About those auto bailout "loans"

Practically overlooked in yesterday’s news about the nationalization of GM was this little tidbit:

In addition, the government would extend a credit line to the new company and forgive the bulk of the $15.4 billion in emergency loans that the U.S. has already provided to GM, the source said.

Is there anything related to this whole fiasco where Obama did not tell a whopper of a lie? I seem to recall hearing things like:

  • “GM is too big to let fail.”
  • “I’m not interested in running car companies.”
  • “This isn’t a bailout it’s a loan.”
  • “We can’t afford to let GM go bankrupt.”
  • etc.

The WSJ nailed it right after the election. Here’s part of the article with my comments inserted.

In return for any direct government aid, the board and the management should go. (That happened, at least to any who didn’t genuflect at the Altar of Obama.) Shareholders should lose their paltry remaining equity. (That most definitely happened.) And a government-appointed receiver — someone hard-nosed and nonpolitical (riiiiight) — should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible. (Can you say “car czar”?)

That will mean tearing up existing contracts with unions (done – their contract now includes ownership of the company), dealers (done – shut many of them down) and suppliers, closing some operations and selling others (the parts the unions didn’t want), and downsizing the company. After all that, the company can float new shares, with taxpayers getting some of the benefits (with any luck we’ll get enough out of it to afford the jar of Vaseline we need). The same basic rules should apply to Ford and Chrysler.

These are radical steps, and they wouldn’t avoid significant job losses. But there isn’t much alternative besides simply letting GM collapse, which isn’t politically viable. At least a government-appointed receiver would help assure car buyers that GM will be around, in some form, to honor warranties on its vehicles. It would help minimize losses to the government’s Pension Benefit Guaranty Corp.

But giving GM a blank check — which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant — would be an enormous mistake. (BINGO! We have a winner!) The company would just burn through the money and come back for more. (BINGO again! $15B vanished and they now have an unlimited credit line for more “loans”.) Even more jobs would be wiped out in the end. (Doesn’t matter – all Obama will count are how many he “saved”.)