Wintery Knight

…integrating Christian faith and knowledge in the public square

How much did taxpayers lose in Obama’s GM bailout?

Investors Business Daily does the math on the GM bailout.

Excerpt:

Sale of the U.S. government’s stake in General Motors Corp. ends a sorry saga. Not only were Americans lied to about the costs, but the bailout underscores why replacing market forces with federal bailouts doesn’t work.

The Obama administration says it will unload 200 million shares — or about 40% of its holdings — back to GM right away. The rest, 300 million shares, are to be sold by March 2014.

[...]Well, GM on Wednesday said it will buy back the 200 million share government stake for $5.5 billion, or $27.50 a share.

The break-even point on the government’s total holdings was $53 a share. But now, with $20.9 billion in taxpayer funds left to pay off from 300 million shares, the break-even point has risen to $69.72 a share.

In other words, at current prices, taxpayers are sitting with a loss of 61%, or nearly $15 billion, on their investment.

So where did the money go, then?

According to a study last summer by the Heritage Foundation, the $80 billion auto bailout gave the UAW and its members nearly $27 billion due to the fact that GM couldn’t shed its outrageously expensive labor contracts, something it could have done in a normal bankruptcy.

As such, Obama didn’t bail out the auto industry; he bailed out the unions. Without the unions’ added costs, taxpayers would have owed nothing.

It’s not hard to see how this happened. The UAW and its affiliates give tens of millions of dollars each election cycle, almost entirely to Democrats.

This union influence explains why Obama’s auto czars, Steve Rattner and Ron Bloom, arranged a government bankruptcy for GM that flew in the face of hundreds of years of bankruptcy law and violated investor rights.

Bondholders took huge losses, while unions got a big chunk of ownership in GM stock that they weren’t legally entitled to.

In a shocking display of favoritism and blatant unfairness, GM’s union workers kept their pensions, while nonunion workers at GM spin-off Delphi lost theirs.

Those unions paid Obama back by working hard to get him re-elected. That’s how socialism works.

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Paul Ryan fact check: Was the GM plant in Janesville closed in 2008 or 2009?

CNS News sets the record straight.

Excerpt:

In his speech accepting the Republican nomination for vice president, Rep. Paul Ryan (R-Wisc.) told the story of a General Motors factory in his hometown of Janesville, Wisconsin, accusing President Obama of failing to keep a campaign promise to keep the plant open.

“My home state voted for President Obama. When he talked about change, many people liked the sound of it, especially in Janesville, where we were about to lose a major factory,” Ryan said Wednesday.

“Right there at that plant, candidate Obama said: ‘I believe that if our government is there to support you … this plant will be here for another hundred years.’ That’s what he said in 2008. Well, as it turned out, that plant didn’t last another year. It is locked up and empty to this day. And that’s how it is in so many towns today, where the recovery that was promised is nowhere in sight.”

Ryan’s claims received widespread criticism from the Obama campaign and many liberal media outlets.

“He even dishonestly attacked Barack Obama for the closing of a GM plant in his hometown of Janesville, Wisconsin — a plant that closed in December 2008 under George W. Bush,” Obama campaign manager Jim Messina said in an email to supporters Thursday.

The Washington Post official ‘fact-checker’ also attacked Ryan’s claims as false, using the same line about the plant closing in 2008:

“That’s not true. The plant was closed in December 2008, before Obama was sworn in,” Post fact-checker Glenn Kessler wrote Wednesday. “Obama gave his speech in February 2008, and he did say those words. But Ryan’s phrasing, referring to the fact the plant did not last another year, certainly suggests it closed in 2009, when Obama was president.”

But Ryan is in fact correct. The Janesville GM factory stopped production of SUVs in December 2008 and closed its doors for good in 2009 – less than one year after Obama promised to keep it open for another hundred years.

