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I'm Ed Whitacre from General Motors. We want to make this a company all Americans can be proud of again.
May 1, 2010 11:58 AM   Subscribe

Remember the General Motors bailout? You may have seen the commercial GM has been airing where GM CEO Ed Whitacre brags about paying back this loan "in full with interest, five years ahead of the original schedule". Ever wonder how that was possible? Reason.tv explains.

From a Forbes.com column:
GM claims that the fact that it is even using the escrow money to pay back the loan instead of using it all to shore itself up shows that it is on the road to recovery. That actually would be a positive development--although hardly one worth hyping in ads and columns--if it were not for a further plot twist.

Sean McAlinden, chief economist at the Ann Arbor-based Center for Automotive Research, points out that the company has applied to the Department of Energy for $10 billion in low (5%) interest loan to retool its plants to meet the government's tougher new CAFÉ (Corporate Average Fuel Economy) standards. However, giving GM more taxpayer money on top of the existing bailout would have been a political disaster for the Obama administration and a PR debacle for the company. Paying back the small bailout loan makes the new--and bigger--DOE loan much more feasible...

GM boasts that, because it is doing so well, it is paying the $6.7 billion five years ahead of schedule since it was not due until 2015. So will there be an accelerated payback of the rest of the $49.6 billion investment? No. That goal has been pushed back, as it turns out.

In order to recover that investment, the government has to sell its equity. It plans to do that only when GM becomes a publicly traded company once again. GM was hoping to turn a profit by the end of 2010 and float an initial public offering this winter. However, GM Chief Financial Officer Chris Liddell, when queried about that timeline a few days ago, demurred. The offering will be made, he said, "when the markets and the company are ready."

...Magliano too maintains that the company will be able to pay back taxpayers if the industry is able to ramp up annual vehicle sales from the expected 10.8 million this year to 17 million in 2014 and GM captures 20% of these sales.... The General Accountability Office, on the other hand, remains deeply pessimistic. It concluded in a December report (which a more recent April report has said nothing to contradict, despite media spin to the contrary) that: "The Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies' values would have to grow substantially more than they have in the past."
posted by tybeet (53 comments total) 9 users marked this as a favorite

 
The commentator gesticulates too much.


Good explanation though.
posted by lampshade at 12:10 PM on May 1, 2010 [2 favorites]


I'm curious too about all the ads GM is running these days claiming that their hulking, slabby SUVs and their bland, plasticky sedans "get better mileage than Toyota" (or words to that effect).
I'm sure they're playing around with the facts there too.
posted by Flashman at 12:24 PM on May 1, 2010 [2 favorites]


The commentator acts like a real person, instead of a stuffed-doll, talking head. Ever watch some of the more studied TV commentators? They're schooled on how NOT to gesticulate, because they're told it doesn't "present" well on TV. Why not? Because some corporate bimbo said so? The phrase "talking head" has taken on mostly negative connotations; the lack of real,human, vernacular presence is exactly the reason why. I was watching Russian news channel the other night - same thing. The newscaster didn't move anything but her lips - boring.

btw, a great explanation about how GM management continues to deceive. The entire lot of them should be fired. They screwed their own workers while doing *nothing* to reinvest in needed infrastructure rebuilds. It's sickening watching these so-called industrial leaders pocket our tax dollars, even as they screw us over.
posted by Vibrissae at 12:29 PM on May 1, 2010 [2 favorites]


hulking, slabby SUVs and their bland, plasticky sedans

Hey, you can't say that about things our tax dollars subsidize!

I wish they'd subsidize some more hamburgers for my sandwich-heavy portfolio.
posted by Inspector.Gadget at 12:29 PM on May 1, 2010 [1 favorite]


Yeah, fuck Detroit! AMIRITE?
posted by joe lisboa at 12:31 PM on May 1, 2010 [1 favorite]


You know, I'd thought real seriously about posting this, back when it was just an article, but figured I probably shouldn't, given my well-known stance on bailouts. I wasn't sure I was a good judge of relative newsworthiness.

I'm glad to see I wasn't the only person that thought this particular song and dance was outrageous.
posted by Malor at 12:34 PM on May 1, 2010 [1 favorite]


Oh, the article I was going to link was on the Reason website: GM's Phony Bailout Payback. If you'd prefer a text version (not the same as the excerpted Forbes link above), that's the original source, as far as I know.
posted by Malor at 12:37 PM on May 1, 2010 [3 favorites]


it's so weird to think of a company that is, on the surface, 100 years old, making an IPO. That said, i am under contract for the bastards and the there has been a lot of outsourcing, cutting of benefits and impeding paycuts for us. The company is not doing that great.

