You’re now the proud owner of yet another failed corporation!
The week between Christmas and New Year’s Day is usually a week when Americans slow down and take some time off. Kids are out of school, many companies are shut down or slowed down, and quite a few families are on vacation. Congress is even on vacation, minimizing the damage they typically inflict on the wallet of the American taxpayer.
This year the Obama administration took advantage of the holiday distractions to seize control of GMAC, the financing arm of General Government Motors Corp. This third bailout of the company that writes loans for Government Motors and Chrysler Corp. vehicles resulted in the US government increasing its ownership share of the company to 56.3%. This, of course, once more gives the Obama administration controlling interest in what had been a privately owned company.
When the Bush administration signed off on the first $6 billion GMAC received from the US taxpayer, officials in the former President’s Treasury Department considered it “part of a broader program to assist the domestic automotive industry in becoming financially viable.” But in May 2009, the Obama administration handed over another $7 billion in taxpayer wages to the beleaguered finance arm of what was soon to become the first US government owned auto maker.
The second bailout netted the Obama Treasury Department a 35.8% stake in the corporation, and an agreement GMAC would take on the additional liability of financing customers of Chrysler Corp. This followed almost immediately after the President took an 8% stake in Chrysler for the US taxpayer and handed over a 55% controlling interest to the unions.
Much of the initial money will go to help GMAC shoulder new lending responsibilities for Chrysler dealers and consumers after Chrysler’s government-orchestrated Chapter 11 bankruptcy filing last month. As part of the Chrysler reorganization, the government in effect dissolved Chrysler Financial and handed its business to GMAC, creating one big auto-financing arm that would service both companies.–WSJ, May 21, 2009
President Obama had already invested billions in Chrysler and plans to secure US government ownership of General Motors were in the works. Bailing out GMAC became an easy way to launder even more bailout cash to the President’s experiment with union and government ownership of former US industrial icons. As with other stones forming the foundation of Obama’s economic policies, funneling money to the automakers through loans to their customers didn’t prove too solid.
But that’s not something the President is willing to admit yet–that his policies for stimulating the economy have failed. No, his newest plan is to throw good money after bad and pile another $3.8 billion of YOUR money onto the still smoldering pile of waste known as GMAC.
The first $6 billion wasn’t enough to rescue the financial firm and its now-nationalized benefactors of its bad loans. The next $7 billion couldn’t save it, but did put Obama in control of 35.8% of the company. The second bailout also allowed the President to twist the arm of the company and force it to agree to loan more money to customers of GM, which Obama would soon nationalize, and Chrysler, which the President had recently handed over to his union backers.
Though neither of these bailouts accomplished their (supposed) goal, our omnipotent, omniscient oracle Obama, in his infinite wisdom, has determined the solution to the problem is to pour more of your hard-earned tax dollars into the bankrupt corporation, $3.8 billion more. But don’t worry! The President who brought us $1.4 trillion deficits and a $12 trillion national debt has traded our greenbacks for a controlling interest in the company.
That’s right. We now own 56.3% of a company that can’t attract private capital because it can’t manage to stem the flow of red ink from its books. A company that cannot, on its own merits, attract private capital. President Obama is forcing all American taxpayers to borrow money to purchase a portfolio of profitless companies controlled by politicians and bureaucrats.
So congratulations taxpayers! Like it or not, you own yet another failed corporation run by Chairman Obama.
You read that correctly. According to Democratic Governor of Tennessee Phil Bredesen went to DC to convince Government Motors to build a new model car in the soon to be shut down assembly plant in Spring Hill, TN. The Democratic Governor stated GM demanded cash up front–you know, sort of like a leave-it-in-an-envelope-on-my-desk-as-you-walk-out- if-you-want-our-car-built-in-your-state bribe.
From Channel 5 News in Nashville.
“The only one they want to know is how much cash can we put up front, we don’t care about tax credits, we don’t care about any of those other things, we want to know how large of a check are you going to write on the front-end,” said Bredesen.
