Yeah that GM bailout sure is turning out badly

[RandomGuy]

What a bunch of garbage.

What was the impact to the economy when millions of people in construction, retail and financial sectors lost their jobs? Work at the mall? No biggie, the economy can sustain the loss of your job. Build homes? Not important. Work at the bank? Not important. Own a restaurant? Not important. Drive a truck? Not important. Fireman? Not important. Build cars? Holy ! We've got to do something!!!!!!!

By your "logic", shouldn't we have spent whatever amount it took to save all those other jobs? If not, please explain to the rest of us jobs in the auto manufacturing sector are the only jobs that the economy can not afford to lose.

Again using your "logic", it seems that the prudent thing for the government to have done was just tell every businesses in America that was losing money to just submit their financial statements to the government and their losses would be reimbursed at taxpayer expense. That would keep everyone employed, right? Doesn't matter if the taxpayers never get paid back because whatever we're losing certainly can't be any bigger than what the effect on the economy would be otherwise. Right?

This is a logical conclusion.

Any other conclusion is simply playing politics at the expense of common sense.

That is a "slippery slope" logical fallacy.

It is the very definition of illogical.

"If we apply your logic,
then we must do everything under the sun."

GM was, and is, one of the largest companies in the US. Allowing it to collapse in an enormous vortex of disappearing capital in the middle of the worst financial crisis would have caused a lot of "collateral damage" far beyond simply letting the company die. The glib "should have let it die" bits never acknowledge the depth of the effect of how much would have been interconnected.

We applied a moderate amount of intervention in a very volatile situation. The government cannot, nor should it, invervene in everything. Weak businesses must be allowed to fail. GM's restructuring certainly cost a good number of jobs even if it wasn't destroyed as some wished.

Was it fair? No.

It does NOT matter at all if the taxpayers get paid back. The purpose of the intervention was not to pay the taxpayer back, but to prevent even more catastrophic losses, as I have stated before. Does that suck? Yes. Does that suck less than the alternative? Yes.

Is it good that we might get a good chunk of it back? Yes. That is an added bonus.

[TeyshaBlue]

So you are claiming that GM's 20% of market share would not have been replaced and we would have a car shortage now?

You seem to think everything happens instantly.

I doubt a car shortage would've ensued with inventory levels being high and such. Suppliers would gradually fold creating upward pricing pressure on remaining parts inventories. With a destabilized credit market, the surviving suppliers wouldn't have been able to leverage the capital to expand supplier shops, add machinists and the machines they work with, in a cost-effective manner. Result? Rising unemployment...a serious e in car prices of which the long term effects would not be pretty.

[RandomGuy]

Would there be a shortage of new cars if GM did not exist?

No.

[TeyshaBlue]

If GM had folded, the winners would have been the used car market.

[RandomGuy]

You can't (or wouldn't without government collusion) have it both ways. Yeah, the bondholders would have been virtually wiped out and they would have deducted the loss on their investment from their current and future taxable income and carried the loss forward. Thats the same thing they did when "old" GM was dissolved.

BUT

"NEW" GM would not have been able to take the SAME loss because it already went to the wiped out investors in the bankruptcy.

Tax Accounting 101

Quite frankly I am not familiar enough with the specifics of how that was handled to really comment on it. I don't know enough about the nature of the losses taken out to say one way or another.

They did have a lot of operating losses to contribute to the carry-forwards of the new en y. My understanding is that you discharge a lot of the liabilities, and keep all of the assets in such a restructuring. Assets would include tax credits. Again, without looking at the specific components, I can't really say for certain what happened and how fair/unfair or how much real "gimmie" credits they got.

[RandomGuy]

If GM had folded, the winners would have been the used car market.

The used car market is currently a winner.

Remember that the number of new cars sold was less than what was required to keep the current fleet of vehicles on the road, i.e. the "birth rate" was less than the "death rate".

People are holding on to cars a bit longer, and that has caused used cars to retain more value.

[coyotes_geek]

Unemployment benefits are not the only cost associated with mass unemployment. The estimates on unemployment were for 1 million, however.

$100 billion / 1 million = $100,000. I have a hard time buying that all the costs associated with unemployment add up to $100,000 per person.

[MannyIsGod]

$100 billion / 1 million = $100,000. I have a hard time buying that all the costs associated with unemployment add up to $100,000 per person.

Why does it just have to be costs? Why can't it also be lost tax revenue? If you have a hard time believing it then thats fine I guess but I posted studies when we talked about this back then. I was just simply talking out of my ass.