Go ahead, dooce me.
posted by djduckie at 12:38 PM on May 1, 2010 [1 favorite]


btw, a great explanation about how GM management continues to deceive. The entire lot of them should be fired.

...into the son.
posted by Pope Guilty at 12:44 PM on May 1, 2010 [2 favorites]


This feels like the current administration's version of "Mission Accomplished."
posted by phaedon at 12:45 PM on May 1, 2010 [3 favorites]


...into the son.
posted by Pope Guilty


Eponysterical!
posted by Malor at 12:45 PM on May 1, 2010 [9 favorites]


"Here's forty-nine point six billion dollars."

"And six point seven billion, your change. Have a nice day!"
posted by Sys Rq at 12:59 PM on May 1, 2010 [5 favorites]


Obama always said he was all about change.
posted by ZenMasterThis at 1:03 PM on May 1, 2010 [1 favorite]


...hows that change werkin ou fer ya
posted by clavdivs at 1:12 PM on May 1, 2010 [2 favorites]


So if we spend our money buying Government Motors cars, maybe the company gets healthy, IPOs, making those lying executives rich, and maybe making the shares we own worth what we paid for 'em.

Or we don't buy cars from the lying executives, the company goes bust and we're out the money we've already spent, plus the interest.

Keep the change, thanks.
posted by DaveP at 1:15 PM on May 1, 2010 [2 favorites]


When I first saw the Whitacre ad, I thought, given the excellent review of the guy that the Freep did, that he was pretty much being honest (of course, this is a Detroit paper, likely rooting for the hometown team).

When I saw this, I first wanted to blow my stack, but then realized I should not have been surprised.

No intervention of any sort is going to cure GM of their disastrous ways of doing business. Non-existence just might (as horrible as it sounds). I couldn't tell, nor am I in a position to judge.

And frankly, living a mere 15 minutes from their Willow Run establishment, knowing a handful of hard working, honest people that I met there and elsewhere during my HS robotics days, and even now at the Umich in the form of professors who worked elsewhere in the GM hierarchy, its depressing that they would run their company in such a careless (I hope that's an OK word) manner. Simply depressing.

This all said, I wish the company luck into the future. I hope and pray they can pull a miracle or two.
posted by JoeXIII007 at 1:21 PM on May 1, 2010 [2 favorites]


GM once heaped wealth on everyday Americans in the form of generous benefits and steady pay checks. Then along came a disastrous industrial and trade policies championed by the likes of Forbes and Reason magazine. Now they want to piss on the comeback parade and spread more FUD. Why do these guys hate America so.
posted by humanfont at 1:47 PM on May 1, 2010 [7 favorites]


All I know is GM heaped on me a P.O.S. '76 Nova that crabbed down the road to the delight of everyone who was following me. Fool me once, shame on them.
posted by digsrus at 2:03 PM on May 1, 2010 [1 favorite]


What? A SYTL from Reason TV, home of libertarian wankers like John Stossel?

GM was lent $50 billion and paid back $6.7 billion of it. What's to complain about? That loan probably saved over 150,000 jobs in the middle of the worst recession since the Great Depression. All of those people actually have jobs that make real stuff that increases the welfare of the country. Contrast that with the over $180 billion given to AIG to save the jobs of a few hundred whiny million-dollar-bonus-babies at AIG and Goldman Sachs who do nothing but deal cards in the casino and produce nothing of value.
posted by JackFlash at 2:08 PM on May 1, 2010 [17 favorites]


Contrast that with the over $180 billion given to AIG to save the jobs of a few hundred whiny million-dollar-bonus-babies at AIG and Goldman Sachs who do nothing but deal cards in the casino and produce nothing of value.
Where is that number coming from?
posted by planet at 2:27 PM on May 1, 2010 [1 favorite]


So if we spend our money buying Government Motors cars, maybe the company gets healthy, IPOs, making those lying executives rich, and maybe making the shares we own worth what we paid for 'em.
Keep in mind that the management at GM is totally new, not the same guys who ran the company into the ground.

Would you rather have seen the economy of Michigan Decimated, or what? Or should GM have been turned into a socialist car cooperative?

This commercial was an astoundingly stupid idea, though.
Where is that number coming from?
Facing sharp criticism on Capitol Hill, Treasury Secretary Geithner and his predecessor, Henry Paulson, on Wednesday defended their decision to complete a $182 billion bailout of American International Group Inc.
posted by delmoi at 2:43 PM on May 1, 2010 [1 favorite]


libertarian wankers like John Stossel?

