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Taxpayers Face Losses On Auto Bailout

From a seemingly surprised Associated Press:

The GM-Segway ‘Obama-Mobile’

Taxpayers face heavy losses on auto bailout

By Christopher S. Rugaber, AP Economics Writer Wed Sep 9

WASHINGTON – Taxpayers face losses on a significant portion of the $81 billion in government aid provided to the auto industry, an oversight panel said in a report to be released Wednesday.

The Congressional Oversight Panel did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program. But it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid.

"I think they drove a very hard bargain," said Elizabeth Warren, the panel’s chairwoman and a law professor at Harvard University, referring to the Obama administration’s Treasury Department. "But it may not be enough."

The prospect of recovering the government’s assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM’s case by next year.

The shares "will have to appreciate sharply" for taxpayers to get their money back, the report said.

For example, GM’s market value would have to reach $67.6 billion, the report said, a "highly optimistic" estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008. And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is "highly unlikely" to ever be repaid, the panel said.

Treasury Department officials have acknowledged that most of the $23 billion provided by the Bush administration is likely to be lost. But Meg Reilly, a department spokeswoman, said there is a "reasonably high probability of the return of most or all of the government funding" that was provided to assist GM and Chrysler with their restructurings

Greg Martin, a spokesman for the new GM, said the company is "confident that we will repay our nation’s support because we are a company with less debt, a stronger balance sheet, a winning product portfolio and the right size to match today’s market realities." …

Other agencies have also projected large losses on the loans and investments provided to the industry. The Congressional Budget Office estimated in June that taxpayers would lose about $40 billion of the first $55 billion in aid.

How unexpected, huh?

"I think they drove a very hard bargain," said Elizabeth Warren, the panel’s chairwoman and a law professor at Harvard University, referring to the Obama administration’s Treasury Department. "But it may not be enough."

Sure they did.

Note, too, how this article makes it sound like the auto bailout was the work of Mr. Bush:

Treasury Department officials have acknowledged that most of the $23 billion provided by the Bush administration is likely to be lost.

Never mind that, as we have noted before, the auto industry bailout was the brainchild of the Democrats, including Ms. Pelosi and Mr. Reid. And it was specifically recommended by Mr.Obama, of the office of the President-elect:

From the (post-election) November 11, 2008 edition of the Washington Post:

Obama Asks Bush to Back Rescue of Automakers

By Lori Montgomery and Michael D. Shear
Tuesday, November 11, 2008; A01

President-elect Barack Obama yesterday urged President Bush to support immediate aid for struggling automakers and back a new stimulus package, even as congressional Democrats began drafting legislation to give the Detroit automakers quick access to $25 billion by adding them to the Treasury Department’s $700 billion economic rescue program.

Yesterday, in an urgent bipartisan appeal, all 15 House members and both senators from Michigan sent a letter asking the Bush administration to include the auto industry in the Treasury program on its own initiative or to work with Congress to modify the program.

"There’s an urgent crisis. It’s a national issue. If the administration won’t act, we’ll have to. But they should act," said Rep. Sander M. Levin (D-Mich.)

So far, administration officials have resisted calls to include the Detroit automakers in the Treasury’s bailout program, which was conceived to stabilize banks and other financial institutions reeling from the global credit crisis

Democrats want the Bush administration to approve an additional $25 billion in loans from the Treasury program, bringing total federal assistance to the car companies to $50 billion. In a letter sent yesterday to Treasury Secretary Henry M. Paulson Jr., Levin and other Michigan lawmakers urged Paulson "in the strongest possible terms to use your authority under the Emergency Economic Stabilization Act (EESA) or other statutes to immediately address a significant and systemic threat to the U.S. economy and provide emergency assistance to the domestic automobile industry."

The letter followed a similar entreaty to Paulson over the weekend by House Speaker Nancy Pelosi (D-Calif.) and House Majority Leader Harry M. Reid (D-Nev.)

Perhaps the Democrats and Mr. Obama can now explain what would have been so terrible about a normal bankruptcy.

After all, the airline industry has had dozens of spectacular bankruptcies, and they seem to have survived and now almost thrive despite all of the obstacles they face.

But of course saving the auto industry was never the intention of the bailouts. The intention was to save the unions, and their bloated healthcare packages and retirement benefits.

And, even more importantly, it was designed to get control over another part of our economy.

Oh, and of course it had the further benefit of giving Mr. Obama a chance to put an end to those earth destroying SUVs – like the Hummer. Which will now be made in eco-friendly Communist China.

