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?

Comments

10 Comments

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  • FSK says on: December 19, 2008 at 11:08 am

     

    You have a typo. You mean $8B and not $8M, right?

  • David Z says on: December 19, 2008 at 11:13 am

     

    Yes, thanks for catching that.

  • Robin says on: December 19, 2008 at 12:08 pm

     

    The blogger is this site is a shit-mop.

    I am guessing he wrote this blog in a starbucks using all his intelligence his liberal arts degree could give him. Too bad he is not smart enough to bathe.

    People who work hard should be rewarded and for years, the Big 3 did earn profits and paid their employees well. Now of course bad decision do creep in and lead to this bailout which should have never happened. But to claim employees were overpaid during profitable years is the dumbest fucking thing I have ever heard.

    Did it occur to this latte tard that these employees might have saved up for that boat, truck, or cottage?

    This guy is a douche fucker. He should help reduce his faggot carbon footprint by never having little latte-tards.

    EDIT: If you want to read more of robinohio1’s vile, hate-filled and immature commentary, just check out his (her?) reddit account. At first, I thought maybe this post struck a nerve with robinohio1. Sadly, it seems this type of dialogue is par for the course — dz

  • David Z says on: December 19, 2008 at 12:29 pm

     

    Sixth grade just called: they want their insults back.

    Leave another comment like that, and it goes straight to the garbage bin. I will not tolerate personal attacks, especially such bigoted, mean-spirited insults.

    You should be ashamed of yourself.

  • Robin says on: December 19, 2008 at 1:14 pm

     

    FYI…thanks for the plug. Head over to http://www.reddit.com/user/RobinOhio1/ to check my profile out and my comments and submissions.

    Maybe I was a little harsh on David_Z now that I think about it. But to be honest, saying employees are overpaid in profitable years is just one of his claims that so fantastic that is borders on dumb.

  • David Z says on: December 19, 2008 at 1:56 pm

     

    FYI – I was not saying that “employees are overpaid in profitable years” as a general maxim or as a universally applicable statement. But certainly, in an industry that has been historically as protected and privileged as the Auto industry, almost everyone that was a part of it has been overpaid: this includes (as I previously stated, and to which you neglected to respond) management and shareholders.

  • Mike Gogulski says on: December 19, 2008 at 2:30 pm

     

    Clearly Robin’s imagination was taxed severely here. Poor thing.

  • Zach S says on: December 20, 2008 at 1:42 pm

     

    First off, as it has already been covered, there should be no teen-age type arguments on this bog, especially when trying to argue against a valid and supported assertion. I know Dave_Z personally and he and I have more personal contact with the Big 3 than most people commenting on this site and I will not even provide the pleasure of defending his and my own educational background

    There is a big difference between “rewarding” employees during profitable times and downright taking advantage of a company. About 3 years ago I was having discussions with people about the problems GM was having…this whole issue is nothing new especially the $60B they need to cover retiree benefits.

    At this point in time, I clearly remember the UAW threatening strikes and unwilling to concede anything when the company was NOT being profitable. They certainly wanted everything they felt they “deserved” when the company was doing well, why they should not concede when the company was doing poorly .

    If the UAW really cared about the company, there are multiple ways they could have written contracts to benefit from the good times without benefiting from the bad times. Performance based compensation and bonus programs just to name 2. Hell, with all that money, UAW members could have invested directly into GM and became owners themselves, but this could be a topic in itself and I’ll drop that for now.

    I can’t even count how many times I’ve talked to UAW workers who would tell me about their “slacking off” schemes. One in particular I recall was a scheme between 3 third shift receiving employees who would rotate nights off, and yet still get paid. Name another business you can get away with this?

    Coming in on holidays to play cards all day and get paid time and a half?

    I could go on and on about the issues with UAW. Am I saying they are the CAUSE of the problems? Definitely not, but to not admit they weren’t a major contributor to the problems is a major flaw in anyone’s argument. Management and the UAW as well as some government policies all need to step up and admit their place in the failure. Until this admission to fault has happened, I have a difficult time believing the underlying problems of the Big 3 will ever, truly be solved.

no third solution

Blogging about liberty, anarchy, economics and politics