Here's a "hard-hitting" critique of libertarian wanker John Stossel
posted by hamida2242 at 2:44 PM on May 1, 2010 [3 favorites]


There is a difference between the bailout loan and the purchase of equity.

The american taxpayer will get (most of) their other money back when the company goes public. If the taxpayer loses money, it will be far less than what would have happened if they just let it rot on the vine.


"... IPOs, making those lying executives rich, and maybe making the shares we own worth what we paid for 'em."

The "lying" executives will get nothing on an IPO, they don't own any of the stock.

Cite.

And another.
posted by gjc at 2:53 PM on May 1, 2010 [2 favorites]


A more balanced Business Week profile on the current state of GM.
posted by humanfont at 3:41 PM on May 1, 2010 [1 favorite]


GM was lent $50 billion and paid back $6.7 billion of it.

Did you even read the article? They only paid it back so that they could borrow even more.

What's to complain about? That loan probably saved over 150,000 jobs in the middle of the worst recession since the Great Depression.

Jobs for the sake of jobs are stupid. What we SHOULD have done was budgeted that $60 billion to take care of the workers, and get them retrained into something else. GM is a smoking crater of a company, run by people who don't know how to make cars people want to buy.

It also has a nasty knock-on effect on the rest of the industry. The one good American car company, Ford, is being punished for doing a good job. GM and Chevrolet should be gone, and they should be expanding production in a big way to sell us cars that we actually want. They managed themselves well, didn't take any government money, and what do they get for it? They get to go into competition with the bottomless pockets of the US government. They're not just playing against other companies now, they're playing against the referees.

I'd have been in total support of giving that money to the workers. $60 billion is $240,000 per employee. We could have probably paid off the primary residence of every GM employee, sent all of them to comprehensive training programs, paid them a reasonable salary for a few years, and still ended up with money left over.

But giving it to GM pretty much amounts to lighting it on fire, and doing drive-by bombings of Ford to boot.
posted by Malor at 3:46 PM on May 1, 2010 [22 favorites]


...maintains that the company will be able to pay back taxpayers if the industry is able to ramp up annual vehicle sales from the expected 10.8 million this year to 17 million in 2014 and GM captures 20% of these sales....

I was going to play sceptic and wonder how annual cars sales would magically increase 57% in the next four years but when I looked up the numbers it seems 17 million a year is what they were doing regularly a few years ago. I still think it's overly optimistic though. I guess if the gov't gets back $0.80 on the dollar it wouldn't be too bad.
posted by furtive at 3:48 PM on May 1, 2010 [1 favorite]


Can China save GM?

They have a ~13+% share of a market that grew 46% last year and is still going like gangbusters. The US has around 850 cars per 1000 people; China has only 35/1000 and 4x the population.
posted by SpookyFish at 4:16 PM on May 1, 2010 [1 favorite]


Can China save GM?

Yeah, that's just what we need is a country 4x the population of ours with 1/1000th the environmental protection emulating our now failed experiment with cars. I hope you like paying 4-10 times what you currently pay for gas, because that's what will happen.

This is also assuming that they'll actually keep buying GM cars instead of just reverse engineering them and making their own even less efficient, cheaply made versions.
posted by loquacious at 4:32 PM on May 1, 2010 [2 favorites]


Malor: GM is a smoking crater of a company, run by people who don't know how to make cars people want to buy.

Nobody wants to buy? GM sold over 9 million cars last year that people wanted to buy, second only to Toyota in the world. You sound like Yogi Berra -- nobody goes to Coney Island because it's too crowded!
posted by JackFlash at 4:51 PM on May 1, 2010 [2 favorites]


I didn't say nobody wanted to buy them. That was something you inserted out of the blue. Yes, that would indeed be like saying that nobody goes to Coney Island because it's too crowded. You're totally right. I would look really stupid if I'd said that.

GM sold over 9 million cars last year that people wanted to buy

From what I can see, they moved just over 2 million cars last year. They've been down steadily every year for the last ten or so, at least per Wikipedia figures. (oddly, that's all I can find quickly... I wanted to try to get to primary sources, since those figures disagreed so strongly with yours, but the Wikipedia reference links are broken, and all the other links I'm coming up with are always talking about present year or present quarter, not historical trends.) In 2007, which was the last year before the crunch hit, Wikipedia claims they moved 3.8 million. They just barely broke 5 million in '99, and have been trending steadily downward ever since.

I'd say that's pretty goddamn clear evidence that the present management is not good at making cars people want to buy. They were down every year since 1999, in an economy in the middle of a debt-fueled boom. They're not just bad at making cars people want, they're dismal.

