Taxpayers Will Lose Nearly $40 Billion on Bailout Out GM?

Via Reason:

...The Treasury Department yesterday revised its loss estimate for the Government Motors bailout from $14.33 billion to $23.6 billion, thanks to the company’s sinking stock price. GM’s Sept. 30 closing price, on which the new estimate is based, was $20.18, about $13 less than its December IPO price and $35 less than what is needed for taxpayers to break even.

The $23.6 billion represents a 25 percent loss on the feds $60 billion direct “investment” in GM. But that’s not all that taxpayers are on the hook for. As I explained previously, Uncle Sam’s special GM bankruptcy package allowed the company to write off $45 billion in previous losses going forward. This could work out to as much as $15 billion in tax savings that GM wouldn’t have had had it gone through a normal bankruptcy. Why? Because after bankruptcy, the tax liabilities of companies increase since they have no more losses to write off.

This means that the total hit to taxpayers, who still own about a quarter of the company, could add up to $38.6 billion. That’s even more that the $34 billion on the outside I had predicted in May....

...GM’s new competitors are not Toyota and Honda that share its cost structure but Hyndai and Kia that have a far leaner one. These companies concentrate on the small car market and don’t offer a full product line so GM and Ford’s most profitable vehicles—those evil, gas-guzzling, greenhouse-gas emitting SUV’s and pickup trucks—are somewhat insulated from the downward price pressure. But the greens and Obama administration want GM to reorient its product mix away from big cars and toward money-losing hybrids and electrics, something that could well put GM back in a hole.

But that’s part of the administration’s long-term strategy for ruining GM....

...But the Ostrich-in-Chief Barack Obama, who had assured taxpayers that their GM "investment" would cost them "not a dime," is drawing the opposite lesson, obviously. He has been trumpeting the success of the bailout—repeatedly....

Read the whole article here- it is very good, and echo's a lot of my earlier comments and thoughts about the whole 'bailout.' From the beginning, I was critical of the bailout. In my post More Thoughts on the Auto Loan Bailout written on December 12, 2008, I wrote:

I don't think that the banks should have bailed out either (auto company), and by bailing them out, Congress created this whole auto loan mess themselves. Second, the reason I'm not in favor of the bailout is out of principle- it is not fair and morally right that some companies are allowed to go bankrupt by the government, and others are saved with loans. Why one company and not another? The only arguments I ever hear in favor of the auto loan is the the auto companies affect a lot of people- that's true, but if you gave out loans of $1 million to 25,000 small companies (total of $25 billion, same as auto companies), that would probably affect a lot of people too.

And also, why now? Why let past companies fail, and then come in and rescue one now? Were the other companies in the past less deserving- were their works less important than the workers now? My grandpa worked for a steel company, and the US government let it go under- why didn't it rescue that company and provide money for my grandpa's pension and healthcare? Why rescue GM now- because it has better lawyers and lobbyists? That's not how America works- that is how corrupt regimes work.

The simple fact of the matter is that under President Barack Obama and the new Democratic Party of Pelosi and Reid, government policy is now to direct money borrowed from China to favored groups in American society, such as auto workers and those who work for 'environmentally friendly' companies like Solyndra and SunPower. Government leaders take a cut of this money to make themselves more and more wealthy-see Frank, Dodd, Obama, Pelosi, Gore, Clinton, etc for a range of Democratic Congressman who have made themselves rich redirecting taxpayer funds. And thus America becomes just like every other corrupt oligarchy in the world, and our life, liberties, and property is less protected.

The only way to stop this is to throw the bums out next election. That means Obama has to go, and Democrats and Republicans who have supported his agenda also have to go- that's pretty much every Democrat and a good number of Republicans too. The most tea-party or conservative candidate who can win the general election must be nominated and we must act to get them elected, or America will continue to slide into the kind of tyranny that is evident when looking back at the sad and unprincipled chapter of the auto loan bailout.

For more information on this subject, check out Crash Course: The American Automobile Industry's Road to Bankruptcy and Bailout-and Beyond or Bail Out or What Would the Founders Say?: A Patriot's Answers to America's Most Pressing Problems or How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today's Economy.