Howard County Maryland Blog

Local Politics and Current Events

General Motors

Posted by David Keelan on Sunday, May 31, 2009

President Bush should have let GM sink into bankruptcy like he threatened to do a day before he bailed them out.  I understand he didn’t want to hand that mess off to President Obama – but in the end he handed off a different mess.

Senator Shelbey seems to agree.  We are on a slippery slope.

Shelby assails large gov’t role in General Motors

Top Banking panel GOP member raps large federal stake in financially beleaguered GM Corp.

  • On Friday May 29, 2009, 8:27 am EDT

WASHINGTON (AP) — Sen. Richard Shelby said Friday the government should have allowed the marketplace to decide General Motors’ fate and that the huge federal stake in the company puts Washington on “the road to socialism.”

Shelby, ranking Republican on the Banking Committee, argued that the financially beleaguered GM could have saved “lots of money” if it had chosen six months ago to file a Chapter 11 bankruptcy petition.

“What I worry about” is Washington’s large interest in the company, the senator said in a nationally broadcast network interview. “It’s basically going to be a government-owned, government-run company … a company that has been sadly run into the ground.”

Shelby represents Alabama, a state with a significant presence of non-U.S. automakers, including Honda, Mercedes and Hyundai.

Facing a restructuring deadline, GM is in the process of brokering a last-minute deal with bondholders and the United Auto Makers, and then is expected to file Monday what would be one of the largest bankruptcies ever.

Said Shelby: “I’m sure they haven’t cut enough and there are not enough concessions there.” 

The Treasury has loaned GM $19.4 billion and would provide $30 billion in additional financing to keep the new GM operating under bankruptcy protection. The government would get 72.5 percent of the new company’s stock under the plan.

A friend/neighbor and I sat down over memorial day weekend to discuss President Obama’s firt 100 days in office.  He the democract and me the republican you might expect firework but I think we were both “hopeful” that President Obama would do the right things when it comes to the economy.

I think the President (at this point in time) will be measured on how he manages this crisis after the fact.  Other presidents facing crisis during their terms have managed that crisis through the increase in power of the federal government (Lincoln, Wilson, FDR,  Bush, etc).  Today we have see a growth in power on the scale of the Civil War and WWII.  Since those two crisis have passed government power has continued to increase.

In case you didn’t think of it this way let me share with you my thought on POWER.  Their is not an unlimited amount of power – their is only so much.  It is like a piece of pie.  If someone has all the pie they have all the power.  Government has been taking more slices of pie than the states, local governments and people for a long time.  President Obama holds the knife in his hands.  How big of a pie is he willing to cut and who will he serve it to?  You or government.

To manage through the financial crisis government is buying, lending, and printing a lot of money.  They have an unbalanced amount of power and influence over private business and the markets.  We are headed toward hyperinflation and high interest rates (not today but we are on the path).

So, when the “crisis” is over what will President Obama do that could make him my hero?  Quickly exit from the financial markets and the automobile business.  Use the tools available to the President to tighten monetary policy in order to avoid Carter like inflation and keep interest rates low. 

We will see.

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2 Responses to “General Motors”

  1. PZGURU said

    David,

    Well said. I think it’s a bad situation to have the federal government owning any part of a company. It’s an even WORSE situation to have the federal government owning a majority stake in a company. This is putting the government in competition with other private companies. Could there be anything more anti-freemarket or anti-capitalist? What happens if the federal government waives certain rules for GM but not other auto makers? This is bad, bad, bad.

    On top of that, I can recall news clips where Obama has emphatically said he does not want the government to own these [failing] companies (banks, insurance companies, and auto makers). Yet, look at where we are with GM.

    And, on top of that, unsecured holders of GM debt are being forced to take something in the range of 30 cents on the dollar for what is owed them, while the UAW is getting a sweetheart deal. What is wrong with this picture? EVERYTHING.

  2. Freemarket said

    It’s a shame that GM is in trouble. It’s not like their cars are inferior to Japanese models or anything like that. Oh, that’s right. Testing HTML tags for They are inferior.

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