But certainly the fate of the taxpayers’ billions of dollars never entered into the equation.

The prospect of recovering the government’s assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said.

How can this not happen? Mr. Obama has taken charge. He has put people at the top of GM who have never run a car company or even (in the case of the man-child in charge of dismantling them) held any previous job.

Of course GM and Chrysler’s sales will go through the roof. Especially now that they have gotten rid of most of their dealerships and have pledged themselves to selling automobiles that nobody wants and which will cost much more and be far less safe.

How can they fail?

This article was posted by Steve on Wednesday, September 9th, 2009. Comments are currently closed.

14 Responses to “Taxpayers Face Losses On Auto Bailout”

  1. BillK says:

    Wow, what a surprise.

    From the Associated Press:

    Taxpayers face heavy losses on auto bailout

    By Christopher S. Rugaber and Ken Thomas

    Taxpayers face losses on a significant portion of the $81 billion in government aid provided to the auto industry, an oversight panel said in a report to be released Wednesday…

    http://host.madison.com/business/article_63e4a18b-ea72-5991-92e9-c5581cecea56.html

    Wow, the money’s likely lost.

    Surprised?

    Oh, it gets better:

    … The Congressional Budget Office estimated in June that taxpayers would lose about $40 billion of the first $55 billion in aid.

    Nice job, Mr. Obama.

    Of course the public trusts you with Health Care.

    • Rusty Shackleford says:

      “Of course the public trusts you with Health Care.”

      It just gets beyond the sublime. Even when the closely held MSM tells the truth, the drooling masses who think this stick-boy of a president is going to fix it all….they still have no clue. Their selective learning abilities lets them filter stuff like this out..and of course they HAD to have that dig on the Bush administration there, and thus, the “reader” will have their opinion slanted to believe, once again, “It’s all Bush’s fault”.

      I do truly wish that W hadn’t signed anything of any bailout nature, thus allowing this whole thing to be tied around the democrats’ balls to be dragged around in public. Here it is, 2009, almost a year after the election and while they are fond of saying, “Get over it, you guys LOST…Obama is president, so deal with it” I’m afraid my retort has to be, “Well, yes, he is and he’s doing a hell of a so-called ‘clean-up’ job isn’t he?”

      We still have an avowed moron in our work group who voted for this sack of crap. He gets hit almost daily now, and yet, in his 60’s and determined Pittsburgh union tool, he defends this communist in fascist’s clothing to the hilt.

      It’s amazing. Half a nation still in love with an idea of utopian solar-panel powered, cars-that-run-on-grass-clippings, everybody has a house and money (not necessarily a job)…and so on. Even during the campaign, this teleprompter-dependent boob contradicted himself.

      My head hurts.

  2. Tater Salad says:

    It is evident that the UAW has “taken a haircut” and with that, General Motors will survive and make profits as soon as the IPO of their stocks are issued. The auto companies with the “future problems” are the Japanese because their wages are around $30.00 per hour for their assembly line workers while GM/Fords and Chrysler’s are $14.00. I see problems on the horizon don’t you?

  3. Rusty Shackleford says:

    Steve, I work for one of those airlines of which you mentioned and in the very bad years after 9/11, our execs, like many in other companies, went seeking funds to survive, in the form of a loan. Our company was denied. So we went it alone. Last quarter, we were one of two that posted a profit. Not saying that it’s a monumental thing, but somehow, being able to have no only recovered, but to be doing (relatively) well in these (also) bad times is a feather in our caps of perseverance, independent thinking and fighting the good fight.

    I want to hear one….just ONE…MSM major news head interview Blammo and ask, much as a father would a teenager, “So, where did the money go? Hmmmm? Can you tell me that? Where?”

    Without a teleprompter, it would be my wish to see him squirm, fidget, touch his face a lot….act important and create out of thin air the answer we all know is coming. “Well, during the Bush administration…..we….uh……..” And so on.

    This prick can go sit on a desert island. I will give him a canteen and a gun with one bullet.

  4. catie says:

    Rusty, I think I know the airline of which you speak. It is a monumental thing though in my book especially during this era of bailouts.
    I will never buy another Chrysler or GM vehicle again, ever!

    • Rusty Shackleford says:

      Well, the simple truth is that being indebted to the government is never a good thing, which is why we were all surprised when Iacocca did it but got the company back on track and kept it there until he retired.

      I never wanted my company to go grovel for money..and I’m glad they were turned down as it forced them to do some things…that were unpopular. We ALL took paycut after paycut…and our work rules changed but I was glad that our unions decided to play fair. Watching how the UAW acted is an excellent example of how bad it could have gone. And…now look where they are.

