Another bailout for GM?

posted at 1:36 pm on October 29, 2009 by Ed Morrissey

Maybe three’s the charm?  After two bailouts and a politicized bankruptcy that ended up being a big payoff to the United Auto Workers, the credit arm of General Motors wants even more taxpayer money.  Why?  Because, silly geese, GMAC is just too big to fail:

It might seem like a lot of cash for one supersize clunker, a good-money-after-bad attempt to jump-start a broken-down giant of Detroit.

But as the Obama administration contemplates a third rescue of GMAC, the onetime finance arm of General Motors, federal officials, automotive executives and analysts all say the company is — just like the biggest Wall Street firms — too big to fail.

Despite two taxpayer-financed bailouts, GMAC is still struggling, even as its two biggest customers, General Motors and Chrysler, have put bankruptcy behind them.

While the collapse of GMAC probably would not send shock waves through the financial system the way the failure of a giant bank would, it would nonetheless deal a devastating blow to the auto industry, its suppliers and employees.

How much more does GM want to rescue its loan business?  Another $5.6 billion, on top of the $12.5 billion it has already sucked out of the Treasury in its other welfare checks.  GM apparently wants to sell the government even more of its business in exchange for the cash.  At the moment, the government holds 35% of GM; after this “sale”, it would own a majority stake in the automaker.

At least there’s one piece of good news — the UAW won’t need Card Check after all.  If the federal government owns a majority stake, then every negotiation will be federally arbitrated, right?

Why would the government even consider a third bailout for GM?  In part, the thinking is that they have to rescue the funds already committed:

Why rescue GMAC again? The federal government has committed more than $60 billion to prop up G.M. and Chrysler, and letting GMAC fail, the thinking goes, would threaten a recovery in the broader car industry.

“We are in too deep for us to sensibly back out now,” said Douglas Elliott, a former investment banker who is now a fellow at the Brookings Institution. “We will probably lose less money by putting in more now.”

This is the kind of thinking most often seen at craps tables and bookie joints.  Betting on the Tennessee Titans will eventually pay off, and besides, bettors have gotten in too deep to stop now.  The Titans have to win sometime, don’t they?  The only real difference is that one gets better odds on craps, and for that matter, even the Tennessee Titans.

The best policy would be to let GM fail, which is what the government should have done in the bankruptcy.  Instead, it put a wet-behind-the-ears campaign worker in charge of interfering with senior creditor rights to hand the UAW a sweetheart deal.  Now we’re just throwing nonexistent money after crushing debt, all in the service of a company that hasn’t performed well in years.  This is what happens when government puts its money on bad teams in a sport they have no business playing in the first place.


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Comment pages: 1 2

Send a message to Obama and the UAW. Refuse to buy a GM product ever again. That is the only way this beast finally gets killed.

angryed on October 29, 2009 at 5:37 PM

Good Gosh Damn … who will save us? They are taking every penny and ounce of sweat from our grandkids.

There will be nothing left.

Do people STILL consider secession as “fringe”??

We have a government that is out of control – and not responsive to the desires of Americans. This has to stop people.

HondaV65 on October 29, 2009 at 5:38 PM

I would like to point out that GMAC is now owned by Cerberus, not GM. They sold it to them back in 2006. I’m still pissed about the GM bailout; however this new request is coming from Cerberus, not GM.

mrflibbleisvryx on October 29, 2009 at 5:49 PM

Why can’t we let the market decide the fates of companies?
This company is nothing but a large conglomeration of nothing but unsustainable promises, and endless obligations.

Hmmm. Come to think of it, that describes the Federal Government as well….

Medbob on October 29, 2009 at 5:54 PM

I would like to point out that GMAC is now owned by Cerberus, not GM. They sold it to them back in 2006. I’m still pissed about the GM bailout; however this new request is coming from Cerberus, not GM.

mrflibbleisvryx on October 29, 2009 at 5:49 PM

You’re splitting hairs. GMAC is GM and GM is GMAC. One doesn’t exist without the other. The fact Cerberus owns GMAC is moot in this situation.

angryed on October 29, 2009 at 5:58 PM

Like so many other things, being a CEO is not Zeros forte.
Some of us knew that all along. No sympathy for the UAW are the idiot president here. Let them both fail.

bluegrass on October 29, 2009 at 6:06 PM

Send a message to Obama and the UAW. Refuse to buy a GM product ever again. That is the only way this beast finally gets killed.

angryed on October 29, 2009 at 5:37 PM

I second that motion!!!!!!!!!!!!!!!!

bluegrass on October 29, 2009 at 6:07 PM

Cerberus owns 51 percent og GMAC. GM still owns the rest. although both were supposed to reduce their shares to 10 percent in order to get the bank charter. but apparently that hasnt been enforced. The govt. has not tried to force GMAC to sell or close its mortgage business despite billions in losses and 25 percent default rates.

