Taxpayers Face Heavy Losses on Auto Bailout

FOXNEWS.com ^ | September 09, 2009 | FOXNEWS.com

[Son House]

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

Administration officials have previously said they want to maximize taxpayers' return on the investment but want to dispose of the government's ownership interests as soon as practicable.

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."

The Congressional Oversight Panel was created as part of the Troubled Asset Relief Program, or TARP. It is designed to provide an additional layer of oversight, beyond the Special Inspector General for the TARP and regular audits by the Government Accountability Office.

The panel's report recommends that the Treasury Department consider placing its auto company holdings into an independent trust, to avoid any "conflicts of interest."

The report also recommends the department perform a legal analysis of its decision to provide TARP funds to GM and Chrysler, their financing arms and many auto parts suppliers. Some critics say the law creating TARP didn't allow for such funding.

[Son House]

Tax cuts would have helped every business across America

[SkyPilot]

We told GW Bush it was a HUGE mistake to cave to the auto unions last December and to start this madness.

Obama made it even worse.

When will people learn that Socialism is a cancer? When Christ returns? What is going to take?

[Son House]

Low tax rates would have also generated more revenue to the IRS

[Enosh]

"... perform a legal analysis of its decision to provide TARP funds to GM and Chrysler..."

Oops.

[bgill]

GM, said the company is "confident that we will repay our nation's support because we are a company with less debt

Yeah, yeah. Sounds like Popeye's J. Wellington Wimpy who was always begging, "I'd gladly pay you Tuesday for a hamburger today." Interestingly, the cartoonist created him from a teacher he had at the Art Institute of Chicago. Things never change in Chicago.

[bmwcyle]

One shot bandaids never work.

[Ghost of Philip Marlowe]

Henry Hazlitt's primary theme in “Economics in One Lesson” is that when the government acts to effect the economy, if you look beyond Stage 1, you'll see a ripple effect of other unintended consequences.

Hazlitt uses the “broken window” analogy. A couple of thugs want to stimulate business for the local glazier, so they throw a rock through the front window of a business shop. They succeed in stimulating that one business. But what they fail to see is that the money that the business owner had set aside for another purpose (to expand, to purchase a suit) has been wasted on purchasing something that has already been purchased. In short, it goes to waste.

OTHER AREAS OF THE ECONOMY ARE HARMED IN PROPORTION TO THE ONE AREA OF THE ECONOMY WAS STIMULATED.

They can count the number of cars that the CFC resulted in. What they can't figure as easily is how the economy on the whole will suffer as a result of that money being drawn from the taxpayer at a time that the taxpayer desperately needs every dime he can get.

[pnh102]

Taxpayers Face Heavy Losses on Auto Bailout

No excrement, Sherlock!

Did anyone really believe that two companies in the toilet financially, companies which were not making any money to even sustain their own existance, could possibly make even more money to pay back these bailouts?

[MeneMeneTekelUpharsin]

This should be good for 60+ on the DOW and 15+ on the Nasdaq.

[Big Giant Head]

Did anyone really believe that two companies in the toilet financially, companies which were not making any money to even sustain their own existance, could possibly make even more money to pay back these bailouts?

When I was in debt with credit cards, it never occurred to me to get a dozen more NEW credit cards to pay off the old ones and also have even more debt limit, as a way to get OUT of debt.

[dools007]

Especially when you take into account the government is going to make them build cars we don’t need and nobody wants.

Bailing GM and Chysler out (Chrysler for the second time) was a negative gimmick that has produced nothing but negative results.

[blueheron2]

The funny part is how low dealer inventory was at GM dealers and Chrysler dealers, especially Chrysler, during the clunker program. Its like having a sale with nothing to sell. Obama didn’t give lead time to the industry so they could supply inventory covered under the program.

So much time, so little experience.

[LibLieSlayer]

Our tax dollars will make the unions rich and powerful again... but the patients will die... patients being GM and Chrysler.

LLS

[Liz]

Taxpayers Face Heavy Losses on Auto Bailout. The Congressional Oversight Panel recommends the Treasury Dept perform a legal analysis for providing TARP funds to (1) GM, (2) Chrysler, (3) their financing arm.

BIGGER QUESTION---WHERE IS THE MONEY?

Ben Bernanke, Hank Paulson, J Ezra Merkin---salivating to divvy up the taxpayers' billions. Americans have not yet learned the full extent of official corruption, thievery, schemes and scams involving $TRILLIONS of tax dollars aided and abetted by the dupes on Capitol Hill.

THE WHIFF OF MADOFF J, Ezra Merkin---ousted head of GMAC (GM financing arm)---got a $6 Billion taxpayer bailout---and was also feeding hundreds of millions to jailed money launderer Bernie Madoff from Merkin's four offshore investment vehicles.