      And the worst part is, they don’t care. Cut their nose off to spite their face.

      We lost jobs….and I even got furloughed and I hated it. But I got a good job and never looked back. That is how business works. Yeah…for some time it was rough. There are no guarantees and in this world, like any time in history…except for that brief period from 1946 to about 1980, or maybe smaller, there has never been a time when you will retire from the company that you started with.

      I realize that’s a bit of a loose statement but it’s essentially the point I was trying to make. These days, one has to be vigilant and keep an eye out for future changes…and maybe get training in a “back-up” career field. I’ve been considering that and it may have to come to that. Airlines are notorious for growth and shrinkage (I was in the pool…for those who remember). And thanks to NAFTA and a few other things…we are in a shrinking economy. And though I hate to say it….the worst FIRST thing that can be done is to throw money at it in the first seizure it has. There are more coming…and they will be much worse. I’m thinking 50 to 75 years down the road. If our economy cannot shift to producing what the world needs for a fair price, then we are as doomed as France, the UK and others.

      Unfortunately, as wages were on the steady rise over most of the last century…they are now on the decline. And….as go wages, so SHOULD go taxes…but oddly enough……taxes continue to rise as wages go down. You can see the problem here.

      I watched as my parents lived the American dream. I was brought up in a lovely home…we had new cars ever so many years, etc etc. I cannot live the way my father lived even though I have a college education and work for a major airline. They just don’t pay like they used to and I fear it will continue to worsen. I do ok…but…..no new boats or expensive hobbies for me, like my parents had.

      My truck is 15 years old. I cannot afford to pay to put any money down….or finance anything that is equipped the same as my old one. And I’d go broke financing a stripped model. (there’s a joke in there somewhere)

      My point is….I’m for less government because the government knows how to take but it never gives back. It’s a law of diminishing returns. I was totally confused as to why I paid income tax on my military salary. How stupid is that? How is the accounting done for that? Out of one pocket into another?

      And I’ve watched as taxes from the 1960’s to today have eaten more and more out of our lives and….is life substantially different because of that? Short answer —no.

      HAve schools markedly improved since Johnson’s Dept of Education? No

      If someone tells me disease is under control..well…I thank private drug companies who figured that there’s money to be made in creating the scripts we need to stay healthy.

      I’m really pretty tired of hearing politicians say, “gonna”. Because when “gonna” becomes “is”…the “is” is nothing like the “gonna” said it was. By the time something is made a law, it never acts like the duck it was supposed to be.

      So….inasmuch as I hate it when republicans do it…I hate it when democrats do it even more. Jimmy Carter’s houses that were built 20 years ago at the start of Habitat for Humanity are now falling down..as they were built poorly, with substandard materials, donated materials and even the code inspectors ignored a lot of things….

      So….yet again one of our first Hopey changy dopes….built a bunch of crap.

      I liked Reagan…I liked Bush, Sr…. W not so much and I thought Bill-Jeff was just a kid who wanted to play all the time…and he did.

      But for this presidency….it’s the ultimate “in-your-face” attitude and elitism and the “I know what’s good for you” BS that gets me every time I find out what the latest sticky thing in my pocket is that the democrats have put there.

      I really truly detest them. And I pity them and I hate them all at the same time. Like I told my mom, there are bad people on this planet…and I don’t have the time to wish their souls to turn out well. They are adults and if they cannot recognize that what they are doing is wrong then they deserve everything they get.

      Sorry for the long post….It’s late and like a lot of folks, I worry about the fate of this nation. Going down this path that a few selected mirror-lovers want to traverse has my stomach upset. In Rome, when they got too big for their britches (togas) they were dispatched quickly. We have to wade through another 3 and a half years of this crap….unless we can oust the mushroom munchers out in the congressional elections.

      I hope we can. ACORN is probably burning the midnight oil trying to figure out how to steal it.

  5. proreason says:

    This is one of the most disingenuous reports of all time.

    In addition to libwits being the instigator of “Bush’s” $23B, GM alone was given an addition 19.4B in February 2009 as “a loan”, and another $30B to “help” reorganize. Chrysler got at least an additional 4B in 2009, maybe more.

    And that does not count the tens of billions in losses that private bondholders had to eat, illegally.

    So, GM and Chrysler are on the dole already for at least 76.4B. The Government got a 60% stake. So the 2 companies would need to grow in size to at least 126B for us to get our money back.