In any event, if you so choose the threads are there to be looked at and are only a search away but at some point it gets tired having the same debate over and over. I won't be trying to prove it again.

[RandomGuy]

$100 billion / 1 million = $100,000. I have a hard time buying that all the costs associated with unemployment add up to $100,000 per person.

Current worker pay, total (arbitrary, roughly about US average):
$55,000 per year (all directly contributed to GDP)

Multiply this by the average length of unemployment stint. 24.5 weeks
The average length of unemployment is higher than it's been since government began tracking the data in 1948. (2009 data)

55,000*(24.5/52)= 25,913 in lost wages.

Add

unemployment insurance benefit, a paydown in assets, for same period, at 75% (again arbitrary, not sure exactly what precise % is) rate of pay

25913*.75 = 18684

Total losses to economy from this job loss before any additional factors:
25913+18684= $44,497 in losses.

That gets to close to half of that even before counting on the add-on losses from bills not paid, houses foreclosed on, etc.

Not entirely out of the ballpark, it seems.

[coyotes_geek]

Why does it just have to be costs? Why can't it also be lost tax revenue? If you have a hard time believing it then thats fine I guess but I posted studies when we talked about this back then. I was just simply talking out of my ass.

In any event, if you so choose the threads are there to be looked at and are only a search away but at some point it gets tired having the same debate over and over. I won't be trying to prove it again.

Current worker pay, total (arbitrary, roughly about US average):
$55,000 per year (all directly contributed to GDP)

Multiply this by the average length of unemployment stint. 24.5 weeks
The average length of unemployment is higher than it's been since government began tracking the data in 1948. (2009 data)

55,000*(24.5/52)= 25,913 in lost wages.

Add

unemployment insurance benefit, a paydown in assets, for same period, at 75% (again arbitrary, not sure exactly what precise % is) rate of pay

25913*.75 = 18684

Total losses to economy from this job loss before any additional factors:
25913+18684= $44,497 in losses.

That gets to close to half of that even before counting on the add-on losses from bills not paid, houses foreclosed on, etc.

Not entirely out of the ballpark, it seems.

If it works, why stop with GM? Why not give the banks extra money so that they don't have to lay off anyone? Why not give retailers money to keep their salespeople employed? Why not end unemployment altogether and just pay companies to employ everyone? They'll all be paying taxes, no one will be on welfare and it will all just work itself out, right?

Certainly if those 1 million jobs that would allegedly be lost if GM went under justified the expenditure then similar expenditures would be more than justified for the 9 million jobs in other sectors that we actually have lost.

[RandomGuy]

Depends how the bankruptcy would have been handled. I don't see why there couldn't have been some kind of arrangement where GM continued to build some number of cars while bankruptcy proceedings went on. The bondholders would have been for that since liquidation of a GM that was still building cars would fetch more $$$ than liquidation of a GM that wasn't building cars. The union would be ing up a storm since operations under that condition would certainly involve throwing out the union contracts with a BK judge determining compensation, but given the alternative of no one having a job at all, I think they'd begrudgingly have gone along with it. The stockholders were going to get wiped out under any scenario so their input didn't matter.

Under that scenario, GM continues to build cars while the company is being liquidated. Secured creditors get first dibs on the proceeds in accordance with bankruptcy law, secondary creditors come next. Taxpayers aren't on the hook. The corporate en y known as GM dies, but the production continues and the only significant ripple in the pond is the falling consumer demand which no one can do anything about anyways.

As I have pointed out, you are forgetting the fiscal environment that this took place in.

1) No one, NO ONE, would have had the $$ to step in and buy the assets for anything near the true value. There was no credit market. The assets, if divvied up would have been neglible compared to keeping the en y as a going concern.

2) If you don't remember the surveys at the time of people who stopped buying GM because they were unsure of whether their warranties would be honored, or if they could even get parts for their cars, were they to buy them.

Do you really think ANYONE would have bought a GM car under such conditions?

Would you?

If you would not buy a car under that condition, then I think it is safe to conclude that no one else would have either.

"a GM that was still building cars would fetch more $$$ than liquidation of a GM that wasn't building cars" is all well and good, but if no one is buying those cars, building cars is a losing proposition.

Your assessment of how well things would have gone in bankruptcy is unrealistically optimistic.

Tell me you would buy a new car with a questionable warranty, and no gaurantee that you could get parts in 12 months, and I take it all back.

[RandomGuy]

If it works, why stop with GM? Why not give the banks extra money so that they don't have to lay off anyone? Why not give retailers money to keep their salespeople employed? Why not end unemployment altogether and just pay companies to employ everyone? They'll all be paying taxes, no one will be on welfare and it will all just work itself out, right?

