guy. When push comes to shove, they all watch out for themselves first, you and I last. Once everyone comes to that realization, we will be on our way to correcting this monstrosity that is the federal government.

[heironymouspasparagus]

I'm not sure how one could say that TARP was a success with a straight face.

For politicians maybe, but I would hardly use return on investment as a measure of success. If that was the case, I could think of tons of ways for the government to make money.

TARP was a wreck for us (the people) in pretty much every way imaginable. The only people that TARP was good for in the end was big banks. It more than likely saved a handful of banks, and definitely helped many more as well. However, with the extreme swiftness with which the returned to profitability, it is hard to believe they were in as bad as shape (not all of them) as they were portrayed.

Generally speaking TARP maybe wasn't the worst idea on the planet, but it is far from what I would call a resounding success. And it flew in the face of the whole Democratic Party platform of helping the little guy. When push comes to shove, they all watch out for themselves first, you and I last. Once everyone comes to that realization, we will be on our way to correcting this monstrosity that is the federal government.

Wow!  The reality of that business education is really starting to come through.  I guess FoxWorld is the only amusement park business school in the world where a profit would be considered a failure.

As for GM, well...just gotta wonder what kind of reaction's your and Gaspar's bosses would have if they were given the type of business advice advanced here:  "get out now to avoid ALL chance of getting the money back" -- just exactly when it looks like there may well be an actual return at least POSSIBLE, if not probable.  And no, "taking the loss and the deduction" is not a bright thing in this case just when it actually looks like GM  MIGHT give it a go....you know...since they are making a profit and all that.  Kinda like the whole intent of "free enterprise"...

[erfalf]

Wow!  The reality of that business education is really starting to come through.  I guess FoxWorld is the only amusement park business school in the world where a profit would be considered a failure.

As for GM, well...just gotta wonder what kind of reaction's your and Gaspar's bosses would have if they were given the type of business advice advanced here:  "get out now to avoid ALL chance of getting the money back" -- just exactly when it looks like there may well be an actual return at least POSSIBLE, if not probable.  And no, "taking the loss and the deduction" is not a bright thing in this case just when it actually looks like GM  MIGHT give it a go....you know...since they are making a profit and all that.  Kinda like the whole intent of "free enterprise"...

It would be nice if you would retort with something interesting instead of FoxNews this, Brietbart that....

Regarding GM, does the fact that GM's management is saying that they want the government out because it is holding them back mean anything. While I don't agree with how we handled the bankruptcy, we did it. We did it on the premise that we were helping GM. Now, we aren't helping them. Why should they not get out. If the government was in the business of making money, they would have been fired long ago. I don't think anyone (except those shilling for Obama) would consider the top priority of the government to be "making money".

[heironymouspasparagus]

It would be nice if you would retort with something interesting instead of FoxNews this, Brietbart that....

Regarding GM, does the fact that GM's management is saying that they want the government out because it is holding them back mean anything. While I don't agree with how we handled the bankruptcy, we did it. We did it on the premise that we were helping GM. Now, we aren't helping them. Why should they not get out. If the government was in the business of making money, they would have been fired long ago. I don't think anyone (except those shilling for Obama) would consider the top priority of the government to be "making money".

Now it is certain - with a comment like that, there was no business education.

Oh, yeah...it means EVERYTHING!!!  Just like when any of the companies involved said that they wanted Carl Icahn out because he was holding them back...do they teach about Icahn in FoxFantasyWorld Business School??

Why should we sell our investment any more than any other person or institution that owns GM?  It IS an investment - and very sad that it had to be made in the first case - but since we are there, we certainly should try to maximize the return as would any other investor.


And this whole adventure shows just what a wonderful idea the extreme rightists have when they talk about "privatizing" Social Security - that is EXACTLY what they are proposing - the the government become in effect its own investment banker with the trust fund.  Such clever people....  and now, chastising when we are actually doing that very thing. 

[erfalf]

Now it is certain - with a comment like that, there was no business education.

Oh, yeah...it means EVERYTHING!!!  Just like when any of the companies involved said that they wanted Carl Icahn out because he was holding them back...do they teach about Icahn in FoxFantasyWorld Business School??

Why should we sell our investment any more than any other person or institution that owns GM?  It IS an investment - and very sad that it had to be made in the first case - but since we are there, we certainly should try to maximize the return as would any other investor.


