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The bailout was massively profitable for the government and every penny has been repaid. Investing in innovation is exactly what a company like GM should be doi

The bailout was massively profitable for the government and every penny has been repaid. Investing in innovation is exactly what a company like GM should be doing and our tax dollars are in no way involved in this. Edit: didn't make money on GM http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430 http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA... Made lots of money overall: http://www.nytimes.com/2014/12/20/business/us-signals-end-of-bailouts-of-automakers-and-wall-street.html?_r=0 http://www.nytimes.com/2014/12/20/business/us-signals-end-of...

mangeletti 11y ago
This is entirely untrue, pertaining GM. We tax payers lost tremendous money on GM[1], and then GM restructured (think "good bank bad bank"[2] style nonsense) in a clever way to ensure that we would never reap the benefits of the future success of "GM". 1. http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430 http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA... 2. https://en.wikipedia.org/wiki/Bad_bank https://en.wikipedia.org/wiki/Bad_bank
- tomasien 11y ago
  Good point! Very good point - I still think investing in innovation is the only thing that makes sense for GM, the reason the auto bailout worked out is because Ford*, for example, did and is crushing it. http://www.nytimes.com/2014/12/20/business/us-signals-end-of-bailouts-of-automakers-and-wall-street.html?_r=0 http://www.nytimes.com/2014/12/20/business/us-signals-end-of... Edit: Ford did not take bailout money so that logically does not hold like I thought it did. Point about innovating still holds fine.
  - j2bax 11y ago
    I was under the impression that Ford was the only one that didn't take a bailout.
    - wavefunction 11y ago
      You are correct.
      - cgy1 11y ago
        IIRC Ford actually got very lucky in that they were actually in huge trouble before the market crash and decided to mortgage the company right before the credit market seized up. So that was really why they didn't need to take the bailout.
        georgeecollins 11y ago
        I would argue they were also better run than GM during this period.
- mrtron 11y ago
  Canada lost about 3.5B[1] on the bailouts to GM and Chrysler as well. [1] http://www.theglobeandmail.com/report-on-business/canadian-taxpayers-lose-35-billion-on-2009-bailout-of-auto-firms/article23828543/ http://www.theglobeandmail.com/report-on-business/canadian-t...
- bduerst 11y ago
  That's because in 2009, G.M. filed one of the biggest Ch. 11 bankruptcies in history, which the bailouts failed to prevent.
- maxerickson 11y ago
  Didn't the government take a 61% percent stake in the good bank part of the company? Wikipedia links this WSJ article on the topic: http://www.wsj.com/articles/SB124646098696280443 http://www.wsj.com/articles/SB124646098696280443 The second paragraph mentions the US government being the majority owner of the new company. Am I misunderstanding which clever restructuring you are talking about?
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acchow 11y ago
> The bailout was massively profitable for the government and every penny has been repaid I don't really have a stance on the GM bailout, but your statement here is missing something important - every company that a government gives billions to will do disproportionately well in their industry in the short term and give solid returns. But the role of taxpayer money isn't to select winners. The free market is supposed to weed out the chaff. Edit: Want to add a PS - the government might "make profit" on the investment, but structurally the market and society has lost.
- kbenson 11y ago
  The government didn't give money, they invested because the market wasn't in a position to do so when the industry needed it. The narrative that the company is only going to do good short-term because the government gave them a lot of money doesn't make sense when the government has since sold it's position in that company for a profit, meaning the market now viewed that company as a more favorable investment then they did when the government intervened. > The free market is supposed to weed out the chaff. The free market doesn't care about stability, but we as the people that deal with the market, should. An unconstrained free market will swing wildly, which is one of the ways it will identify the chaff to cull, or depending on how low the swing is, the not-quite-as-good wheat to cull. The US has long recognized the benefits of a steady economy though, so while there isn't as aggressive culling, allowing some mediocre companies to survive, the environment itself is more amenable to sustaining a population of people which is the whole point of the economy.
  - icelancer 11y ago
    > they invested because the market wasn't in a position to do so when the industry needed it How is this different than "The industry planned poorly and deserves to have its assets liquidated?"
    - kbenson 11y ago
      Because that industry employed two million people and a blow that large to the workforce with the economy how it was might have resulted in consequences that reached far beyond that industry. Put another way, a free market will result in the best solution. Eventually. There's no reason we can't target what might end up being cascading failures to reduce the negative swings in the economy. I would hazard that this will result in a better economic outcome quicker, but even if it doesn't, I think it at least results in less human suffering, which is a fair trade in my eyes.