Ahhh, the beauty of having the Chicago political machine wielding its influence from White House. Expect more and more of this type of thing as this crowd gains control of more and more of the American economy.
So said President Obama’s new Chairman of the Board of Uncle Sam’s newest acquisition, GM. Edward E. Whitacre, Jr went on to say “A business is a business, and I think I can learn about cars.” Under that premise, a successful hot dog vendor on the streets of New York could lead the board for the bankrupt money pit American taxpayers just invested in.
Whitacre retired from AT & T in 2007 after 44 years with the company. Though the last 17 years he served as CEO and Chairman of the Board at the telecom company, his first job at what was then Southwestern Bell was setting fence posts. Without a doubt, he started at the bottom and worked his way to the top. But telecom analyst Victor Schnee calls his appointment to lead GM “bizarre.”
White House Press Secretary Robert Gibbs explained, “What was required was somebody with savvy, big-business experience that could take a company, change its management culture, make some of those tough decisions to put it on that path toward viability.” But how does Whitacre’s experience at AT & T compare to that required to turn around the new Government Motors?
At AT & T, he started with the smallest of the “Baby Bells” and gobbled up its competition in mergers to create the largest US telecom company. Along the way, competitors cried foul, accusing the ever-growing AT & T of using its might to price them out of business and ignoring regulations smaller companies had to abide by. In reference to a 2001 complaint filed by the Competitive Local Exchange Carriers (CLEC) Association of Michigan, then CLEC-MI president Brad Kruse said “Companies are limited in the service they can provide in Michigan because of SBC/Ameritech’s (now AT & T) actions, and the pace of competition is slowing. SBC/Ameritech is unilaterally setting telecommunications policy in Michigan, disregarding the rulings of regulators and the policies set by legislators alike, while blocking competition.”
Could this be exactly what the administration seeks for GM? A go-for-the-jugular Government Motors bent on crushing competition. Might we see the taxpayer-bought-and-paid-for bankrupt company buy out the smaller Chrysler then use its government backing to try and drive Ford Motor Co. (Which by the way is the only American auto company that didn’t take a taxpayer bailout.) out of business? If so, and if successful, Obama will have accomplished the nationalizing of the entire American auto industry! Why else would he choose a Chairman of the Board who, in his own words, doesn’t know anything about cars?
Could the administration’s motivation have been political? Mr. Whitacre made a lot of political contributions in the ’08 election cycle, mostly to Republicans. But one donation, in February of 2007, might raise an eyebrow when one’s asking how Whitacre was chosen for his new job–$1000 to Rahm Emanuel, President Obama’s current Chief of Staff. The natural question is, what would cause a Texas Republican to donate to the campaign of a Democratic Congressman in Illinois? On the same day Whitacre made his suspicious donation, AT & T’s COO Randall Stephenson also contributed $1000 to Emanuel’s campaign. Coincidence? Maybe.
On May 1 of this year, the Wall Street Journal reported that Emanuel has taken a lead role at the Treasury Department and if “Rahm wants it” it’s almost certain to happen. Just a couple of days ago Kevin Hasset, in a piece on Bloomberg, opined that he believes Obama’s plan is to put policies in place that drive every American business to need a bailout, and then “Rahm Emanuel can stack the boards of all of our companies with his political cronies.” Perhaps the idea that Whitacre’s appointment, who knows nothing about the auto business by his own admission, to head the new Government Motors is political payback by Rahmbo isn’t so far-fetched.
In either case, if Obama’s seeking to completely nationalize the entire auto industry with the “Kingpin” of the telecom industry or if Rahmbo made the call to pay off a favor, the fact that Whitacre steps into the limelight announcing he knows nothing of the business doesn’t allay my fear that this “investment” is going to be one big boondoggle.
But maybe every GM car will come with a new AT & T phone.
Happy New Year!
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John Allison III
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