Little Green Idiocy: Taxpayers Taking A Bath On GM Is Great News!
Over at Little Green Footballs, Charles Johnson is showing everyone why he doesn’t do much these days besides apologize for radical Islam and repetitively squawk about conservatives. When he gets out of his tiny comfort zone, here’s Charles Johnson pumping out laughable nonsense like this:
General Motors went on the public market today, with one of the largest IPOs in US history, and from all accounts it was a monster success.
GM is well on track to a full recovery; they’ve returned billions of dollars in bailout money to the federal government, and it looks like they’ll be completely free of government involvement much sooner than anyone predicted.
So this might be a good moment to look back at what Republicans said about the GM bailout at the time, because they could not possibly have been more wrong.
From there, Johnson goes on to quote Republican after Republican saying things like this,
Rep. Trent Franks (R-AZ): When government gets involved in a company, “the disaster that follows is predictable.” [7/22/09]
Ironically, Johnson knows so little about business that he doesn’t realize the Republicans he’s quoting are right. Here’s Iain Murray at Dailly Caller explaining what a disaster the GM IPO is turning into:
When a government sells stock in a company, it is usually trying to maximize short-term revenue. Therefore, the share price is normally pegged at what the market will bear. If the valuation of the total stock offering is less than the value of the company (or a portion thereof) being sold, something is amiss. That is certainly the case with the initial public offering of GM stock sold to investors on November 17. The stock price is telling us something the federal government doesn’t want to admit, all the rhetoric about the supposed success of the GM bailout notwithstanding.
….If the federal government wanted to recoup its investment in GM, then the GM stock price should be much higher than the $33 initial price. In order to break even, as the Deal Journal reports, the stock price would have to rise to around $50 per share. So why is the Treasury Department selling off the company at a loss?
…While GM’s financial position is much better than it was when it should have gone bankrupt, the company’s finances are not great. A quick crunch of any of the numbers in the GM prospectus shows the company is not the healthy organization the politicos would have you believe. They have done a poor job running the company, even if they did save it from going under by ignoring the law and throwing billions of dollars at it. The sale prospectus even admits “our (that is, the government’s) disclosure controls and procedures and our internal control over financial reporting are currently not effective.” Hardly a ringing endorsement!
Here’s more from John Lott:
Only the government would consider it a success to buy stock at $43.84 a share and sell it at $33. — But President Obama and those who supported his bailout of General Motors and Chrysler are claiming just that today.
…Some are pointing out that just a year and a half ago GM stock was trading at just $1 a share and claim that today’s closing price of $34.19 is proof of the bailout’s success. It simply doesn’t account for the over $50 billion in direct bailout funds and the tens of billions of dollars in other breaks President Obama gave the company and its unions.
It also ignores that GM’s stockholders and particularly its bondholders had their wealth stolen from them when the government took over ownership of the company. Traditional property right protections were shredded by the Obama administration, making corporate investments in America riskier as a result.
…Nor does the government wait to sell its shares just on the hope that stock prices will rise. The administration hopes that if GM’s stock can rise from $33 per share to $52.79, a 60 percent increase, the government will be able to break even.
But the Obama administration is not anywhere near as good at predicting future car sales as private individuals who have their own money at stake. The current stock price already reflects what those future sales are expected to be.
Obama tossed the rule of law and billions of taxpayer dollars down a rathole to pay back his union cronies and bail out an incompetent, but well connected corporation, and that’s a “monster success?” Who says liberals don’t get economics?
Hat tip to Lee Doren for the Little Green Footballs story.