Certainly if those 1 million jobs that would allegedly be lost if GM went under justified the expenditure then similar expenditures would be more than justified for the 9 million jobs in other sectors that we actually have lost.

You don't do it because there simply is not enough money to do so, nor would it be the right thing to do in the long run.

The ability to justify GM, but not extend it to everything is a rational stop to the "slippery slope" argument, and why it is a logical fallacy.

Just because you can't/won't do it for everyone is not a reason NEVER to do it.

I think it was a cost/benefit decision, and arguably (heh) the right one. At least Buffet thinks so.

[coyotes_geek]

Your assessment of how well things would have gone in bankruptcy is unrealistically optimistic.

I suppose there's not anything unrealistically pessimistic about thinking one million people were automatically going to end up unemployeed if GM and the 91,000 Americans they employed at the time of their bankruptcy filing went under.

You don't do it because there simply is not enough money to do so, nor would it be the right thing to do in the long run.

The ability to justify GM, but not extend it to everything is a rational stop to the "slippery slope" argument, and why it is a logical fallacy.

Just because you can't/won't do it for everyone is not a reason NEVER to do it.

I think it was a cost/benefit decision, and arguably (heh) the right one. At least Buffet thinks so.

Agree to disagree. I accepted long ago that my opposition to corporate welfare is a minority opinion.

[TeyshaBlue]

Agree to disagree. I accepted long ago that my opposition to corporate welfare is a minority opinion.

Because you're wrong and stupid and stuff!

[coyotes_geek]

Because you're wrong and stupid and stuff!

My gra ude to yourself, RG and MIG for the entertaining discussion.

[TeyshaBlue]

My gra ude to yourself, RG and MIG for the entertaining discussion.

Yeah, occasionally, a reasoned discussion actually breakouts at this hockey game.

[RandomGuy]

I suppose there's not anything unrealistically pessimistic about thinking one million people were automatically going to end up unemployeed if GM and the 91,000 Americans they employed at the time of their bankruptcy filing went under.



Agree to disagree. I accepted long ago that my opposition to corporate welfare is a minority opinion.

Don't get me wrong. I'm not happy about it. I ing can't stand the fact that it had to happen.

I think if a corp gets that big and in that much trouble, it shouldn't have gotten that big to begin with.

The bailouts were a stop-gap, patch-the-hole-in-the-hull-THEN-worry-about-how-not-to-steer-into-iceburgs thing to do.

I really think that laws and structures need to be in place to wind down, in as orderly a fashion as possible, such large companies in the future.

I am all for some pretty strict size limits on financial ins utions and companies, as well as some method for decoupling them so they can't take each other down.

The suck thing is that a lot of big financial ins utions bet (not that they would admit it) on just such government bailouts, and continue to do so.

If that is what they want, private profits, and public risk, then we need to drop the facade, and plant government bureaucrats on their boards of directors, and force them to pay dividends to the treasury in a big ol' set aside fund akin to the FDIC. Let them suck on that.

Then if they up, we kill the company, and have some cause to throw some greedy s in federal pound-em-in-the-ass prison.

I might defend the decision, but I do not want it to happen in the future. If it does, I want someone's head on a stick. Literally.

[RandomGuy]

My gra ude to yourself, RG and MIG for the entertaining discussion.

I think we managed to pull that off without anybody using the words "you idiot".

That may be a political forum first.

[MannyIsGod]

Yeah, occasionally, a reasoned discussion actually breakouts at this hockey game.

The parties involved tend to be some of the more reasonable ones here. Its not surprising.

[CosmicCowboy]

I think we managed to pull that off without anybody using the words "you idiot".

That may be a political forum first.

However, we couldn't get by without a Bouton's VRWC and MIC post...

[Winehole23]

[boutons_deux]

In the stock offering, the government made $11.8 billion by selling 358 million shares at $33 apiece. It stands to make $13.6 billion if bankers exercise options for up to 412 million shares, as planned. The government would still have about 500 million shares, a one-third stake. It would have to sell those shares over the next two to three years at about $53 a share for taxpayers to come out even.


http://hosted.ap.org/dynamic/stories...11-18-09-41-05

[CosmicCowboy]

LOL @ MYSA.com

[boutons_deux]

LOL @ MYSA.com

It's AP. What specific facts are wrong, in your OPINION?

[CosmicCowboy]

It's AP. What specific facts are wrong, in your OPINION?

Fuzzy math.