GM's CEO Rejects Repaying Feds for Bailout Losses 356
PolygamousRanchKid writes with news that GM's outgoing CEO doesn't agree with the National Law and Policy Center's call for GM to repay the loss made by the Treasury from their bailout. From the article: "GM CEO Dan Akerson rejects any suggestion that the company should compensate for the losses. He says Treasury officials took the same risk assumed by anyone who purchases stock.
Akerson said that GM repaid all the debt issued by the government beginning in December 2008 when George W. Bush was still president and extending into the first year of Barack Obama's presidency. He added that it was the Treasury's decision ... to take an ownership stake in the form of company shares."
Wrong use of money these days (Score:5, Insightful)
real socialism (Score:5, Insightful)
The word socialism gets tossed around carelessly by right wing pols who don't know what it is. To them it's just a nasty thing you say when liberals like me want to redistribute a little wealth. But real socialism, as meant by Karl Marx, is defined as "the ownership of the means of production by the state". Domestic spending on public education or health care is NOT socialism. But government assumption of corporate shares is the real thing. In our system of economics, corporations are not people and governments do not own the means of production.
Re:real socialism (Score:5, Insightful)
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um, no...
socialism
1. a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.
The united states is partially socialist. Not as socialist as the USSR was or China is. Most of the western world is to some degree socialist. This is a matter of degrees not absolutes.
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To some degree you need funding from corporations to get elected in the first place. I mean who pays for the campaign? That they get served in returns is bound to happen.
The fact that in the US it is bloody hard to create alternatives to both leading parties is a problem as well insofar as the less people you have to buy off the easier it is to buy them off.
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Yes, but you realize that "means of production owned by the state" is pretty much the thing that conservatives and right-wingers fear the most. Incidentally, your description of socialism also sounds a lot like fascism...
Anyway, conservatives will question the logic of solving the problem of too much power concentrating in the hands of a few corporations by further concentrating that power into the hands of a single, enormous entity.
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If charity worked we wouldn't need taxes. As it actually is, people are incredibly selfish antisocial bastards. Also, most of those who do not work, wish that they could get it. Just a few facts for you to ponder - as opposed to what the "media" would have you think.
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The federal government should only be involved in matters that require national cooperation, such as defense and infrastructure. Everything else is tying to use a jackhammer to set a thumbtack.
Local charitable organizations are still quite successful despite all the money that the gov
Re:real socialism (Score:5, Insightful)
We're not captains of industry, we're captains of freedom. And the disabled are not douchebags, they disabled. That's where charity comes in to play.
Statists are the biggest captains of industry, they're the enablers, the socialist drug pushers, and the violent thugs. Since you like using names for people.
Libertarians and anarchists are on a far better plane than people like you. We value morals and ethics over utilitarianism which is all too easy to misuse by tyrants.
Re:real socialism (Score:4, Insightful)
Most of us, unlike Karl Marx, do not believe you need to own something to control it - the evidence is that it is quite possible to alter the volume on someone else's stereo, or drive a stolen car. The man was an idiot.
Scumbags like you think that the object of life is to be "greedier than thou".
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We the people give permission to people/corporations to operate profitably amongst us...
How magnanimous of you. Guess what: they don't need your permission. Which means you don't get to attach strings or demand concessions.
If you choose to build some infrastructure without any prior arrangement, you can deny them access to it but you have no basis for charging them for it. That was your decision, not theirs; you bear the costs.
Most of us, unlike Karl Marx, do not believe you need to own something to control it - the evidence is that it is quite possible to alter the volume on someone else's stereo, or drive a stolen car.
Marx got a lot of things wrong, but he had the right idea here. While you can control something you don't own, you do need to own it to have the right to control it. Tha
Re:real socialism (Score:4)
> Yet people like you ... never complain when the IRS giving our money to the Military, or to form a police state ...
Stereotype much? :)
I hate big government AND I hate big corporations. (I'm an equal-opportunity curmudgeon.) So yes, I will complain about the GM bailout, but I will also complain about the military buying weapon systems that it arguably doesn't need and will almost certainly never use.
