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GM making risky subprime loans to prop up Obama bailout myth

July 31, 2012 08:14

Desperate to keep the myth of “saving the auto industry” with billions of taxpayer dollars alive, GM is trying to keep sales figures up by offering car loans to people with poor credit. Isn’t this what caused the housing collapse?

Earlier we reported that one of the major buyers of GM’s pride Volt “green” car is the American taxpayer via massive purchases by Obama administration agencies. It makes sense though. The government IS a subprime borrower.

GM’s stock price has fallen below what it was for the IPO leaving taxpayers still on the hook for about $24 billion and unlikely to get it back as GM continues to lose market share.

Obama illegally gave ownership shares to the auto workers union who spent millions to elect Democrats leaving US taxpayers holding the empty bag.

Obama’s agenda is the union agenda. He said it, I believe it, the GM and Chrysler deals prove it.

Few are mentioning the theft of assets from the original creditors, the union pension bailout at taxpayer expense or the billions in funds Treasury Secretary Geithner now admits will never get repaid. Obama unconstitutionality took over a private company, overturned decades of surety laws, and paid campaign supporters with confiscated stock.

The Wall Street Journal points out that this is not near as good as was anticipated;

“So, today, amid the bally and the hoo, many have lost track of that fact. The offering valued GM at $50 billion, the low end of the hoped-for range. You would never know it, based on everything you read and hear. Once underwriters saw where demand was (not as great as desired), they shifted from talking about implied valuation to emphasizing shares issued, the per-share price and total money raised. The different storyline painted a picture of boffo box office even though the facts, as laid out just a few weeks ago, indicate that this deal really didn’t meet the hopes and expectations of GM or its biggest shareholder, the U.S. Government.”

So even though all the media hype is pushing Obama’s mantra of what a great thing it was to destroy the constitution in taking over the auto industry, the US is still short billions. Obama says “it helped save jobs, rescue an industry at the heart of America’s manufacturing sector and position it to be more competitive in the future.” according to the Washington Post. Geithner said “”We cannot guarantee their success, and at some point they may stumble. But we’ve given them a better shot,”.

An earlier IBD Editorial pointed out the sweetheart deal Obama gave the UAW:

“Given that the wasteful work rules that UAW bosses — wielding government-granted monopoly-bargaining power over employees — insisted on for decades were largely what drove GM into bankruptcy, they certainly didn’t deserve kid-gloves treatment. Yet that’s what they got.

A UAW-controlled auto retiree health care fund was owed $20 billion by GM before the bailout.

Under the White House-dictated terms, UAW-appointed fund managers got back half of what they were owed in cash, whereas taxpayers who were owed $19.4 billion didn’t get a dime back in cash.

Instead, the Obama administration “forgave” this entire loan on taxpayers’ behalf and earmarked an additional $23.5 billion for the company’s trip through bankruptcy. In exchange for the nearly $43 billion funneled to GM, taxpayers acquired a “60.8% equity stake” in GM.”

It should be noted that the UAW is one of the most politically active of all unions. The union gave $2,119.937 to the 2008 campaigns 99% of which went to Obama and the Democrats. They gave another $1,106,500 in this past 2010 election cycle 100% of which went to Democrats. That is a total of $3,226,437 in just the last two election cycles. That does not include the phone banks, neighborhood canvassing and get out the vote efforts. Since 1990 the UAW has donated $26,510,252 of which 99% went to Democrats.

Not a bad return on investment when you consider they received billions back in ownership and benefit funding.

The government is subsidizing purchases of the GM Volt to the tune of $7,500 each. By the way that $7,500 is being supplied by you the taxpayer and is not being considered in the overall loss figures on the GM union payoff scam.

The UAW also spends about a million and a half a year lobbying for important issues like card check, pension bailouts and the Buy America Act. So in reality taxpayer money was used to pay off unions so that they could then campaign for Democrats and lobby for special favors from those same Democrats. This is change alright. An increase in arrogant corruption that is off the Richter scale.

The Obama campaign is claiming the union bailout saved the auto industry but neglects to mention that Ford took no money and has recovered even better than GM or Chrysler and that US plants owned by Toyota, Nissan and others continued to employ Americans without taxpayer assistance even competing against government subsidized GM and Chrysler.

Daniel Ikenson at Cato @ Liberty reiterated that Obama’s claim of “saving the auto industry” is patently false:

Closer analysis reveals that President Obama (enabled by President Bush’s complicity) bailed out specific stakeholders at two auto companies at great cost to U.S.taxpayers and at great expense to important U.S. institutions.

The assertion – or implication – that he saved the auto industry is bogus. The auto industry was never on the verge of collapse. GM and Chrysler were in deep trouble, but Ford, Honda, Toyota, Nissan, Mazda, Kia, Hyundai, BMW and Mercedes Benz (to name some U.S. producers) were fine. Yes, in 2008-2009 the economy was in recession and automobile demand had tanked. The companies that had been the most profligate, the most reckless, and the least disciplined were exposed, but talk of industry collapse was the product of a Detroit public relations campaign that featured the claim that 2 to 3 million jobs could be lost if the government didn’t funnel huge sums of cash to the Big Three. (Details here.)

I have shouted from the rooftops about this issue for over three years. So rather than present all the facts and reconstruct all the arguments, let me economize with reference to this congressional testimony, given seven month ago. It pretty well sums up everything that’s wrong or misleading about the president’s narrative.

As I wrote last year:

The objection to the auto bailout was not that the federal government wouldn’t be able to marshal adequate resources to help GM. The most serious concerns were about the consequences of that intervention — the undermining of the rule of law, the property confiscations, the politically driven decisions and the distortion of market signals.

Any verdict on the auto bailouts must take into account, among other things, the illegal diversion of TARP funds, the forced transfer of assets from shareholders and debt-holders to pensioners and their union; the higher-risk premiums consequently built into U.S. corporate debt; the costs of denying Ford and the other more worthy automakers the spoils of competition; the costs of insulating irresponsible actors, such as the autoworkers’ union, from the outcomes of an apolitical bankruptcy proceeding; the diminution of U.S. moral authority to counsel foreign governments against market interventions; and the lingering uncertainty about policy that pervades the business environment to this day.

GM’s recent profits speak only to the fact that politicians committed more than $50 billion to the task of rescuing those companies and the United Auto Workers. With debts expunged, cash infused, inefficiencies severed, ownership reconstituted, sales rebates underwritten and political obstacles steamrolled — all in the midst of a recovery in U.S.auto demand — only the most incompetent operations could fail to make profits.

But taxpayers are still short at least $10 billion to $20 billion (depending on the price that the government’s 500 million shares of GM will fetch), and there is still significant overcapacity in the auto industry.

The administration should divest as soon as possible, without regard to the stock price. Keeping the government’s tentacles around a large firm in an important industry will keep the door open wider to industrial policy and will deter market-driven decision-making throughout the industry, possibly keeping the brakes on the recovery. Yes, there will be a significant loss to taxpayers. But the right lesson to learn from this chapter in history is that government interventions carry real economic costs — only some of which are readily measurable.

The real bailout was the union money laundering scheme that keeps union dollars flowing into Democrat campaign coffers. That is the Chicago way of redistributing the wealth. Taking from the unsuspecting taxpayer to give to the union campaign supporters.