Regnat Populus

The people rule.

Posts Tagged ‘Bailout’

GM Gets Bailed Out Again, Then Bails Out.

Posted by Max Barron on April 21, 2009

gm-buildingI can’t say that I didn’t see this coming.  In fact, I believe that I stated it would happen.  The auto bailout saga continues with another $5.5 billion in tax payer money being made available to GM and Chrysler, as a loan of course.  According to an AP story published by the Washington Times the money will be marked for working capital.

DETROIT (AP) — General Motors Corp. could get as much as $5 billion more in federal loans, while Chrysler LLC could get $500 million as they race against government-imposed deadlines to restructure, according to a government report filed Tuesday.

The quarterly report by a special inspector general on the auto industry and bank bailout programs says the money will be made available for working capital. GM has until June 1 to complete restructuring plans that satisfy the government’s auto task force, while Chrysler has until April 30.

This is on top of the $13.4 billion that GM received, while Chrysler took home $4 billion in the initial bail outs.  GM CEO Fritz Henderson stated last February that GM would need at least $4.6 billion for the second quarter.  It looks like he’s getting too.  Making a whopping $18.4 billion in tax payer money “loaned” to GM and 4.5 billion to Chrysler.

This comes after Henderson stated in his first press conference after being crowned CEO of GM, that GM was looking into filing Chapter 11.  A statement that he has repeated numerous times, both during T.V. interviews and conference calls with press.

“We will get the job done. We will either do it out of court or we will do it in court,” he said. “But we will get the job done in terms of recreating and reinventing General Motors as a competitive enterprise – one that wins in the market place.” — Mar ’09

“I felt several weeks ago that it would be more probable that we would need to go through a bankruptcy process,” he said. “That continues today. But I wouldn’t be able to hazard a guess as to what the probabilities would be.” –Apr ’09

If GM plans to file Chapter 11, as they should have last year when the bottom fell out, then why are we going to write the failed company a check for $5 billion dollars?  The short and skinny of it can be boiled down to three letters U.A.W.  The UAW are the only ones to benefit from all of this tax payer money.  It buys them time and a quick pay out.  Not to mention the negotiations to purchase $20 billion in GM stock.  Which would likely make the UAW the largest shareholder in the company.  Smell anything fishy?

I do.  As I stated from the very beginning, GM should have never received tax payer money; they should have filed for a controlled bankruptcy.  However, the UAW doesn’t benefit from that, in fact, it probably would have been painful for them.  So, the UAW and their political allies forced GM’s hand.  $18 billion in tax payer money later… Chapter 11.  As usual, the American tax payer is left holding the bag.

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Geithner Refusing TARP Repayments?

Posted by Max Barron on April 21, 2009

Eeeeexcellent

Eeeeexcellent

Today the Wall Street Journal reports that the Treasury Secretary wants bailed out banks to meet certain unspecified criterion before they can repay the TARP money loaned by the American Taxpayer. 

Treasury Secretary Timothy Geithner indicated that the health of individual banks won’t be the sole criterion for whether financial firms will be allowed to repay bailout funds, a position that might complicate their efforts to give back the cash.

Mr. Geithner wants to “consider the overall health” of the financial system before allowing the tax payers to be repaid in full.  There are a whole host of reasons for this, and in my estimation, the overall health of the financial system is the least of them.  Those reasons likely include profits from dividends and control of the banks.  The latter of the two is probably the chief reason.  However, Timmy has a bit of a different spin on it.

“We want to make sure that the financial system is not just stable, but also not inducing a deeper contraction in economic activity. We want to have enough capital that it’s going to be able to support a recovery,” Mr. Geithner said.

Hogwash!  This is soft-speak for “we want complete control of the economy.”  Essentially, he wants to keep the banks on the hook so that he can continue to pull their strings for whatever political machinations the Left desires.  Not to mention the added bonus of profits (to the tune of $2.5 billion thus far) on the dividends for TARP monies.  Which, I can assure you, will never be returned to the tax payers.  Instead it will line the federal coffers and later be doled out by Congress to their favorite pet projects.

Obama administration officials worry that the repayment of bailout money, combined with a general disinclination toward partnering with the U.S., could undermine their efforts to restore health to the financial sector and the broader economy.

Worried that repayment will undermine partnering?  Doesn’t that seem a bit antithetical?  Foreign and domestic investors are probably far more likely to invest in institutions that are free from federal puppet strings than those that are still firmly attached.  Repayment of the debt shows investors that the institution is making every effort to return to full profitability.  It also shows that it is making enough of a profit to maintain operations AND repay tax dollars.  This would encourage more investment from private sources and help return the financial system to stability.  Keeping the banks tied to the federal government only diminishes the confidence that investors have in these institutions.  Especially with Congress holding populist witch hunts and interfering with board decisions.  Private investors see those actions and steer clear of government strings. 

Then again it might make perfect sense.  If, of course,  you are looking to push out private investment to ensure continued government control of the banking system both here and abroad.  

“We want to be out of the financial system. We want people to be paying back the government. But we don’t want people to be paying back the government in ways that will put themselves right back in trouble and leaving themselves with inadequate capital,” Lawrence Summers, chairman of the president’s National Economic Council, said Sunday on NBC’s “Meet the Press.”

Double speak.  Pure, unadulterated double speak.  Saying in one breath that you want out of the financial system but don’t want borrowers paying you back in the next… double speak.  What Mr. Summers meant to say was “We want to continue to receive dividends from the banks, but we do not want to relinquish our control over the finance industry.”  At least that statement would be accurate.  Because as long as the banks have yet to repay every red cent of the TARP money, the gluttonous Fedzilla  has reason to keep the shares and warrants of said banks.  The longer they can keep the banks dancing to the federal tune, the better.  At least as far as the White House and Congress are concerned.  Even if that means prolonging the pain of this recession and credit crunch.

I hate to say it… but we told you so.

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