And this whole adventure shows just what a wonderful idea the extreme rightists have when they talk about "privatizing" Social Security - that is EXACTLY what they are proposing - the the government become in effect its own investment banker with the trust fund.  Such clever people....  and now, chastising when we are actually doing that very thing. 

Boy, if I had a nickel for every dis at my business degree followed by a backwards retort.

The federal government (to my knowledge) is not a business. It may or may not make investments that actaully make money or break even. However, in this particular instance, GM was going under. The stated goal was to save GM. Now, I'm not saying that government ownership would necessarily run GM into the ground again, but it would appear that government ownership is hindering the turnaround at GM. It is a fair assessment. It is what it is. So either the government needs to follow through on their stated goals, or just come out and say that we are a investment company. Of course if the later were the case, they would have long ago been fired. 

[heironymouspasparagus]

The federal government (to my knowledge) is not a business. It may or may not make investments that actaully make money or break even. However, in this particular instance, GM was going under. The stated goal was to save GM. Now, I'm not saying that government ownership would necessarily run GM into the ground again, but it would appear that government ownership is hindering the turnaround at GM. It is a fair assessment. It is what it is. So either the government needs to follow through on their stated goals, or just come out and say that we are a investment company. Of course if the later were the case, they would have long ago been fired.  

Only in FoxFantasyWorld would an investment by one particular entity or person mean anything different than that same investment by any other entity or person.  

You say the government is not a business.  And yet your own party is advocating just that - putting the Social Security system into the private equity markets.  Wow.  See the irony??

Hindering according to who?  The CEO of GM??  Ok, here is a very direct question, since the dissemination is all over the map.  Since in EVERY other instance in the world, money is a neutral entity...tell us HOW the money that holds GM stock from say, my purchase of GM stock would be, in ANY way different from money from the Federal government that holds GM stock??  (Other than scale...)  

How can it possibly make a difference to either the company OR the equity markets?  (Except for some possibility of price depression if it were all sold at once...)  (Make some sense of the answer, and I will try very hard not to disparage the business degree from here on - don't feel like I am picking on you, though...I say the same about Harvard MBA school.)

[erfalf]

Only in FoxFantasyWorld would an investment by one particular entity or person mean anything different than that same investment by any other entity or person.  

You say the government is not a business.  And yet your own party is advocating just that - putting the Social Security system into the private equity markets.  Wow.  See the irony??

Didn't let me down with the FOX retort. 

Privatizing something is the exact opposite of government as a business. That has more to do with what the government should and shouldn't do. Which there is no right or wrong answer to that question. Just opinion. And generally, privatization is done to save the government money. For example, some towns hire private firms to pick up trash because the government couldn't provide the same service at that price. For that matter, there is hardly anything that most governments actually do. Governments are allocators, not doers (if that's a word, English was definitely not my subject, you can slam me on that all you want  ).

Hindering according to who?  The CEO of GM??  Ok, here is a very direct question, since the dissemination is all over the map.  Since in EVERY other instance in the world, money is a neutral entity...tell us HOW the money that holds GM stock from say, my purchase of GM stock would be, in ANY way different from money from the Federal government that holds GM stock??  (Other than scale...)  

There is no difference. But we're not talking about money as much as we are government responsibility.

And yes, the management at GM is saying that it wants the government out. I'm sure their quit aware of the possible effects of a government sale and are still adamant that it happen.

How can it possibly make a difference to either the company OR the equity markets?  (Except for some possibility of price depression if it were all sold at once...)  (Make some sense of the answer, and I will try very hard not to disparage the business degree from here on - don't feel like I am picking on you, though...I say the same about Harvard MBA school.)

From a marketing perspective, there is a stigma of being "Government Motors" and the name of the game after all is to sell stuff. Yes, in my opinion, the government holding the stock is keeping the price up by limiting the number of shares sold. Other than that, I'm not sure what else you really are asking. Those are the highlights.

Apparently the reasoning behind holding on to the stock is to keep GM on the right track. Does no one else find this problematic? There are government officials talking about how poorly GM was run (duh). How and why does the government think it knows what the right way is and why does it think it needs to be imposing this on to private companies. Why did they think GM was so worth saving if it was so poorly run as to not come up with a reorganization plan on its own. It just seems to me that the government wants to be in the car business for some reason. That is the discussion that should be occuring. Whether or not the federal government should be running private companies.