They make crappy products, and sensible customers will stick with Ford if they want to buy domestic, or one of the numerous high-quality imports if they just want a good car.

And yet, we threw sixty billion dollars into that reeking pile, and it looks like we're going to throw in even more. And Ford is taking it in the shorts; it should be boomtime for them right now, but instead of one strong, high-quality, very profitable domestic manufacturer, we have two shitty ones, and a decent one that, despite much superior management decisions, is now hamstrung in its strongest market by its propped-up competition.
posted by Malor at 6:29 PM on May 1, 2010 [1 favorite]


...hows that change werkin ou fer ya?

Since I'm smart enough to look at Google Finance, and see the DJIA (and the more critical, IMO, Wilshire index) rebounding to pre-crash levels on Obama's watch, I'd say it's working out really fucking well.

Bailouts and stimulus need to be examined in terms of total wealth created. It's a far better use of taxpayer funds than, say, eleven carrier groups and a pointless land war or two in Asia. I mean, you might want to see your parents spend their retirement in poverty as both their house and their retirement funds took a bath, in the name of Tea-Baggery.

Me, I like a well-run civilization, and it's clear the Democrats are the only political party qualified for the job at the moment, and for the foreseeable future.
posted by Slap*Happy at 6:40 PM on May 1, 2010 [3 favorites]


You're confusing dollars created with wealth created. The US government nationalized the biggest car manufacturer, the main issuers of mortgages, the main insurer of those mortgages, and the Fed has injected trillions of dollars into the system, including directly buying a trillion dollars in crap mortgages.

With that kind of stimulus, of COURSE the numbers are going back up. But we're in a far, far weaker position than we were 24 months ago. We've taken on at least ten trillion in liabilities with AIG, FNM, and FRE, our government deficit now amounts to 10% of the entire economy, and we haven't fixed any problems at all. All the old players are still doing exactly what they were doing before. We took on ten trillion dollars in liabilities, and injected trillions more in cash, to stop anything from changing.

So, yeah, of course it looks better now. It'll probably look pretty good for some time to come. But don't confuse that with actual health.
posted by Malor at 6:53 PM on May 1, 2010 [3 favorites]


Yes, my GM numbers were were from a previous year, but the fact remains that today GM cars are the most popular cars in the world and actually outsold Toyota in March. GM cars are more popular than Ford, Chrysler, Honda, Nissan, Subaru, Hyundai, Acura, Mazda, BMW, Audi, Volkswagen, etc. Everyone but Toyota. So, yeah, it is pretty stupid to say that GM doesn't know how to make cars that people want to buy. More people buy GM than any other except Toyota.
posted by JackFlash at 6:54 PM on May 1, 2010 [2 favorites]


From what I can see, they moved just over 2 million cars last year.

7.48 million. GM does have the odd small operation outside the US, you know.
posted by ROU_Xenophobe at 8:57 PM on May 1, 2010 [1 favorite]


I'd have been in total support of giving that money to the workers. $60 billion is $240,000 per employee. We could have probably paid off the primary residence of every GM employee, sent all of them to comprehensive training programs, paid them a reasonable salary for a few years, and still ended up with money left over.

Me too.

Was anything like that ever seriously proposed?
posted by hamida2242 at 9:09 PM on May 1, 2010


joe lisboa : Yeah, fuck Detroit! AMIRITE?

Yeah, sorry, the Universe beat you to it.

As for me... I'll call it good if GM just manages to last long enough to pay us back.


JackFlash : GM sold over 9 million cars last year that people wanted to buy, second only to Toyota in the world.

So remind us again why the second most successful car company in the world not only went bankrupt, but 50 billion in the hole? And why outselling Toyota in March should impress us? "We lose money on every sale, but plan to make it up in volume!"

Let 'em all die. "Too big to fail" just delays the inevitable of reeducating people to ask "would you like fries with that" in Mandarin.

posted by pla at 9:39 PM on May 1, 2010 [1 favorite]


Oops... </i>
posted by pla at 9:40 PM on May 1, 2010


With that kind of stimulus, of COURSE the numbers are going back up. But we're in a far, far weaker position than we were 24 months ago. We've taken on at least ten trillion in liabilities with AIG, FNM, and FRE, our government deficit now amounts to 10% of the entire economy, and we haven't fixed any problems at all.

