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Automotive News & Views Do You Favor A Government Loan To The Detroit 3?
3958 messages, Last post on Oct 02, 2009 at 4:52 PM
You are in the Automotive News & Views Forum. Your Hosts are steve_ & claires
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Replying to: bpizzuti (May 07, 2009 1:47 am) That is the debate. Can the government pass a law that circumvents the Constitution, which gives rights to the lenders. The Supreme Court has upheld those 5th Amendment rights that the TARP law would like to take away. Only in this case, it involves protecting every taxpayer, not just a select few hedge funds. I have NO love for hedge fund operators. I believe they are a big part of our financial problems. However the tax payers money should not be spent in the way it is being used. That I blame on the Treasury and Congress. I think we are totally out of control with no one at the helm. Let me put it this way....if the bondholders get their way, and Chrysler liquidates in order to pay off their bonds with bailout money, what we have is redistribution of wealth from the ordinary taxpayer to hedge funds acting largely on the behalf of the wealthy. And frankly, I'm tired of covering investment losses for gamblers who decided afterward that they couldn't handle the risk. I agree and that was my gripe with the bailouts. Our bailout history is a mixed bag. We the tax payers are out way more than we have gotten back. That in spite of those that believe these loans/gifts will ever be repaid. Here are the bailout losses up to 2001. Figures in 2008 dollars 1970 Penn Central RR loss ($16.02B) 1971 Lockheed loan fees paid $122,220,000 1974 Franklin National bank still owes $185,300,000 1975 NYC All loans and fees paid 1980 Chrysler bought back 14.4 million shares of stock netting the US $660,000,000 1984 Continental Illinois Bank FDIC suffered $1.8 Billion loss 1989 Savings and Loan Bailout cost the tax payers $178,560,000,000 the rest was covered by the private sector. I see this current round of bailouts in the same light as the Savings and loan losses in the late 1980s. http://www.propublica.org/special/government-bailouts |
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Replying to: bpizzuti (May 07, 2009 1:55 am) That is not necessarily true. Liquidation could have made the bondholders money. I would assume that was in their minds when they loaned Chrysler the money. The Government stepping in should not change the terms of a loan agreement. That is what the 5th Amendment is addressing. I think it is pretty scary to run off all those willing to invest in shaky business ventures. The Federal government cannot be the lender for all businesses in the country. We have proven with Fannie Mae that the Feds are incapable of being a responsible lender even on a small scale. If the Feds can steal money you have loaned they can steal your land or any other property.
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Replying to: gagrice (May 07, 2009 5:35 am) On the other hand, if the bondholders can steal money we have loaned, they may just be able to do the same. Then we're really up a certain creek without a paddle, aren't we? These days I have (a little) more faith in the government than in large, rich (and crooked) investment houses. They both try to steal, they both figure they're entitled to. But at least there's more accountability in the government. Considering how little accountability there actually IS in the government....again, anyone have a paddle?
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Replying to: bpizzuti (May 07, 2009 6:05 am) 
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Replying to: gagrice (May 07, 2009 6:15 am) link title |
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Replying to: tlong (May 06, 2009 10:33 pm) I completely agree. |
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Porsche and Volkswagen Consider a Full Merger link title |
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Replying to: gagrice (May 06, 2009 5:49 pm) I think it's in everyone best interest to make this happen, and then make it work. At least then, at 10% equity, the bondholders have an opportunity to make their money back, and then some. BTW, as far as the GM stock thing, I thing the 100-1 stock swap is for regular shareholders only. The formula they are using would allow shareholders to end up with a grand total of 1% of all outstanding shares. |
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Replying to: imidazol97 (May 06, 2009 7:37 am) The baby is out with the bathwater. Time to stamp a new logo on the steel already in inventory. Regards, OW |
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Replying to: kdhspyder (May 06, 2009 2:54 pm) That equity stake is akin to a Ponzi scheme...a sure bet,no doubt! I'm not buying!! WASHINGTON -(Dow Jones)- Financial analysts are casting doubt on General Motors Corp.'s (GM) ability to repay billions of dollars in U.S. government loans, given the company's debt load and sales outlook. GM has acknowledged it can't repay the U.S. loans in the original time frame. It is proposing that the Treasury Department accept majority ownership (51%) of the company in exchange for wiping out about $10 billion in debt. Discussions are ongoing. But even with a large equity stake, the government risks losing at least some of the $15.4 billion it has lent GM since January, analysts said. It would likely take years of profits and a significant appreciation of the company's value for the government to recoup all of its money, analysts said. That time frame would appear to conflict with the Obama administration's insistence that any government takeover of the company be short-lived. "Should a GM bankruptcy not proceed as the government wishes, or demand for GM automobiles doesn't rebound, there is an outsized risk that the government could sustain substantial losses," said Joe Brusuelas, a director at Moody's Economy.com. He called the original decision to lend to GM risky given the company's condition. Aaron Bragman, an automotive analyst with the consulting company IHS Global Insight, said that with a stake in the company, the U.S. government "will be left to wait, and hope that GM can pull out of this nosedive and be a successful company when this is done." Regards, OW |
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