This company has gotten an amazing amount of special treatment and we should be asking why. it isnt even about jobs in Detroit becaue GMAC is closing its Detroit office and moving to Charlotte. somebody is pulling some strings here and questions need to bee asked!!!!!

rockmom on October 29, 2009 at 6:09 PM

I love how the most used line against Republicans is that they are for big business….there is so much wrong with this picture…
…and the hole in the wall, next to my computer, keeps getting bigger.

lovingmyUSA on October 29, 2009 at 6:16 PM

Send a message to Obama and the UAW. Refuse to buy a GM product ever again. That is the only way this beast finally gets killed.

angryed on October 29, 2009 at 5:37 PM

Given their horrible sales while Ford’s are holding up, I’d that’s already happening. But you see what the result is right? Obama will see to it the UAW gets our money one way or another.

jarodea on October 29, 2009 at 6:18 PM

“We will probably lose less money by putting in more now.”

WTF? I will never figure out this liberal math.

farright on October 29, 2009 at 1:44 PM

Hey, at least they are consistent.

This is the same insane logic we are getting from the “adults in charge”:

“Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that’s what I’m telling you.”



Joe Biden,AARP meeting
July 16, 2009

Makes sense right.
If you want to keep people(or government) from going bankrupt,tell them to spend all they can.

These words of wisdom coming from the group that has political strategist making economic decisions:

As one CEO of a major financial firm told me: “The economic guys say that when they explain the costs of programs, the policy guys simply thank them for their time and then ignore what they say.”

The executive said he told the president that he’s at a disadvantage because he’s relatively inexperienced in economic matters during a time of economic crisis. “That’s why I have Valerie,” came Obama’s reply.

“Valerie” is senior adviser Valerie Jarrett — a Chicago real-estate attorney and one of Obama’s closest friends,

Wonder if this is why we have the government spending over 800 billion tax payer dollars to jump start job creation at a price tag of over $250,000 per job and a cash for clunkers program that hit us at $24,000 a piece.

No wonder our economy is in such a mess with these idiots running the show.

Now you know why Wall St. is so nervous!!!

Baxter Greene on October 29, 2009 at 6:27 PM

Going all in while holding a 2 of clubs and 7 of aces.

WashJeff on October 29, 2009 at 1:52 PM

We know for sure he doesn’t have a pair.

mike in NV on October 29, 2009 at 6:29 PM

“We are in too deep for us to sensibly back out now,” said Douglas Elliott, a former investment banker who is now a fellow at the Brookings Institution. “We will probably lose less money by putting in more now.”

This is BullShit. Investors call this kind of behavior “loser” psychology. Investors know when to cut their losses and invest in something that produces an acceptable return on investment. The psychology of bad investing is rife with stories of losers who kept holding negative investments and adding in more capital to meet margin calls.
.
As long as its not their money, why should “they” care? It’s only when “they” have to answer for their decisions and the results therefrom that they begin to get real about government investing in private enterprise. It wasn’t revealed in the article who in the administration was making the decisions but I would take bets that it is “TurboTax Timmy.”
.
Douglas Elliott (Harvard, Duke, JP Morgan), a former investment banker who is now a fellow at the Brookings Institution, represents “they” and speaks for “loser” psychology investors everywhere. The fact that he is described as “a former investment banker” tells you everything you need to know. (His tenure at JP MOrgan isn’t divulged).
.
“We are focused on transforming the company and restoring financial health,” said Gina Proia, a GMAC spokeswoman. How about focusing on paying back the taxpayer to whom you owe your job rather than looking for the next round of “bridge financing.”

ExpressoBold on October 29, 2009 at 6:33 PM

Too bad Penske didn’t buy Saturn. It could’ve conquered over GM’s sales by being the brand you’d be more up to buying.

But if there’s a car you need to buy when it arrives, here’s my suggestion: buy an Alfa Romeo, surely the only auspicuous part of Fiat’s return to American sales, and here’s just the baby to buy! The best looking SUV since the Peugeot 4007/Citroen C-Crosser.

Avi Green on October 29, 2009 at 6:37 PM

Avi Green on October 29, 2009 at 6:37 PM

Hmmmmm, looks like it could double as a wireless optical mouse.
.
Wonder where they got the design inspiration for it …

ExpressoBold on October 29, 2009 at 7:01 PM

Send a message to Obama and the UAW. Refuse to buy a GM product ever again. That is the only way this beast finally gets killed.

angryed on October 29, 2009 at 5:37 PM

I’ve been doing that since I bought a 1986 S-10 pick-up that was a total lemon. Long story short…in my dealings with their “customer support” dept in Detroit, they basically told me (paraphrasing) “suck it up, chump”. I swore then I’d never buy a GM product again. And now more than ever!!!

Big John on October 29, 2009 at 10:45 PM

Hmmmmm, looks like it could double as a wireless optical mouse.
.
Wonder where they got the design inspiration for it …

ExpressoBold on October 29, 2009 at 7:01 PM

Ha! Good one

Big John on October 29, 2009 at 10:51 PM

Dude. GM is not GMAC. Not even close. Once upon a time the former owned the latter. Nowadays, the strongest link between the two is that the federal government owns both.

Xrlq on October 30, 2009 at 10:33 PM

That, plus the fact that they both have the letters “G” and “M” in their names, as does General Mills.

Xrlq on October 30, 2009 at 10:37 PM

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