    Maybe a tiny part of that will be returned as loan payments.

    But what rational person in his wildest dreams could possibly imagine that either of those 2 companies will ever turn a profit? Nobody. That’s who. The situation is MUCH WORSE now than before, because there has been no relief from the business-killing UAW contracts, and the companies are being forced to build cars that nobody will buy. $40,000 for an all-electric compact car? What a joke. It is truly truly insane.

    Basically, the GM/Chrsler deal is only about redistribution of money from YOU to the UAW. And it will go on for years as losses mount up until finally, at some future date, both companies will finally be allowed to expire.

    The final cost will be at least $200 million to the taxpayer. A lot more if the Fascists remain in power.

    And not a penny of it was Bush’s fault either.

    • Rusty Shackleford says:

      Remember Pro,

      Nothing is ever too big to fail. Rome failed.

      Eastern, TWA, Braniff, all failed.

      Most of the nation’s railroads, some bigger in adjusted dollars than GM and Chrysler combined EVER were, failed.

      But as you’ve pointed out, Blammo’s agenda is simply to destroy us financially first, then what morally, ethically, or what-have-you , next? ( I know, rhetorical).

      It’s fast becoming obvious that he’s pushing up against the wall of the majority of this nation, trying to convert us by hook or by crook to socialism. What befuddles me and what makes me refer to him as an idiot is that it has been proven that socialism FAILS. It is a bad design…..a bad method, a bad idea. It is merely a sterile model when on paper but in reality, when subjected to the natural human ability to game any system, it fails miserably.

      So, ultimately as you have have pointed out, he’s desirous of power for a select few and perhaps, mostly, to have all the blacks in this nation as unwitting dupes and loyal to his stripe. Kind of funny when you think about it since he knows they will fall for almost anything he does “cuz he black”.

      I really want this sick feeling to go away.

    • proreason says:

      “what makes me refer to him as an idiot is that it has been proven that socialism FAILS”

      He and his handlers don’t care.

      Stalin and his commissars lived in splendor while millions of Russians died.

      I call him a Moron for a different reason than you do. I actually think he is stupid. Steve has challenged me about this before, saying that the Moron has accomplished a lot of evil shit. But I don’t think the Moron gets any credit for it. It’s his handlers. Take the TOTUS away, and all you have is an empty suit that doesnt know history, can’t make a coherent sentence and can’t think on his feet. If he had decent grades, he would have published them. If he could point to anything he wrote that made sense, we would know about it. If he had made a contribution to legal scholarship, we would hear about it every day.

      No, he is an idiot because he’s butt stupid. Dumb as a post. Good at remembering a few verbal tricks, and good at modulating his voice as trained. Other than that, an imbecile.

      This is a 10-minute interview by Beck with David Horowitz from last week. Beck asks Horowitz whether Obama is the Architect or the front-man. Horowitz answers without hesitation that he is the front-man. He also says the Moron is an idealogue. I’m not so sure about that. I see him more as a guy who pushes the buttons he’s told to push. I do think if he had his way, he would indeed be even more extreme than he is now, but he is totally controlled by Soros and others. Obamy would come out as a Capitalist cheerleader if they told him to do it.

      http://www.youtube.com/watch?v=W276ICvVAd4

    • TwilightZoned says:

      Pro-I saw the interview with Beck. Like you, it only re-affirmed my belief he’s a puppet as well.

      “…he’s desirous of power for a select few and perhaps, mostly, to have all the blacks in this nation as unwitting dupes and loyal to his stripe.”

      RS-The tragic irony is blacks who are duped will only become slaves again, just to a socialist government.

    • Rusty Shackleford says:

      And TZ’ed, that is the ultimate, sad irony. They have no understanding that they are being played. It’s like saying “I love you” to a hooker.

    • Confucius says:

      I agree with proreason and TwilightZoned.

      I believe Obama isn’t smart. I believe he is power hungry and has traded in his soul (and skin) for it.

      I’m embarrassed for this country’s black community.

  6. Confucius says:

    How can they fail?

    They do have that fetching Cadillac perfume.

  7. GL0120 says:

    What exactly is meant when they say that the money has been lost?
    Has anyone looked into a UAW officials bank account?
    It’s not lost, it’s merely been redistributed from the stockholders to the union.
    And for all those who believe the union will take care of them answer me this –
    How many steel workers are there today versus 40 years ago?
    Never forget this line from the long forgotten (Banned?) Billy Joel song “Allentown” –
    “And the union people crawled away “


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