no third solution

Blogging about liberty, anarchy, economics and politics

Will the Auto Bailout Be Repaid?

December 19th, 2008

An awful lot of GM shares have already changed hands today.

If you knew that the government was going to bail out the Auto Industry, you could’ve bought shares of GM yesterday at $3.66 and sold them today for $4.30 — a 17% profit overnight. Someone knew, that someone just wasn’t you: just yesterday signs pointed to Big Three bankruptcy.(“Now” is Friday, December 19, 2008 at 9:48 Eastern)

GM probably got about $8B in short-term financing this morning. I have no idea what the terms are, or what the interest rate is, although I can say with 100% certainty that this rate is far lower than GM could otherwise obtain, which means that nobody was willing to voluntarily lend them the money. Additionally, the people from whom this money was extracted will never be compensated for assisting them.

If GM turns a profit next quarter or next year, are we going to receive dividend checks in the mail? Of course not. If and when GM repays this “loan” plus interest to Uncle Sam, do we get our money back? Of course not.

So, how’s about they give us some of equity? At the very least, give us a debtholder stake. General Motors real value is approximately zero anyways.

The same anti-freedom principles that are used to justify taking money from productive people, and giving it to unproductive companies (on account of having grown too big to fail) could similarly be used to expropriate an equity share, or ownership of this subsidized debt, in the companies bailed out, which would then be distributed among taxpaying individuals in one way or another (this could be an aliquot distribution, or it could be quotal based on taxes paid, etc.)

For years, decades even, General Motors and Ford (and to a lesser extent, Chrysler) were profitable companies. For decades their employees were well paid. They bought summer cottages, boats, large trucks that get shitty MPGs, they added on to their homes or bought new ones. They never went to college, they didn’t have to, but they could afford to send their kids. They were middle-class and upper-middle class working folk, the epitomization of the “American Dream”. For decades, labor and management and shareholders alike were probably overpaid. They are all to blame.

Now, the day of reckoning has arrived and they want more of our money?

no third solution

Blogging about liberty, anarchy, economics and politics