Look, I'm pretty cynical, but that's simply false. Although the stock market is not a good indicator of financial health, by all measures we averted a major global economic disaster far bigger than what we're dealing with presently. The only group I can see disagreeing with this strongly takes their cues from the Austrian School. We're not out of the woods yet, but to say the measures we took did nothing requires willful ignorance.
posted by krinklyfig at 10:44 PM on May 1, 2010 [3 favorites]


I would just amend that to say that the regulation required to avert such a problem in the future has not yet been implemented. But that still doesn't mean we haven't done anything which has had a tangible positive effect. Quite the opposite is true. We need good regulation like some of what we got after the Great Depression, like the repealed provisions of Glass-Steagall and recent proposals like the Volcker Rule, if we're going to make real progress, and Obama has taken his time to get to it, but we're dealing with it now. Whether we get what we need remains to be seen ...
posted by krinklyfig at 10:50 PM on May 1, 2010 [1 favorite]


...and the Fed has injected trillions of dollars into the system...

Cue Morbu: The Fed does not work that way!

You are aware that 1) The Federal Reserve is actually 12 separate institutions, politically isolated from each other, and not beholden to Ben Bernanke, who in turn does not answer to Tim Geithner? No, I didn't think so.

The US does not have a central bank, as other nations do. The Federal Reserve BANKS (emphasis on the plural) cannot be compelled to inflate our way out of debt, as their mission is to control inflation, as well as regulate banks and investment institutions with the terms and conditions that it sets on borrowing from its various incarnations. (Greenspan did a terrible job at this, Bernanke is actually something of an ass-kicker, and able to sway the various Fed presidents to see things his way, if slowly and with much resistance.)

Come back when you understand the difference between the Fed and a central bank, and understand the political relationship between the Presidential Administration, the Fed Chairman, the Fed Board of Governors, and the Federal Reserve Banks -- and their relationships with the Bureau of Public Debt and the Treasury. You are aware that the Fed paid a few dozen billion dollars back into the Treasury last year? No? Better bone up a bit, then. Until then we shall all laugh at you and your gold-standard idiocy. (Pop quiz - what did Winston Churchill do that dropped Britain into the thick of the Great Depression? Compare with what Roosevelt did, only in reverse.)
posted by Slap*Happy at 11:26 PM on May 1, 2010 [4 favorites]


It also has a nasty knock-on effect on the rest of the industry. The one good American car company, Ford, is being punished for doing a good job.
If they're being "punished" why did they support the auto bailout? It wasn't all that clear that they were going to survive if the economy got worse, which would have happened if GM had gone down, it would have also killed their suppliers.

The other problem is that the bailouts happened as we were going into a recession. If there had been no recession, GM might not have failed, and if it did the need to rescue wouldn't have been as great. But piling GM's failure on top of all the layoffs and stuff would have had an amplifying effect on the problems caused by the credit bubble.
I'd say that's pretty goddamn clear evidence that the present management is not good at making cars people want to buy.
What are you talking about? The current management has only been there for like a year and half, not long enough to have an impact on automotive design, which takes years.

Even if you wasn't the case, you would have called yourself stupid in your own comment. You said it would have been dumb to say "I didn't say nobody wanted to buy them. … I would look really stupid if I'd said that." And then you said "The present management is not good at making cars people want to buy."

So which is it? Are they bad at making cars that people want to buy, or would that be a stupid thing to say?
Since I'm smart enough to look at Google Finance, and see the DJIA (and the more critical, IMO, Wilshire index) rebounding to pre-crash levels on Obama's watch, I'd say it's working out really fucking well.
Working out well for who? Unemployment is still at 10%. If major corporations figured out how to squeeze higher productivity out of their workers by scaring them with the prospect of layoffs (or replace people with technology), how does that benefit the average non-stock-holding American? They're either working harder or unemployed.

The GDP number is great if you're a wallstreet titan, but it's pretty useless for the average American.
I'd have been in total support of giving that money to the workers. $60 billion is $240,000 per employee.
You mean loan $240,000 to each employee, with the expectation that they would pay it back in a few years? Because that's what we did with GM.
The US does not have a central bank, as other nations do. The Federal Reserve BANKS (emphasis on the plural) cannot be compelled to inflate our way out of debt, as their mission is to control inflation...
Incorrect. Their job is to both control inflation and unemployment. They are failing.
posted by delmoi at 5:36 AM on May 2, 2010


(Another reason why GDP can recover without unemployment is that, obviously, companies tried to dump their crappiest workers)
posted by delmoi at 5:40 AM on May 2, 2010


Working out well for who? Unemployment is still at 10%.

Working out well for anyone who doesn't want to lose their job. Here's a nice little graph on "Before and After" in terms of job loss.