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The government of China works pretty well. So did the governments of Soviet Russia during the so called war communism period. Economically at least.
State control of the economy and planned economics did not begin with communism, despite what Marx would have liked to think, since Palace economies in the distant past worked pretty much that way. The problems are always the same. Lack of innovation and lack of drive to push efficiency further. But in a place where the individuals actors themselves cannot act t
Re:real socialism (Score:5, Insightful)
The government of China works pretty well. So did the governments of Soviet Russia during the so called war communism period. Economically at least.
Yeah...I don't think so. If you think it was economically sound, then all you need to do is find people who lived during the period, and ask them about the lack of *everything* from basic necessities, to food. Hell, I can even give a small story from a ex-professor of mine(teaches criminal law and drug laws here in Canada). Back in the 80's they had a group of 10 soviet police officers come over as part of a training program. Their firm belief was everything was staged, from people driving cars, to full shelves in every store, to people walking around and not being subject to search, arrest, and documentation checks. They believed, that the government had created giant potyomkin villages(ottawa, and toronto), just to impress them.
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This is in part because resources were channeled to the defense sector. Khrushchev tried to increase the production of commodity products but he failed. Miserably. Planned economics seldom works in the consumer products sector.
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Yes, its fine to deliver 100 tons of shoes by making 100 identical shoes left that weigh one ton each!
State control apparatus always slides downwards into a pit of sewage because no one gains from doing a job better than the next guy, but many benefit from doing it worse, and anyone doing anything in a new way is undermining the status quo, and by implication undermining the government,
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Had they done that when Stalin was in power they would have been denounced as 'wreckers' and sent to the Gulag in Siberia or killed immediately. So no that did not happen. There was shoddy production quality in the rush to meet production quotas. But if you did that in any strategically relevant sector you would not live a happy life for long.
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Example: See what happened to Tupolev after the ANT-20 requirement and quality control issues.
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Mao's problems started when he went from the Soviet planned development model, which had been working fairly well, to his Great Leap Forward movement and the repression where he started punishing professors and scientists in most sectors of the country. The only person who I can think of which was even more evil in the past century is probably Pol Pot. The only sector which escaped was probably ICBM development. But even that after the freeze in relationship with the USSR their development was undermined by
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Because:
a) It's the right thing to do, the money he took belonged to the people.
b) It won't affect him, personally, on any level. His paycheck will be as big as ever.
I guess he just enjoys being a tyrant and saying "no" to people when they come to him with reasonable requests.
Re:Wrong use of money these days (Score:5, Insightful)
It doesn't affect him personally, but it does affect GM's bottom line and it's his duty to the shareholders to protect that. Ultimately he's got to choose between two sets of investors: GM's shareholders, and the general public, and he's chosen the ones who still hold shares. As far as is economic function is concerned he has done exactly the right thing. Of course one would like to think that CEOs of all people weren't reduced to the role of an amoral intelligent agent serving the mother company, but at the end of the day even a brain cell doesn't get to argue with the body's need to survive and flourish.
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The government has sold its remaining shares, at a lower price than it bought them for in the first place. That's the loss alluded to in the summary.
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Yes, I would love to hear the economic rationale for selling when they did.
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Yes, I would love to hear the economic rationale for selling when they did.
To shut up all the people whining about the government being in the car business?
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Run? Whatever losses GM made during that period would seem to be the GM leadership's own responsibility. They nearly went bankrupt in the first place after all.
Re: Wrong use of money these days (Score:4)
That GM lost money is their responsibility. That the dollars came from taxpayers, and the loss is now effectively part of the national debt, is the government's fault.
Re: Wrong use of money these days (Score:3)
Government is no better than other investors, and often worse. Take Solyndra as an example: private investors basically gave up on it until corruptocrats at DoE decided to funnel cash down that toilet. There's also a conflict of interest when government has a big stock position in certain companies. Given that the US has traditionally not made that kind of investment in private companies, I certainly do hold the government responsible for losing taxpayer dollars there. Do you think private investors are
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Government is no better than other investors, and often worse. Take Solyndra as an example: private investors basically gave up on it until corruptocrats at DoE decided to funnel cash down that toilet. There's also a conflict of interest when government has a big stock position in certain companies. Given that the US has traditionally not made that kind of investment in private companies, I certainly do hold the government responsible for losing taxpayer dollars there. Do you think private investors are, or should be, off the hook when they make money-losing investments?