[nathanm]

You don't think the reasoning behind continuing to hold GM stock is so that we lose the least amount of money possible on bailing them out? I doubt Carlyle or Bain would sell early just because management gets restless. (Note, I'm not saying government should be run like a business, but it's still a useful benchmark to help inform what is reasonable)

[erfalf]

You don't think the reasoning behind continuing to hold GM stock is so that we lose the least amount of money possible on bailing them out? I doubt Carlyle or Bain would sell early just because management gets restless. (Note, I'm not saying government should be run like a business, but it's still a useful benchmark to help inform what is reasonable)

Look, in no way am I saying that return on investment is not important. It is a discussion about priorities. What are the priorities of the federal government? If it is to turn a profit, be up front. However, that would bother me immensely, because I don't think that is the government's role. It creates far too may conflicts of interest.

My only point is that the government "sold" the bailout (or whatever you want to call it) of GM as a way to keep the auto industry going. If it now appears that the government is hindering that very thing, and they are unwilling to entertain ways to help, then what was the point of it after all? Do I want the government to loose money, no. But what is government for? Locally there is virtually nothing that creates a direct "return on investment". Governments spend money, they don't make money. I'm fine with that. Obviously I am not in agreement with all spending, but you get the gist.

[nathanm]

Ok, explain to me in what way the government continuing to hold 20something percent of GM's stock keeps them from selling more cars. I believe they are limiting CEO pay somewhat. I can't really consider that a terrible thing, but it's probably not a hill worth dying on since the problem isn't GM specifically, it's the culture of corruption in the C-suites.

[erfalf]

Ok, explain to me in what way the government continuing to hold 20something percent of GM's stock keeps them from selling more cars. I believe they are limiting CEO pay somewhat. I can't really consider that a terrible thing, but it's probably not a hill worth dying on since the problem isn't GM specifically, it's the culture of corruption in the C-suites.

It's not like it is a fact or anything, but marketing is generally factless. Trying to predict the future is not easy, obviously.

The reasoning being that the stigma attached to GM for being "Government Motors". Ford has been perceived to have benefitted from this over the last few years. I have no way of verifying this, and I doubt there is real evidence to show one way or the other. But the name of the game is selling cars. I'm not saying it's absolutely incontrivertably true, but the feds seem unwilling to entertain the idea and far more interested in keeping control over the firm. Does this not bother anyone else? Why did the government not show the same interest in Chrysler?

[Conan71]

My boss may be the only one who has attached a stigma to it which has resulted in a lost sale to GM, but after driving Chevys for the last 14 years, he bought a new Ford truck a couple of months ago.  He wouldn't even bother to look at a Chevy simply because he's put off by the government being attached to it.  I realize that doesn't show much rationale, but he's a consumer with plenty of disposable income.  He voted with his wallet.

He even purchased it at Bob Hurley.  He could have walked next door to Momentum Chevrolet to compare pricing and features, but was adamant he would not own another GM product.  Specifically, I believe it has more to do with Ford at least being forward thinking enough that they needed to make the hard decisions before bankruptcy became necessary.  GM simply proceeded until the government needed to save their donkey.

[erfalf]

My boss may be the only one who has attached a stigma to it which has resulted in a lost sale to GM, but after driving Chevys for the last 14 years, he bought a new Ford truck a couple of months ago.  He wouldn't even bother to look at a Chevy simply because he's put off by the government being attached to it.  I realize that doesn't show much rationale, but he's a consumer with plenty of disposable income.  He voted with his wallet.

He even purchased it at Bob Hurley.  He could have walked next door to Momentum Chevrolet to compare pricing and features, but was adamant he would not own another GM product.  Specifically, I believe it has more to do with Ford at least being forward thinking enough that they needed to make the hard decisions before bankruptcy became necessary.  GM simply proceeded until the government needed to save their donkey.

It doesn't help GM any that Ford seems to be really hitting it's stride with design right now. They have a pretty sweet lineup of vehicles.

[Townsend]

My boss may be the only one who has attached a stigma to it which has resulted in a lost sale to GM, but after driving Chevys for the last 14 years, he bought a new Ford truck a couple of months ago.  He wouldn't even bother to look at a Chevy simply because he's put off by the government being attached to it.  I realize that doesn't show much rationale, but he's a consumer with plenty of disposable income.  He voted with his wallet.

He even purchased it at Bob Hurley.  He could have walked next door to Momentum Chevrolet to compare pricing and features, but was adamant he would not own another GM product.  Specifically, I believe it has more to do with Ford at least being forward thinking enough that they needed to make the hard decisions before bankruptcy became necessary.  GM simply proceeded until the government needed to save their donkey.

You think if McCain had won he'd've done the same thing?