WillowTree
Diamond Member
- Sep 15, 2008
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With Chrysler and GM announcing they have repaid their government loans, it did not take long for Democrats to crow that the federal auto bailouts were a clear success. Indeed, the president and his supporters hope to make political hay from these efforts for the 2012 elections.
Never mind that the bailouts were a use of taxpayer dollars not even within the initial scope of the constitutionally questionable TARP. Never mind that taxpayers are still a major shareholder in GM. And never mind that these bailouts have ingrained a too big to fail strategy among American businesses, who now feel entitled to federal funding should they fall short in the marketplace.
In reality, GMs claim about paying back bailout money is misleading. Much of the $50 billion in federal assistance came in the form of equity purchases, with the government taking a 61-percent stake in the company. The cash loan totaled only $6.7 billion in taxpayer dollars. For taxpayers to recoup their investment, the federal government would have to sell its 365 million shares at a profit. The break-even price would be $55 a share, but GM is currently selling at $28.90.
And it doesnt look like share prices are increasing any time soon. The stock market is up since mid-November by about 8 percent. But the stock of General Motors has bucked the trend. Its down more than 16 percent since its initial public offering on November 18, 2010.
Read more: The Truth About the GM Bailout - FoxNews.com
Never mind that the bailouts were a use of taxpayer dollars not even within the initial scope of the constitutionally questionable TARP. Never mind that taxpayers are still a major shareholder in GM. And never mind that these bailouts have ingrained a too big to fail strategy among American businesses, who now feel entitled to federal funding should they fall short in the marketplace.
In reality, GMs claim about paying back bailout money is misleading. Much of the $50 billion in federal assistance came in the form of equity purchases, with the government taking a 61-percent stake in the company. The cash loan totaled only $6.7 billion in taxpayer dollars. For taxpayers to recoup their investment, the federal government would have to sell its 365 million shares at a profit. The break-even price would be $55 a share, but GM is currently selling at $28.90.
And it doesnt look like share prices are increasing any time soon. The stock market is up since mid-November by about 8 percent. But the stock of General Motors has bucked the trend. Its down more than 16 percent since its initial public offering on November 18, 2010.
Read more: The Truth About the GM Bailout - FoxNews.com