If you're going to talk about Solyndra, you really should include mention of China dumping solar cells on the U.S. market below cost as a big part of Solyndra's woes.
And how the federal government didn't really do anymore to prevent that then they did to keep the Japanese from destroying domestic television set production via dumping back in the '70s, despite the government's ability and duty to regulate commerce.
Re: Wrong use of money these days (Score:4, Insightful)
But only if the government is involved, it is all the fault of of the government, right?
When the government uses force to take money from ordinary people "invests" it for them, losing $10 billion on the deal, then yes. It's their fault.
If the people whose jobs/future that were saved by that "investment" now have an excess of $28 billion in cash, they should give it back to the people who were forced to help them (with threats of jail, etc. if they didn't).
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What confuses me is how does buying stock in a company help the company stay afloat? They don't own the shares, the shares do nothing for them once they've sold them. It only gave whomever owned the shares prior to the government purchase a gain/loss from their previous purchase.
I don't get why whomever held those shares sold them. I bought a single share of GM for shits and giggles a while back. It's been steadily gaining over the last ~ six months and there was no reason to sell other than politic
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But, he survived and flourished because of the tax payers. They'll fail again and we'll see with the tax payers will help them survive a second time.
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I didn't say it was right, just that amoral decisions by human beings are the inevitable outcome of the survival instincts of the vast and terrible creature they compose.
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GM is correct of course. This was not a loan and the State could have chosen to sell off their shares after the economy rebounded and GM stock went further up. Assuming it ever did.
What the State can do to get the money back from the auto industry is to start taxing cars more. But I suspect they would not like that either.
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Neither of these statements are facts.
Saying it's the 'right' thing to do is purely subjective. You don't know what he believes is the right thing to do, I'm sure in his mind he's already done the right thing and trying to argue that he should do YOUR right thing instead of his own right thing will never get you anywhere. It's a null argument.
It very much will affect his position at that company. His overriding goal is to make choices that keep the company strongest to the exclusion of all other considerati
Re:Wrong use of money these days (Score:5, Insightful)
He didn't take the money, Treasury chose to invest the money under direction of both the Bush and Obama administrations, in order to keep GM and its supply chain from collapsing. While they lost money on the face of it, the economy gained value, likely in excess of the $10B loss. If the end result exceeds the scenario where government did nothing, then government did it's job by stabilizing the economy.
This isn't personal. His job is to protect shareholder value. He indicated, in the interview, that if he paid back the $10B loss he would be opening GM up to lawsuits from every other shareholder who lost money in the bankruptcy.
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He didn't take the money, Treasury chose to invest the money under direction of both the Bush and Obama administrations, in order to keep GM and its supply chain from collapsing. While they lost money on the face of it, the economy gained value, likely in excess of the $10B loss. If the end result exceeds the scenario where government did nothing, then government did it's job by stabilizing the economy.
This isn't personal. His job is to protect shareholder value. He indicated, in the interview, that if he paid back the $10B loss he would be opening GM up to lawsuits from every other shareholder who lost money in the bankruptcy.
The shareholders who lost money in the bankruptcy were those who held the previous shares, the ones from GM's first Initial Public Offering from back in the early 20th century, or shares issued subsequently, but before the bankruptcy.
Technically, the corporation of which those shares were shares no longer exists.
And those who bought bonds issued by that previous corporation have a much more legitimate gripe than the government.
GM would be facing suits by others who bought the same shares the government did,
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Some perspective when Sweden bailed out the banks in 1994 the government waited a long time to sell. It was a very good investment.
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The whole point of the bailout was to prevent a systemic collapse of the US economy. A GM failure would have probably caused losses upwards of 105 billion dollars of lost tax revenue (http://money.cnn.com/2013/12/09/news/companies/gm-bailout-stock-sale/), which is paltry in context of the direct loss of 10 Billion.