In his speech in Janesville, then-Sen. Obama said that if elected, he would support retooling the Janesville plant to make energy efficient vehicles. Despite his administration’s carefully shepherding of GM through bankruptcy, the Janesville plant has not been retooled to make anything.

[...]“Full-size sport utility vehicle production has ended at the local General Motors plant, but medium-duty truck production is continuing—not starting—in Janesville. And it likely will continue into May, when the lights finally go off in the facility that has been producing vehicles since 1923” the paper reported February 2, 2009.

In fact, a GM press release confirms that the automaker had placed the Janesville plant on “standby capacity” – an auto industry term for a factory no longer producing vehicles – in May of 2009.

“Janesville was placed on standby capacity in May 2009 and will remain in that status,” GM said in a June 26, 2009 press release.

In sum, the Janesville plant shut down the majority of its production in December 2008, laying off all but 50 of its approximately 1,200 employees. Those 50 employees remained at the plant making Isuzu trucks for several more months as the plant’s operations wound down.

As a candidate, President Obama promised to support re-tooling the factory to make more fuel-efficient vehicles and keep the plant open for a century. The plant, however, remains closed.

It’s amazing how the left-wing media just flat out lies in order to protect the incompetence of this community organizer President. Recall also that the economy started to decline when the massive spending started under the new Pelosi-Reid plan in January of 2007. Deficits went from $160 billion to about $600 billion as soon as the Democrats took over, and then well over a trillion in 2009 when Democrats controlled the House, Senate and Presidency.

More responses to criticisms of the speech at the liberal Washington Post.

Filed under: News, , , , , , , , , , , , , ,

Obama-connected General Electric paid no taxes on $14 billion profit

From the Weekly Standard, a possible explanation of why GE CEO Jeffrey Immelt is tightly linked to Barack Obama.

Excerpt:

General Electric, one of the largest corporations in America, filed a whopping 57,000-page federal tax return earlier this year but didn’t pay taxes on $14 billion in profits. The return, which was filed electronically, would have been 19 feet high if printed out and stacked.

The fact that GE paid no taxes in 2010 was widely reported earlier this year, but the size of its tax return first came to light when House budget committee chairman Paul Ryan (R, Wisc.) made the case for corporate tax reform at a recent townhall meeting. “GE was able to utilize all of these various loopholes, all of these various deductions–it’s legal,” Ryan said. Nine billion dollars of GE’s profits came overseas, outside the jurisdiction of U.S. tax law. GE wasn’t taxed on $5 billion in U.S. profits because it utilized numerous deductions and tax credits, including tax breaks for investments in low-income housing, green energy, research and development, as well as depreciation of property.

“I asked the GE tax officer, ‘How long was your tax form?’” Ryan said. “He said, ‘Well, we file electronically, we don’t measure in pages.’” Ryan asked for an estimate, which came back at a stunning 57,000 pages. When Ryan relayed the story at the townhall meeting in Janesville, there were audible gasps from the crowd.

Meanwhile, Obama’s General Motors bailout is going to cost taxpayers at least $23.6 billion dollars.

Excerpt:

The Treasury Department dramatically boosted its estimate of losses from its $85 billion auto industry bailout by more than $9 billion in the face of General Motors Co.’s steep stock decline.

In its monthly report to Congress, the Treasury Department now says it expects to lose $23.6 billion, up from its previous estimate of $14.33 billion.

The Treasury now pegs the cost of the bailout of GM, Chrysler Group LLC and the auto finance companies at $79.6 billion. It no longer includes $5 billion it set aside to guarantee payments to auto suppliers in 2009.

Obama’s millionaires and billionaires get another bailout and taxpayers get the bill.

Related posts

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New York Times admits that GM repaid its bailout loans with TARP loan money

Story here in the radically-leftist New York Times. (H/T Hot Air)

Excerpt:

AS we inch closer to a clearer understanding of the products and practices that unleashed the credit crisis of 2008, it’s becoming apparent that those seeking the whole truth are still outnumbered by those aiming to obscure it. This is the case not only on Wall Street but also in Washington.