BAILOUT SWILLERS Stephen A. Fineberg's private equity firm---Cerberus Capital Management LP--- also owns Chrysler Motors. The US Treasury bought a $5 billion stake in GMAC (GM financing arm), and lent $1 billion to GM. This latest loan is IN ADDITION to the $13.4 billion the US Treasury lent earlier to Merkin's GMAC, and Fineberg's Chrysler.

SWILLING TIMELINE In 2006, GM sold 51% of Merkin's GMAC to Feinberg's private equity firm Cerberus Capital Management LP (which also owns Chrysler).

HOGGING AT THE PUBLIC TROUGH In May 2004, Feinberg's "private investment group," Cerberus Capital Management, LP became majority owner of IAP Worldwide Services, Inc, one of the US Army’s largest contractors in Iraq. In Afghanistan, Feinberg's IAP runs a drug/addiction center" in Kunduz---Kunduz is the largest opium supplier in the world. BUSY LITTLE BEAVER IAP also provides infrastructure support for the British Ministry of Defence in Kandahar....apart from supporting the US Army in Basra.

BAILED OUT AND STILL SWILLING Stephen A. Feinberg's IAP also serves a broad array of federal clients including the US DOD, NASA, the US Geological Survey, the US Agency for International Development, the IRS, and a variety of other federal agencies.

BACKSTORY GMAC's Merkin and Chrysler's Feinberg paid the Israeli govt $500M to buy Bank Leumi. An “inside” deal not just anybody could get. Bank Leumi looms large in the missing billion dollar taxpayer bailouts since Israel is the only place in the world where an individual can fly-in, got o a bank with a suitcase full of cash, and nobody asks where they got it, or whether taxes were paid on it.

[Liz]

ping

[Froufrou]

Bona fide signage at North Central Ford in San Antonio:

“American owned, not owned by America.”

[Liz]

North Central Ford, San Antonio: “American owned, not owned by America.”..........Hope he sells lots of Fords.

[nascarnation]

I’ve asked my senator Evan Bayh (D, IN) for a picture of the 50 year old UAW retiree I’m supporting at $3200/month pension and silver plated healthcare.

So far, no response.

[Froufrou]

*giggle* The roads are like a sea of F150s!

[RWB Patriot]

Same thing it took in Atlas Shrugged; a complete removal of any way for the looters to escape the consequences of their actions.

[jersey117]

NO MORE BAILOUTS FOR THESE AUTO COMPANIES. Let them die and the unions along with them. The country will be better off for it.

[Lurker]

What is going to take?

You already know the answer to that and it won't be pretty.

[Gabrial]

I dumped my Chrysler and bought a new Ford. I did not want to be doing business with the Obama administration.

I have been seeing at lot more Fords on the road lately.

[DontTreadOnMe2009]

“Our tax dollars will make the unions rich and powerful again... but the patients will die... patients being GM and Chrysler.”

Our tax dollars will make the unions rich and powerful again... but the patient will die... patient being the USA.

[CutePuppy]

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

Duh... Bush should have refused to do it (there was $15B fund already appropriated and committed but unspent - for "greening" of the auto industry - that should have been used) and could help convince the management of both companies to file for prepackaged bankruptcy, which would allow both companies (and maybe Ford, as well) to restructure their debts and union and pension contracts, reorganize and emerge far stronger, without taxpayers losing a dime. Now he is (rightly) being blamed by media and Democrats, who at the time demanded the auto companies bailout, for wasting taxpayers money, i.e., George H.W. Bush "read my lips" and John McCain "media loves me so I can win" redux.

The report also recommends the department perform a legal analysis of its decision to provide TARP funds to GM and Chrysler, their financing arms and many auto parts suppliers. Some critics say the law creating TARP didn't allow for such funding.

Duh... TARP was not designed to be a pool of money available for bailout of just anything that didn't move, like a couple of bankrupt unionized companies in the automobile industry. It was very specific in its purpose to provide liquidity to frozen banking and financial system and stave off the run on the banks (attack on the financial system, by proxy) and allow the 'netting' of the [frozen] assets on the books of financial institutions, in the aftermath of fall of Lehman Bros and run on trillions of dollars in the money market funds in the consequent "breaking the buck" by Reserve Primary Fund managed by Bruce Bent.
It’s Time to Admit it: Money Funds Involve Risk - FR / CNBC / NYT, 2009 August 29.

Sleep-At-Night-Money Lost in Lehman Lesson Missing $63 Billion - BL, 2009 September 09, by Bob Ivry, Mark Pittman and Christine Harper.

Treasury Secretary Henry M. Paulson Jr. left his suite at Manhattan’s Waldorf-Astoria Hotel last Sept. 15 after a sleepless night, feeling he’d done all he could to minimize the damage from that morning’s collapse of Lehman Brothers Holdings Inc., aides said.