The treasury would have had to sold it at 53 USD to break even
Re: Wrong use of money these days (Score:2)
That you believe those numbers is your fault. For example, when was the last time GM stock traded above $45? Why do you think one of today's shares will ever be worth more than $50?
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That you believe those numbers is your fault. For example, when was the last time GM stock traded above $45? Why do you think one of today's shares will ever be worth more than $50?
That probably would have been around 2005-06, and guessing at their sales figures? I'd say mid to late 2014, depending on whether or not the current administration moves forward with it usual business of not having a clue about how the world works or not. Nothing kills economic growth faster than a government that's uncertain, or enables business killing regulations(see Ontario and California).
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Want to punish them? Don't buy their vehicles when they act like dicks.
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That only punishes the workers (and the taxpayer if they need another bailout because of it).
The people who really need punishing will happily watch you do that from their yachts.
Re:Wrong use of money these days (Score:5, Insightful)
a) Those 'other shareholders' bought the shares voluntarily. The taxpayer didn't.
Very true, but "the taxpayer" did not choose to invest in GM in the first place, the US Government did. Equally, "the taxpayer" did not choose to sell their shares in GM, at a lower price than those shares were bought for (thus generating the losses), the US Government did.
The US Government had a very compelling reason for buying those shares and shoring up the GM corporate entity and its supply chain. However, there was no contractual obligation for them to sell the shares when they did - as far as I can tell, that decision to sell was made for purely political/PR decisions. Admittedly, those reasons are also compelling - if the US Government introduces and legislation that will have some kind of positive impact for car manufacturers, then there is a conflict-of-interest issue to be addressed, so it is in the Government's interest to avoid holding the shares for an extended period.
However, the Government decided to sell when it did, and the Government is (or should be) responsible for the losses incurred through that decision. After all, if the transaction had yielded a massive profit, the Government would not have been willing to hand that profit over, either back to GM for further investment or to some other organisation that could use it. That profit would go to the treasury to be used.
The company whose shares are being bought and sold has no control over that process, as the shares are freely tradeable on the open market. So without any leverage of control, the company cannot assume the liability for losses. Want to complain about it? Welcome to capitalism. Complaints can be addressed to our Complaints Manager, Helen Waite. Her office is in the basement. Form a queue outside the door, and when someone asks what you are doing, tell them that you were told to go to Helen Waite.
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Bingo. Maybe the taxpayers have a very incompetent portfolio manager. The federal government.
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a) Those 'other shareholders' bought the shares voluntarily. The taxpayer didn't.
I wonder if you feel the same way when its taxpayer money used for social programs that have near-certain negative returns.
The problem began when the government moved to help the company with taxpayer dollars. It is no surprise from that point forward that the taxpayers lost value, because the government does not evaluate taxpayer value the same way that taxpayers do. Most members of government evaluate legislation as a tool to gain campaign donations, with taxpayer value nowhere in sight of this evaluat
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Wouldn't it simply be a question of whether the government ever need to do either GM or a company run by Dan Ackerson a favour, they refer to this case and say, "sorry, we're disinclined"...?
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Let's reframe the problem; GM's outgoing CEO doesn't agree with the National Law and Policy Center's call for to repay the loss made by the TAXPAYERS from their bailout.
So, we send a load of hoodlums to the next meeting of the board of directors and cut a finger from each of their hands, slap them around a little and set their cars ablaze in the parking lot. Next time it will be worse, the interest just went up to 100%, and you better have a goddamn payment ready next time we see you. We know who you are an
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By holding stock, they (the US government) may only recover whatever someone else is willing to pay for it. If, and only if, GM offered to buy back the stock in question could the price ever be remotely guaranteed to be close to what it was purchased for. Instead the US government sought to dump that stock for politically expedient reasons which manifested itself as the "loss" to the taxpayers. Had the US government issued a loan to GM this would not be an issue. Had GM and the US government signed a contra
risk? with a printing press? (Score:3, Interesting)
Risk pool payment, not payback. (Score:5, Interesting)
Absolutely right, they shouldn't be forced to pay back government losses. They, along with every other too big to fail corporation, should pay annually in perpetuity into risk pool that will handle all future bail-outs. Not as a tax, but as an insurance pool, that coincidentally, should be required to be held in US treasury bonds.
