GM's big scam

I'm sure a lot of people have heard about how the administration was all excited about announcing GM had repaid their loan. As Mike Myer's Scottish Guy character on Saturday Night Live used to say, "It's crap!"

GM received a lump sum of money from taxpayers, and stored some in a separate account than that of its general operating expenses. With the separate money, the re-payed the original loan. I'm assuming that the loan repayment also included some funds from profit.

It's disgusting and an affront to every citizen in this country. GM even started running television ads stating they had re-payed the loan. What a lie! If the Obama administration was worried about transparency and accountability, this would be a great launching point for such an initiative.

GM should be required to repay whatever amount they used from the original bailout loan, with interest. I would even go as far to say GM would no longer be eligible for any type of government assistance.

Some people think this is a reason for more government oversight. No. If the government had never given Gimpy Motors bailout money in the first place, they would have done exactly what businesses are allowed to do of their own free will. Shape up, or ship out. Now, we're faced with a shady corporate entity that was only allowed to survive through government intervention.

FTC Considers Subsidies to Help Failing Newspapers

According to an article in the Wall Street Journal, the Federal Trade Commision is deciding wether or not to assist failing newspapers, after many major dailies have gone bankrupt or are close to it. With free information and news available through the internet, many papers are struggling with old business models and new ways of making revenue.

There are a few issues with this. One argument the media executives have, especially those from newspapers, is that internet sites can search their site for free and return the article to the user, or print articles on other sites. I take the side of the execs on this, but only a little. Lets look at it this way. Anything that is printed by Townsville's newspaper's staff in that newspaper is property of Townsville's newspaper, and no one else. If Cityville's newspaper wants to borrow, or re-print an article, then they pay Townsville's newspaper for the article. And so on. The problem some execs - OK, Rupert Murdoch - have is that Google, for instance, can search a news site, and reprint a blurb, or an entire article, with out the user ever visiting the actual newspaper site. The other side of the coin is that newspapers need to either update their business model, create new revenue streams (The FTC is considering letting media companies own TV stations and newspapers in the same market), or just fail and go out of business.

Another issue with the government sponsored subsidies of media organizations is the (further) blurring of the line of the separation of government and media. Earlier this year, Democratic Senator Benjamin Cardin of Maryland introduced a bill that would let newspapers operate as non-profits. So, if that were to come to fruition, then newspapers would be indebted to government for practically being propped up. If government intervention is the sole reason newspapers would be able to stay afloat, how could they be government watchdogs and actually do investigative journalism? Media organizations that received government assistance would practically become state run news agencies.

A third issue is the further bailing out of failing companies. I guess, by now, the model for failed government intervention is GM. They get billions of dollars, and have nothing to show for it in nine months except (continually) falling profits and hundreds of dealerships boarded up. As hard as it would be, the government would be better served by letting business find new ways to do business or go out of business. The same business models that worked 50-100 years ago don't always work now.

Markets tank again; GM and Citigroup lead the way

As of 2:30 PM today, the Dow was down 260 points to 6.612. And The One didn’t even mention the economy today. And Timmy hasn’t been in the news. Hmm. I guess this is just reflective of how the markets see the assistance from the government.

The Dow is down more than 50% from its high of 14,164 on October 2007. February 2009 is the worst February for the Dow since 1933.

“The Dow, which dropped 12 per cent this month, had its worst February since 1933. During the month, 20 of the 30 components reset their 52-week lows, with 13 hitting 52-week lows at some point during final session of the week.”

Citigroup’s stock finally fell below the $1 threshold. Welcome home, dear! I thought the feds were going to prop up Citi after their announcement last week about converting a few billion dollars in preferred shares to common stock. That would give the feds 36% ownership in Citi. Looks like that was a great idea..

Oh yeah, and GM is saying today they may have to go into bankruptcy to help restructure. Why didn’t they say this $50 BILLION ago? Once again, the government offered a band-aid to something that needed to be amputated. If GM is going to have to declare bankruptcy to get straight, they should just suck it up and do it. Bankruptcy would allow them to void their union agreement so that could be restructured as well. Every time they’ve been give BILLIONS, they come back to the trough like pigs a few weeks later wanting to get some more. Unfortunately, President Obama promised in his speech to Congress last week that he would not let them fail.

While the American auto makers are crying, why haven’t we heard any screams from Toyota, Nissan, or Honda?

The Results Are In

GM and Chrysler showed up today, tin cup extended, begging for more federal money to stay afloat. All this after they received a Christmas gift in December. Companies that have been the bedrock of American capitalism are now feeding at the trough of the American taxpayer.

In December, GM received $13.4 BILLION. Now they want an extra $16 BILLION by 2011. I hope they are still in business by then. From CNN.com:

“The two firms also detailed plans to cut 50,000 jobs worldwide by the end of the year. In addition, GM plans to close five more plants in the next few years and confirmed it will drop some of its weaker brands.”

I hate that GM is being forced to lay off workers, but slimming down is product is something that has been a long time coming. Does GM really need to produce more than 15 Pontiac lines every year?

Plans are in the works for the Saturn and Hummer lines to go by the wayside. Chrysler will be eliminating the PT Cruiser and the Aspen. Frankly, I’m glad the Cruiser is going away. It’s an ugly car. It’s supposed to look like the street muscle cars from the 60’s and 70’s. This new version has a 4 cylinder engine. Some muscle car. I’m a little sad about Saturn. I’ve never driven one, but that line has been very dependable, and Saturn totally revolutionized the car buying experience. As for Hummer, I’m not sure what to think. I do think it’s a little odd for Citizen Joe to be driving around in something designed for military transport.

I know we don’t want people to be laid off, but it is bound to happen in a sour economy. I would love to see the UAW make some concessions to make sure these companies are able to stay afloat. I doubt that will happen.

A lot of people are complaining that the Obama administration is going to result in socialism and nationalization of industries. But when these industries go hat in hand to the government asking for money to stay in business, we shouldn’t complain that the government is going to take over these businesses. After all, they’re basically being asked to do it.