It will take another 15 months or so for unemployment to reach pre-crash levels. The job market always lags behind the rest of the indicators in recovering from a recession, and this last one, which was precipitated by a crisis in credit, may take even longer to sort out. The administration (and the Fed) have done a lot to slow and reverse job loss, and as stimulus projects start gathering steam this summer, I expect to see continued job growth.
posted by Slap*Happy at 6:07 AM on May 2, 2010 [2 favorites]


Look, I'm pretty cynical, but that's simply false. Although the stock market is not a good indicator of financial health, by all measures we averted a major global economic disaster far bigger than what we're dealing with presently. The only group I can see disagreeing with this strongly takes their cues from the Austrian School. We're not out of the woods yet, but to say the measures we took did nothing requires willful ignorance.

Just because the economy is turning around doesn't mean it was a result of the stimulus. Correlation != causation and all that, and according to a poll last month, a vast majority of economists don't believe the stimulus had any impact.
NABE conducted the study by polling 68 of its members who work in economic roles at private-sector firms. About 73% of those surveyed said employment at their company is neither higher nor lower as a result of the $787 billion Recovery Act. (CNN)
posted by tybeet at 6:59 AM on May 2, 2010


Cue Morbu: The Fed does not work that way!

The Fed bought up over a trillion dollars in mortgages... for more than a year, it essentially was the mortgage market. And it has lent out huge amounts of money in a secret program that the management refuses to document. Money injection, lending money into creation, is what the Fed does. At one time, they didn't intervene in the market directly, but all that went out the window in this crisis.

They arrived at this really noxious idea, I think in the 90s sometime, of "interest rate targeting" -- that is, they pick a short-term interest rate that they think is right for the whole economy, and they create any amount of money necessary to hold interest rates close to that level. And that's what started setting off bubbles. There were three central modus operandi at the Fed: an absolute guarantee of liquidity no matter what, an absolute commitment to hold interest rates steady via that unlimited liquidity, and an absolute refusal to ever significantly surprise the financial system.

Taken in tandem, those three things carry one message: "take on more risk, please." So the system loaded itself up with risk, and nearly choked to death on it. Now a very large fraction of the risks have been transferred to the government's books; the Fed holds a trillion in crap mortages, and the government holds AIG's entire loss book. Meanwhile the entities originally taking on the risk, IE, being stupid, are recapitalized at public expense to start doing the exact same shit all over again.

We avoided short-term pain, but at the cost of preserving everything that got us in trouble. Nothing changed. All the same players are still there, and almost all the same institutions, but now a very large fraction of the systemic risk is explicitly on the government dime, instead of being borne by the people trying to make profits. To avoid (a lot of) short- to medium-term pain, we instead have multiplied by many times the total pain we're going to go through. It's just not today, so the politicians think that's better. It's okay to lose a leg tomorrow, as long as you don't lose your foot today.

That system still has to be fixed, and we no longer have the political will do it properly. People are foolish enough to think a little regulation will be enough. The financial system is now constructed so that the government takes the risk, and the private sector keeps the profit. There is no regulation that can fix that structure.

So which is it? Are they bad at making cars that people want to buy, or would that be a stupid thing to say?

That's not a stupid thing to say. What is a stupid thing is claiming that nobody wants to buy them. They just have to sell ONE car to invalidate the 'nobody' claim, and even GM can sell one car. Hell, sell Volts for $50, and I'll be first in line.

You two have a pretty severe mental disconnect there. Either you're not applying your brains, you genuinely think I'm that stupid, or you're deliberately misreading to try to derail the conversation. In any of those cases, I don't think we can usefully converse from here.
posted by Malor at 7:13 AM on May 2, 2010


Malor said "GM is a smoking crater of a company, run by people who don't know how to make cars people want to buy." GM is today either the first or second largest seller of cars in the world. To say they don't know how to make cars people want to buy is pretty stupid.
posted by JackFlash at 10:56 AM on May 2, 2010 [1 favorite]


Slap*Happy, thank you for that tidy little post. It really surprised me with some basic facts. I need to learn more about The Fed, clearly.
posted by IAmBroom at 2:36 PM on May 2, 2010


Let me get this straight. GM pays back its loan 5 years ahead of time with interest, because it decides to retool its plants to provide more energy efficient vehicles using a much larger loan from a pre-existing program to encourage US manufacturers to provide customers with energy efficient products. This is spun out as some kind of bad thing by the biggest libretarian magazine which hates any kind of program to encourage energy efficiency, or for that matter almost all liberal programs except legal weed.

Liberals are outraged.

Apparently thefact that GM has paid its loan back and will now retool its plants to provide energy-efficient vehicles, reducing our dependence on oil, our carbon footprint, and greenhouse gas emissions is enough to drive the left-wing denziens of MeFi into a tizzy.

