Wherever politics intrudes upon economic life, political success is readily attained by saying what people like to hear rather than what is demonstrably true. Instead of safeguarding truth and honesty, the state then tends to become a major source of insincerity and mendacity. – Hans F. Sennholz
Obama: Brags about Saving GM
What is said, and what is concealed.
President Obama brags about saving GM:
When I came into office they were talking about the liquidation of GM and Chrysler, and a lot of folks said you can’t help them, and it’s a waste of the government’s money to try and help them,” Obama said Monday. “But what I said was, we can’t afford to lose up to a million jobs in this country, particularly in the Midwest.
Mr. President, “the government’s money” is income extracted from the American taxpayer. Worse, since the government is borrowing 40 cents on every dollar spent, “the government’s money” is a tax on future generations.
Next, Mr. President, “liquidation” is an overstatement, which conveys devastation ruin, and total collapse. Actually, GM faced a potential bankruptcy process, in which a court would order restructuring of debt and contracts, allowing GM and to continue making and selling cars.
Now Mr. President, what you concealed from the honest people of the Midwest and America. America had a long established legal system to adjudicate bankruptcies, which debtors and creators rely on to make rational and predictable decisions. However, you prevented this orderly process to reward the UAW unions. At the expense of the secure bond holders, you made the UAW a major owner of GM. Bluntly, you used Presidential power and taxpayer’s money to transfer ownership to the unions.
As reported in Cesspool of Crony Capitalism:
… the federal government arbitrarily wiped out secured bond holders and bestowed stock to the United Auto Workers (UAW). Recently, General Motors had an initial public offering (IPO) of the GM stock. Gary Jason in the American Thinker reports on what the IPO revealed:
First is the news that the “new” GM walked away from the crony bankruptcy proceedings with a huge tax break — one worth up to $45 billion.
Normally, a company coming out of bankruptcy is not allowed to offset past losses against future profits. The Obama Administration made an exception with the bailouts.
Thus, the new GM will save about $45.4 billion in taxes on future earnings, which may allow it to escape taxes for the next twenty years. This “tax-loss carry-forward” is a huge plum, an asset most of GM’s rivals don’t have, and one that no doubt led to its artificially high IPO stock price.
The UAW sold about 30% of their Obama-gifted stock in the IPO and received $3.4 billion. If they sell their remaining shares at $36 a share the UAW will have enough money to fully pay all of their promised pension and health care benefits. Bluntly, this has the stench of Chicago-gangster politics. GM was bankrupt. The UAW was destined to be destroyed. The Federal Government forced the American people to bailout GM, wiped out secured bond holders and gave stock to UAW. It pays to have political cronies in power.
Tragically, this Chicago stench is rancid. Jason explains:
In fact, the Obama administration screwed the taxpayer just as thoroughly as it pampered the UAW. The taxpayer put $49.5 billion into GM in the bankruptcy, not to mention all the funds shoveled at the company prior to that. The Treasury recouped only a wretched $13.7 billion in the IPO, mainly because the Obama administration — in yet another unprecedented gift to the union — announced publicly that it would not sell any more stock for the next six months. This enables the UAW to dump its shares whenever it wants at a much higher price than it could get if the Treasury were also selling. The taxpayers will almost certainly get a lower payout, and they will never recoup their forced investment in these dinosaurs — all to enable the UAW to walk away made whole.
Sadly, President Obama failed to tell the people of the Midwest: the “truth, the whole truth and nothing but the truth.” Instead of safeguarding truth and honesty, the state then tends to become a major source of insincerity and mendacity.