Truth seekers the nation over, therefore, are indebted to Senator Charles E. Grassley, Republican of Iowa, who in recent days uncovered what he called a government-enabled “TARP money shuffle.” It relates to General Motors, which on April 21 paid the balance of its $6.7 billion loan under the Troubled Asset Relief Program.

G.M. trumpeted its escape from the program as evidence that it had turned the corner in its operations. “G.M. is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse,” boasted Edward E. Whitacre Jr., its chief executive.

G.M. also crowed about its loan repayment in a national television ad and the United States Treasury also marked the moment with a press release: “We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,” said Timothy F. Geithner, the Treasury secretary.

Taxpayers are naturally eager for news about bailout repayments. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan.

This is what you get when you appoint a tax-cheat to be the Treasury Secretary.

Here’s what we need to understand about government bailouts. There should never be any such thing as a government bailout. GM and these other bailed-out companies made bad decisions that put them at a competitive disadvantage with respect to their competitors. The Obama administration bailed out these failing companies with money from other hard-working individuals and successful companies, including small businesses. The Obama administration did this for political gain with its favored special interest groups, e.g. – unionized labor,  wall street bankers and GSE executives. Those are the groups that got Obama elected, and he paid them back with “bailouts”. Government has no right to get involved with bailing out their buddies with my money and your money.

I remember when people use to complain about profit margins of 8% in some big corporations when Bush was President. But at least they earned that money by selling things that people needed and freely chose to buy. They did operate on a government-backed expense account. Sometimes I wonder whether all of these problems are caused because we elect spoiled-brat, silver-spoon liberals who spent their entire lives getting into trouble and then begging their parents, (and grandparents, in Obama’s case), for bailout money. Maybe they are just making policy based on their experiences in making irresponsible choices and then being bailed out by their parents?

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Did GM pay off its bailout loans by using other government loans?

Story from Ed Morrissey at Hot Air.

Moderate Republican Chuck Grassley, who supported Obama’s bailouts, wants to know how GM paid off their debts. He wrote a letter to Treasury Secretary Tim Geithner.

Excerpt:

General Motors (GM) yesterday announced that it repaid its TARP loans. I am concerned, however, that this announcement is not what it seems. In fact, it appears to be nothing more than an elaborate TARP money shuffle.

On Tuesday of this week, Mr. Neil Barofsky, the Special Inspector General for TARP, testified before the Senate Finance Committee. During his testimony Mr. Barofsky addressed GM’s recent debt repayment activity, and stated that the funds GM is using to repay its TARP debt are not coming from GM earnings.

Instead, GM seems to be using TARP funds from an escrow account at Treasury to make the debt repayments. The most recent quarterly report from the Office of the Special Inspector General for TARP says “The source of funds for these quarterly [debt] payments will be other TARP funds currently held in an escrow account.” See, Office of the Special Inspector General for TARP, Quarterly Report to Congress dated April 20, 2010, page 115.

Furthermore, Exhibit 99.1 of the Form 8K filed by GM with the SEC on November 16, 2009, seems to confirm that the source of funds for GM’s debt repayments was a multi-billion dollar escrow account at Treasury—not from earnings.

[...]In reality, it looks like GM merely used one source of TARP funds to repay another. The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment.

Ed summarizes:

In other words, this is just a shell game. As Jim Vicevich points out, it’s akin to paying off your Visa credit card with your Mastercard — and then bragging about your financial condition. Taxpayers are still on the hook for GM. Nothing at all has changed.

Instead, we have another good reason for government to refrain from bailing out private companies. It makes them act like government when it comes to transparency about their finances. This claim really does prove that GM now stands for Government Motors.

Michelle Malkin also has a good column here about MORE connections between Democrats and rich Wall Street investment bankers. The Democrats are tightly connected with large corporations and investment banks. As a small government conservative, I find this alarming and unsettling. I believe in separation of government and corporations.

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