What's wrong with this picture?

Could someone tell me what GM has done wrong here? Is it wrong that they are retooling the plants? Is it wrong that they are paying back the loan? Is it wrong that there are going to be a lot more energy-efficient cars on the road? Is it wrong that there is going to be less use of oil and less greenhouse gas emissions in the US?
posted by Ironmouth at 3:15 PM on May 2, 2010


Since when do you people listen to Forbes, the fucking propaganda arm of US corporate America and Steve Forbes who ran for President in 2000 on a shitty super-conservative platform?

Here's what Steve Forbes believes in:

Major issues Forbes has supported include free trade, health savings accounts, and allowing people to opt out 75% of Social Security payroll taxes into Personal Retirement Accounts (PRAs). He supports traditional Republican Party policies such as downsizing government agencies to balance the budget, tough crime laws and support for the death penalty, and school vouchers, opposition to gun control and most government regulation of the environment, as well as drug legalization and same-sex marriage.[12] This last was despite his father's increasingly flamboyant gay lifestyle before his death. [13] In terms of foreign policy, he called for a "US not UN foreign policy" (which is composed of anti-IMF sentiments, pro-Israeli sentiment, opposition to Most Favored Nation status for the People's Republic of China, and anti-UN sentiment.) His flat tax plan has changed slightly. In 1996 he supported a flat tax of 17% on all personal and corporate earned income (unearned income such as capital gains, pensions, inheritance, and savings would be exempt.) However, he supported keeping the first $33,000 of income exempt. In 2000 he maintained the same plan, but instead of each person receiving an exemption of $33,000, it more closely resembled the Armey Plan (Forbes's version called for a $13,000 per adult and $5,000 per dependent deduction). Critics noted that Forbes stood to save substantial amounts in taxes if such a proposal was enacted. Forbes himself is quite wealthy, with an admitted net worth in 1996 of $430 million. Although Forbes publishes the list of the 400 wealthiest men and women in the U.S., Forbes conspicuously exempts himself from such disclosure. In response to this criticism, Forbes promised in his 2000 campaign to exempt himself from the benefits of the flat tax, although he did support the repeal of the 16th Amendment in a debate with Alan Keyes the previous year.

In his 2000 campaign, Forbes professed his support for social conservatism along with his supply-side economics. Despite holding opposite positions in 1996, for the 2000 campaign, Forbes announced he was adamantly opposed to abortion and supported prayer in public schools. The previous year Forbes had issued a statement saying he would no longer donate money to Princeton University due to its hiring of philosopher Peter Singer, who views personhood as being limited to 'sentient' beings and therefore considers some disabled people and all infants to lack this status. Steve Forbes was one of the signers of the Statement of Principles of Project for the New American Century (PNAC) on June 3, 1997.


Steve Forbes is the editor-in-cheif of Forbes Magazine.

Adbusters it ain't
posted by Ironmouth at 3:23 PM on May 2, 2010


Since when do you people listen to Forbes, the fucking propaganda arm of US corporate America and Steve Forbes who ran for President in 2000 on a shitty super-conservative platform?

Would you be more comfortable reading it in the Associated Press? From the mouth of Republican senator Charles Grassley?:
"The hype does not match the reality. Taxpayers have not been repaid in full — far from it. ... Much of it will never be repaid," Grassley called it "an elaborate TARP money shuffle" amounting to "taking TARP money out of one account to pay back TARP loans in another account."
Could someone tell me what GM has done wrong here? Is it wrong that they are retooling the plants? Is it wrong that they are paying back the loan? Is it wrong that there are going to be a lot more energy-efficient cars on the road? Is it wrong that there is going to be less use of oil and less greenhouse gas emissions in the US?

What's wrong is that an advertisement starring the CEO of this company is using misleading figures, in what amounts to a lie, in order to manipulate public opinion and fool people into trusting that GM is on the mend, when the reality is far from it. Behind the scenes, this money is not being given back in good faith, but rather being given back strategically so they can ask for more. If you can't see what's wrong with that, then I'm afraid I don't know what else to say.
posted by tybeet at 7:05 AM on May 3, 2010


What's wrong is that an advertisement starring the CEO of this company is using misleading figures, in what amounts to a lie, in order to manipulate public opinion and fool people into trusting that GM is on the mend, when the reality is far from it. Behind the scenes, this money is not being given back in good faith, but rather being given back strategically so they can ask for more.