I'm sure if you presented that idea, they'd rush to substitute the $10b payback.
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(and who is "too big to fail" anyway?)
The famous economist John Maynard Keynes wrote something like:
"If I owe the bank 100 pounds, I have a problem."
"If I owe the bank 100,000 pounds, the bank has a problem."
The US government decided that GM is to big to fail. Which meant they had two problems:
1) GM was bankrupt . . . in other words, it failed.
2) GM is too big to fail.
Problem 1) was solved by fleecing the US taxpayers of billions of dollars. GM is solvent now.
But problem 2) was not solved. GM is still too big to fail. Which means
Re: Risk pool payment, not payback. (Score:2)
Re #1, GM is solvent *for now*, but it is far from clear that they have fixed the structural problems that led to their bankruptcy. The biggest effect of their bailout may simply have been to prolong the pain and economic dislocations due to their collapse, not to to prevent their collapse.
Re:Risk pool payment, not payback. (Score:5, Insightful)
uh that makes no sense at all.
they should have gone bankrupt - or loaned money backed by their assets... having a pool that's kept only to keep failing companies running belongs to the history of the ussr.
Re:Risk pool payment, not payback. (Score:4, Interesting)
uh that makes no sense at all.
they should have gone bankrupt - or loaned money backed by their assets... having a pool that's kept only to keep failing companies running belongs to the history of the ussr.
Who should have gone bankrupt? General Motors? They did.
Or at least the previously exisiting corporation known as General Motors did. And the value of the shares of stock in that corporation fell to $0, and that corporation doesn't really exist any more.
A new corporation also known as General Motors came into being, and issued stock, and it is some of that stock which the federal government purchased and then chose to sell for less than what they paid.
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I wonder if any economist has ever modeled what it would look like if all risk was pooled into a central risk pool versus the myriad risk pools we have now for all the various forms of hazard insurance.
Maybe it wouldn't make any sense, but one of the principal arguments for most health care reform schemes is risk pooling. Maybe it only makes sense for like risks, but there are plenty of insurance companies that sell policies for essentially dissimilar risks (ie, my home insurer also provides my boat polic
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You mean a new tax. I don't see them batting an eyelash at that. It's not like THEY will have to pay it.
Right and wrong (Score:5, Interesting)
He is technically right and morally wrong.
Let the shareholders decide by vote. We the consumers (and the taxpayers) can then decide if we want to continue to buy their products, bail them out, or invest as shareholders. This is a decision that will have very long term effects on GM that will affect them long after the CEO is gone. I know it will affect my future buying decisions.
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Didn't the politicians get what they wanted? (Score:2)
If the Treasury still owns (lots of) stock (and vo (Score:2)
Fire him
Unless they were bonds (Score:3, Funny)
Unless they were bonds, suck it up. The stock market is a gamble, not a GIC or Treasury Certificate.
I'm long past tired of "investors" suing for their losses. You want to gamble with your money, you take the risk of losing it.
If you don't like the risk, buy bonds or deposit your money in a bank for their paltry returns.
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I'm long past tired of "investors" suing for their losses. You want to gamble with your money, you take the risk of losing it.
It wasn't their money to gamble with. It belonged to the taxpayers.
The people at GM should be glad they still have a company and jobs to go to. Saying "thankyou" to the taxpayer doesn't make any sense to you? It's not like they don't have the money (in cash) to do so.
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It wasn't their money to gamble with. It belonged to the taxpayers.
Its not your property if you do not retain the rights afforded to property owners.
The idea that the money did not "belong" to the government is a fantasy based on wishful thinking. Its a pipe dream that doesnt jive with reality. The members of government that decide the fate of these vast sums of money are not asking you, the supposed "rightful owner" of the tax dollars, what to do with it.
Nobody with the power to decide asked the question "is this good value for the taxpayer?" Nobody with the power to
Re: Unless they were bonds (Score:2)
Smart money says GM stock (in constant dollars) will never exceed the price that the US paid.