mangeletti 11y ago

This is entirely untrue, pertaining GM. We tax payers lost tremendous money on GM[1], and then GM restructured (think "good bank bad bank"[2] style nonsense) in a clever way to ensure that we would never reap the benefits of the future success of "GM". 1. http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430 http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA... 2. https://en.wikipedia.org/wiki/Bad_bank https://en.wikipedia.org/wiki/Bad_bank

tomasien 11y ago
Good point! Very good point - I still think investing in innovation is the only thing that makes sense for GM, the reason the auto bailout worked out is because Ford*, for example, did and is crushing it. http://www.nytimes.com/2014/12/20/business/us-signals-end-of-bailouts-of-automakers-and-wall-street.html?_r=0 http://www.nytimes.com/2014/12/20/business/us-signals-end-of... Edit: Ford did not take bailout money so that logically does not hold like I thought it did. Point about innovating still holds fine.
- j2bax 11y ago
  I was under the impression that Ford was the only one that didn't take a bailout.
  - wavefunction 11y ago
    You are correct.
    - cgy1 11y ago
      IIRC Ford actually got very lucky in that they were actually in huge trouble before the market crash and decided to mortgage the company right before the credit market seized up. So that was really why they didn't need to take the bailout.
      - georgeecollins 11y ago
        I would argue they were also better run than GM during this period.
mrtron 11y ago
Canada lost about 3.5B[1] on the bailouts to GM and Chrysler as well. [1] http://www.theglobeandmail.com/report-on-business/canadian-taxpayers-lose-35-billion-on-2009-bailout-of-auto-firms/article23828543/ http://www.theglobeandmail.com/report-on-business/canadian-t...
bduerst 11y ago
That's because in 2009, G.M. filed one of the biggest Ch. 11 bankruptcies in history, which the bailouts failed to prevent.
maxerickson 11y ago
Didn't the government take a 61% percent stake in the good bank part of the company? Wikipedia links this WSJ article on the topic: http://www.wsj.com/articles/SB124646098696280443 http://www.wsj.com/articles/SB124646098696280443 The second paragraph mentions the US government being the majority owner of the new company. Am I misunderstanding which clever restructuring you are talking about?
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acchow 11y ago

> The bailout was massively profitable for the government and every penny has been repaid I don't really have a stance on the GM bailout, but your statement here is missing something important - every company that a government gives billions to will do disproportionately well in their industry in the short term and give solid returns. But the role of taxpayer money isn't to select winners. The free market is supposed to weed out the chaff. Edit: Want to add a PS - the government might "make profit" on the investment, but structurally the market and society has lost.

kbenson 11y ago
The government didn't give money, they invested because the market wasn't in a position to do so when the industry needed it. The narrative that the company is only going to do good short-term because the government gave them a lot of money doesn't make sense when the government has since sold it's position in that company for a profit, meaning the market now viewed that company as a more favorable investment then they did when the government intervened. > The free market is supposed to weed out the chaff. The free market doesn't care about stability, but we as the people that deal with the market, should. An unconstrained free market will swing wildly, which is one of the ways it will identify the chaff to cull, or depending on how low the swing is, the not-quite-as-good wheat to cull. The US has long recognized the benefits of a steady economy though, so while there isn't as aggressive culling, allowing some mediocre companies to survive, the environment itself is more amenable to sustaining a population of people which is the whole point of the economy.
- icelancer 11y ago
  > they invested because the market wasn't in a position to do so when the industry needed it How is this different than "The industry planned poorly and deserves to have its assets liquidated?"
  - kbenson 11y ago
    Because that industry employed two million people and a blow that large to the workforce with the economy how it was might have resulted in consequences that reached far beyond that industry. Put another way, a free market will result in the best solution. Eventually. There's no reason we can't target what might end up being cascading failures to reduce the negative swings in the economy. I would hazard that this will result in a better economic outcome quicker, but even if it doesn't, I think it at least results in less human suffering, which is a fair trade in my eyes.