Let's look at your AP report. Does it say that it is a problem? No. It says that Chuck Grassley thinks its a problem. You are not quoting an AP reporter there. You are quoting a very conservative Republican senator. In fact, if you read the article, it is titled: "Republican senator criticizes GM loan repayment." Your statement that it is an "AP report" gives the false impression that AP has reported that this is some sort of bogus transaction. Instead, it passes on a Grassley press release. This is not the same as an independent watchdog considering otherwise. The Forbes column is just that, an editorial, far from objective news reporting. Thus, your AP link portrayed as some sort of 'independent source' is disingenous at best.

Let's look at the known facts: (1) GM was loaned a great deal of money, some of which was a loan, and some of which was converted to stock ownership; (2) Part of that money included a bankruptcy escrow fund, the monies of which could not be spent without Treasury approval. However, it was hoped that should the economy recovery, the escrow fund could be used to pay off the loan portion of the funds; (3) Because the economy is getting better and GM's position does appear to be better, the Treasury approved repayment of the loan portion of the funds from the escrow account; (4) The Obama Administration, as part of the stimulus package, put in before the GM bankruptcy, included a large pool of money that businesses could obtain loans from to provide more energy efficient products to the public; (5) GM applied for this money and the government is going to loan GM the money, as energy efficiency in cars is a top priority in both putting the US in front of energy efficiency industries and in reducing pollution and energy consumption; (6) A bunch of Republican spinmeisters, led by (a) Reason, a libretarian magazine; (b) Forbes, a pro-corporate magazine edited by one of the most-conservative Republicans out there; and (c) a Republican Senator, all criticized the move, because it made it look like GM paid back its loan. (which it actually did according to the terms of the loan).

This all adds up to? You got duped by GOP spin masters. Don't worry, it is a tough business and it happens all the time.
posted by Ironmouth at 8:46 AM on May 3, 2010


NABE conducted the study by polling 68 of its members who work in economic roles at private-sector firms. About 73% of those surveyed said employment at their company is neither higher nor lower as a result of the $787 billion Recovery Act. (CNN)

Employment is a lagging indicator. The financial bailouts were to ensure the system didn't crash. They weren't stimulus packages. OTOH, the stimulus itself will take a while to work through. If we're still at 10% adjusted unemployment or higher in 5 years, we're probably pretty screwed, but even the most pessimistic scenarios don't predict that sort of stagnation. If anything, we may see slower recovery, but the job losses aren't increasing from here.
posted by krinklyfig at 3:12 PM on May 3, 2010


That system still has to be fixed, and we no longer have the political will do it properly. People are foolish enough to think a little regulation will be enough.

I'm not sure where your assumptions are coming from, but I think they're too pessimistic.

The financial system is now constructed so that the government takes the risk, and the private sector keeps the profit. There is no regulation that can fix that structure.

No, there is an implicit assumption that the government will bail out the economy, meaning in some cases the companies which are either structurally important to the economy or culturally important. There is no mandate. But there is indeed regulation which would fix it. One way is to prevent companies from getting that large in the first place. A more nuanced approach is to apply this restriction to companies which are intertwined in a way which could cause systemic failure if they become too large. Also, Glass-Steagall, the Volcker Rule, much stricter regulation of rating agencies and lenders, particularly concerning securitization of mortgage debt, and at bare minimum a clearinghouse or exchange for derivatives on securities not currently regulated (CDOs, CDSs, derivatives of other derivatives). It's true that the unregulated derivatives market didn't cause the problem by itself, but unregulated derivatives markets have historically been the cause of or catalyst behind more than one recession. If we have transparency in the business of trading hedges by large institutions, then we will have a much better idea where the problems exist. Nobody but a few exotic traders could see the actual state of the mortgages underlying the securities being touted as AAA, because digging that deep requires a lot more work than most diligent investors do.

Stock, commodities and futures options (derivatives) are all traded heavily and regulated through exchanges, though that wasn't always the case. Before the Great Depression, the stock market itself was pretty opaque, as the regulation requiring transparency had not been implemented. Back then, at the height of the frenzy many brokers only required 10% (so $1000 would buy $10,000 in stock), which is crazy leverage for a typical margin account even today (excluding forex). We got over-leveraged in the housing price runs through their garbage loans, when people weren't just buying houses, they were playing the market on zero down, NINJA loans, and the ratings agencies were ginning up the deal on the other side to attract investment money to service the debt. Doing the right thing in regulating the market will take courage, but it's not as difficult as health care from a political POV, and we do know a great deal about what needs to be done to prevent it from happening next time. Whether things will stay tight for another 80 years is another question ...
posted by krinklyfig at 3:51 PM on May 3, 2010


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