At meetings concluded the previous evening at the Federal Reserve Bank of New York, Paulson and executives of the world’s largest financial institutions worked to head off two threats they anticipated in the wake of the biggest bankruptcy in U.S. history. The bankers spent hours trying to unwind Lehman-related credit-default swaps, bets made on whether companies will repay their debts. And with the help of a rule change by Federal Reserve Chairman Ben S. Bernanke, they were confident bank-to- bank loans would keep flowing.

Nobody accounted for Bruce R. Bent. The 72-year-old graduate of St. John’s University in Queens, New York, created the first money market fund in 1971, the Reserve Primary Fund. He touted it as an investment so safe it would lull clients to sleep -- so safe that, even with $785 million in loans to tottering Lehman, Bent and his wife had jetted to Rome that Sunday evening to celebrate their 50th wedding anniversary.

$3.6 Trillion Market

Bent’s $62.5 billion fund had lent money to Lehman, mostly by acquiring short-term notes called commercial paper, used by companies to pay everyday expenses such as utilities and payroll and by Wall Street to fund everything from takeovers to the mortgages it turns into bonds. Money funds like Bent’s are the biggest buyers of commercial paper, purchasing about 40 percent of outstanding issues, according to the Fed.

It was commercial paper and the $3.6 trillion money market industry that traded the notes that came close to sinking the global economy -- not a breakdown in credit-default swaps or bank-to-bank lending. The bankers were focused on saving themselves, and commercial paper, as invisible as the air they breathed, never came up at the meetings, according to one of the two dozen executives invited to the New York Fed by its president, Timothy F. Geithner, 48, and Paulson.

‘Erosion of Trust’

Like ice-nine, the fictitious substance in Kurt Vonnegut Jr.’s 1963 novel “Cat’s Cradle,” a single seed of which could harden all the world’s water, commercial paper was the crystallizing force that froze credit markets, choking off the ability of companies and banks to borrow money and pay bills.

Missing Lehman Lesson of Shakeout Means Too Big Banks May Fail - BL, 2009 September 08, by Bob Ivry, Christine Harper and Mark Pittman.

..... Two dozen of the world’s most powerful bankers, brought together by Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Bank of New York President Timothy F. Geithner the weekend of Sept. 13, 2008, to devise a rescue plan for Lehman, were too busy saving themselves to see the larger threat.

“The discussion among the CEOs was ‘How do we prevent the next firm from going under?’” former Merrill Lynch & Co. Chief Executive Officer John A. Thain, who cut a deal to sell his company that weekend, said in an interview. “There should have been much more discussion about the impact directly on the markets if Lehman went bankrupt.”

While everyone assembled at the New York Fed was aware that unbridled subprime-mortgage lending and the packaging of such inferior loans into investment vehicles such as collateralized- debt obligations had pushed the financial system to the breaking point, what the bankers missed almost destroyed them -- and the rest of the global economy.

Blankfein, Dimon

Lehman’s downfall on Monday, Sept. 15, sparked a run on the $3.6 trillion money market industry, which provides short-term loans called commercial paper used by businesses worldwide to cover everyday expenses, including payroll and utilities. The panic left companies such as Goodyear Tire & Rubber Co. stranded with insufficient cash and ravaged the accounts of millions of people.

For Goldman Sachs Group Inc. CEO Lloyd C. Blankfein, JPMorgan Chase & Co.’s Jamie Dimon and the rest of the financial chieftains who spent a weekend trying to unwind derivatives trades and keep bank-to-bank loans flowing, ignoring the commercial-paper market, the lifeblood of the economy, proved a catastrophic oversight. Within a week, the U.S. stepped in to halt withdrawals from money market funds, leading to a $1.6 trillion industry backstop, part of $13.2 trillion it has committed to beating back the worst financial crisis since the Great Depression. .....

Using TARP money for anything else, but the above - saving the financial system from collapse - and treating it just like the "pot o' gold at the end of the rainbow" - violated the letter and the spirit of the law. So now Bush (and Republicans) will be blamed for the fallout of the bailout.

[Liz]

Taxpayers Face Heavy Losses on Auto Bailout. The Congressional Oversight Panel recommends the Treasury Dept perform a legal analysis for providing TARP funds to (1) GM, (2) Chrysler, (3) their financing arm.

BIGGER QUESTION---WHERE IS THE MONEY?---betcha these guys know.

Ben Bernanke, Hank Paulson, J Ezra Merkin---salivating to divvy up the taxpayers' billions. Americans have not yet learned the full extent of official corruption, thievery, schemes and scams involving $TRILLIONS of tax dollars aided and abetted by the dupes on Capitol Hill.

[SunkenCiv]

• Debt Be Not Proud: The Sorry Tale of America's Out-of-control Spending
• Senate must raise debt ceiling above $12T

[grellis]

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