This just in: welfare recipient ungrateful s.o.b. (Score:5, Insightful)
...at all levels.
As I calculate, the cost to the government is REALLY more like net $70 billion, when you take the $50bn aid, the devaluation, the forgiven loans, and then deduct the small amount that came back to the government as it sold off its shares.
The FACT is that government handouts validate, enstantiate, hell, they ENCOURAGE and reward the sorts of shitty decision-making that caused them to be necessary in the first place. At ALL socioeconomic levels.
Treasury isn't a regular shareholder (Score:2)
Welcome to United State (non)capitalism (Score:4, Interesting)
All the really big players are self serving cartels run for the benefit of the top tier insiders. The stock holders, clients and workforce are short changed and the largest profit goes to the Chief XXX Officers and the Board of Directors.
When the Feds bought GM stock it was poison. No one in the investment world would touch it. If the government didn't take a gamble then GM would have been out of business. Remember that in capitalism larger risk should reap larger rewards for success. However when it comes to bilking the government (and thus the taxpayers), suddenly basic principles of risk and reward no longer apply.
Speaking of rewards, look what happens when CEOs and the like screw everything up. No matter how horrible a job they do, they are always paid vast sums of money. Their performance has nothing to do with their payout.
Look at Mozilo [wikipedia.org], the CEO of Countrywide Financial. Time magazine him one of the "25 People to Blame for the Financial Crisis". He made hundred of millions of dollars. He settled all civil and criminal charges against him for $67.5 million, with Countrywide picking up $20 million. When Countrywide was at it's height, he made loans to all sorts of insiders at Fanny Mae and and Congress members and their families under a program called the "Friends of Angelo (FOA)" VIP program. It's all been swept under the rug.
Another example is that unlocking a smart phone under contract is a federal level felony, like interstate drug dealing or kidnapping. Even though the Obama administration said they would try and change the law, the Trans Pacific Partnership treaty has a provision making this permanent. Since it's an international treaty, there would be no way to overturn this other then renegotiating the treaty will all the other countries. The phone company cartel has their dirty hands all over this. The various carriers only compete on one thing: who gets to take more out of you wallet while delivering the minimal service they can get away with.
No real competition in the US. Move along, nothing to see...
GM is correct in this case (Score:3)
Whether they should have been bailed out, people can argue until hell freezes over. However, since they were bailed out, it was totally up to the government when they sold their stock. They set an arbitrary date to divest themselves of the GM stock by the end of the year. They could have held the stock longer until it recovered their cost. As such, the loss is becuase of the government's action, not GM's.
Maybe they (the government) should have purchased bonds, but they didn't. They (the government) made a decision to purchase stock and they made a decision to sell it below what they paid. Why should GM be faulted for that?
Comment removed (Score:4, Interesting)
Of course they shouldn't repay (Score:4, Insightful)
GM had met the terms required of it from the bailout - some of which was paying back in cash, and some of which was paying in stock. The government decided to sell the stock at a loss. That's not GM's fault.
Here is my question - what happened to GM stock when that many shares suddenly flooded the market? Wouldn't that make stock prices go DOWN? Ironically, though, the stock price went up considerably as investors are happy the government no longer holds a part of GM.
In any case, whether GM benefited from this or not, the point is that 1)GM fulfilled its obligation and 2) the government sold stock at a loss. Maybe this lesson will force the government to make better financial decisions. Okay, probably not, but one could hope
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"Not our fault the government is stupid" (Score:2)
Shares of General Motors Company (GM) hit new 52-week high of $33.77 on May 17, which is above its previous level of $32.44 as well as the Initial Public Offering (:IPO) price of $33.00 (held in Nov 2010) for the first time since May 4, 2011. [yahoo.com]
The government could have sold then and turned a profit (or at least a capital gain).
They chose to wait and sell after the share price had gone back down again, and to not wait and see if it went back up in the future.
GM had no control over those actions.
I'm sure many others who bought at the IPO have sold their shares at various times since then, and taken the then-going price.
If they did so at a loss, GM doesn't owe them anything, and if they did so at a profit, they don't owe GM anything.
He's right (Score:3)
Other GM investment (Score:2)
So much for the High Road (Score:2)
GM CEO Rejects Repaying Feds like... (Score:3)
Philosophy of failed capitalism (Score:3)
Refuse to honor your debt to society who bailed your assets out of imminent bankruptcy.
Capitalism failed. Repeat. No lessons were learned. The U.S. economy post-captialism is run by failures.
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Yep. There's no *legal* requirement for him to pay back the money he took from the people that are keeping him in a life of luxury, so why should he? It's not as if his management was in any way linked to the shitty cars that weren't selling enough to keep the company going. Nope. Not a bit.
Re:Welcome to the stock market (Score:4, Informative)
The government did not issue a loan, they bought a large amount of stock.
a) Would they have purchased that stock if it hadn't been a "bailout"?
b) A "loan" would have left them with nothing if the company had tanked. A stock purchase would entitle them to some company assets to sell off, this is what most people call "security".
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How many cents in the dollar do you think a fire sale in a bust motor factory would raise? I'm assuming there's no way you could sell it as a going concern.
There again it's not my government so who am I to ask.
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As a loan creditor the government would be entitled to some portion of its liability in any bankrupcy sell-off.
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Whereas as stockholders come behind creditors in bankruptcy proceedings. So if a loan left the with "nothing," stock would have left them with less in such an event.
Re:Welcome to the stock market (Score:5, Informative)
You are wrong.
a) As a "bailout", the fed took ownership of the company through stock. How shall GM pay their owners? From what? Shall they take a loan to pay them? From whom? Should they only pay the fed or the other owners as well?
b) If the company had tanked, its assets would be liquidated and payed out to the creditors. Not the owners, you see, because they are the ones who failed. They are left with nothing when the company fails
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Depends on the shares. I would be surprised if the shares the government was issued with did not explicitly include an entitlement to GM's assets in the case of bankrupcy.
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They're low on the totem pole, but that's not (as the post I was replying to asserted) exactly zero money back.
Re:Welcome to the stock market (Score:4, Interesting)
Re:Welcome to the stock market (Score:4, Insightful)
Err ... I think you're confusing things here. When a company tanks, its assets get sold off (or otherwise turned into money) to satisfy the creditors (the people who gave loans) demands. In this process, the stockholders shares go *poof*, mostly.
When a company tanks, the creditors are in a slightly better position than the stockholders. In fact, the creditors might end up being the new owner of the company.
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The government did not issue a loan, they bought a large amount of stock.
a) Would they have purchased that stock if it hadn't been a "bailout"?
b) A "loan" would have left them with nothing if the company had tanked. A stock purchase would entitle them to some company assets to sell off, this is what most people call "security".
You don't seem to have as good a grasp as you might about how stock ownership works.
Stockholders are the last in line when it comes to dividing up the assets of a failing company and paying off creditors to the extent possible.
That's the risk of ownership.
Just ask those who were still holding shares in the previous corporation known as General Motors.
Some of those shares were purchased at around $100 per share back in the mid to late '60s when that would have bought 300 gallons of gasoline.
Although they rec
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As per $SUBJECT. If Slashdot wants to run these stories they should be hidden by default.
It's another one of those car analogies!
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Why should he? This wasn't a loan. They took stock just like any poor shlub who tried to make a buck on GM stock.
Who's "they"?
Did "they" buy shares voluntarily or were they forced to buy them by a government who was trying to save people's jobs?
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"They" is the Treasury, instructed by the publicly-elected Congress to purchase stocks using federal funds, so really "they" is referring to the public at large.
Indirectly (as the United States isn't a direct democracy), the public spent the public's money to keep jobs for the public. When the public realized that meant the public owned stock, the public complained, so the public pushed to sell the stock quickly, and now the public is complaining that the stock was sold at a loss.
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Ford wouldn't have paid investors for losing money on their stock either. Nor should they. Do you think the government would have given GM the money had they profited? Of course not. Why do you think it should go the other way?
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Not if there are votes to be bought.