At 9/19/12 12:03 AM, TheMason wrote:
Nope...not misunderstanding it at all. I never said the escrow account was part of the debt-for-equity swap. What I said was the escrow account was a second account funded in large part, if not wholly, by the US and Canadian governments. It was not the company was making enough profit to pay off the debt...in fact they struggled with the first payments. They just simply did not need this pool of government money. So they paid back the loan that got a lot of press.
Yes, you in effect said that with the whole "robbing Paul to pay Paul" bit. The language is different, but they're both describing the same phenomenon. What does it matter that they struggled to pay the loans at first (which was more than what was expected in terms of GM's ability to pay back anything at the time) when they went to pay off the rest of the 4.7 billion in loans? Even you admitted just now that they didn't need it, so what exactly is the big deal here? They would have needed it if the company was struggling to make ends meet. The fact that they were able to pay back the loan in full means the company was turning around, which is reflected in their profits. I don't see why it's so difficult for you to get this. Do you have the Chevy Volt that much?
The US taxpayer would've been better served making each auto worker who lost a job a millionare. Instead, we just transfered wealth to GM, Chrysler and the UAW.
The taxpayer would have been completely fucked. What kind of effects of the collapse of GM do you think would have on the markets, retirement funds and invstments? What would unemployment be like today? You really think foreign car companies would swallow that many jobs and have them all domestic? Even so, only a limited portion of that total amount of unemployed would have been absorbed by other car companies, mainly assembly line workers. Service shop workers, auto dealers, manufacturing and technical jobs would be completely gone. You think Ford and BMW would cusion that blow? Yeah right.
Oh, and I have no problem with the UAW getting a nice deal, because the last time I checked, unions weren't responsible for white flight, they sure as hell weren't responsible for outsourcing and those are the two biggest reasons for Detroit's decline. Unions weren't responsible for the insipid design and engineering of 20+ years of domestic cars, they weren't responsible for asinine business decisions that ruined 70+ years of domestic loyalty to Detroit automakers, and they weren't responsible for putting all the automaker's eggs in the basket of cheap to make, high margin body on frame SUVs that got shit gas mileage. The unions weren't responsible for having redundant brands that lead to a hugely inefficient company. Most of their brands had models that directed competed with and cannibalized sales from other brands in GM. Compare that to a company like Toyota that has 3 brands with at least a nominally focused reason for existence. Detroit automakers basically had a 50 year head start on European and Japanese automakers due to World War II. They squandered it with lazy management and poor reactions to externalities like the Oil Crisis. These things together are the reason why higher labor costs from the unions exercising their leverage would not have saved Detroit from its current fate and would not have saved Detroit automakers from their woes either. I mean, there are plenty of reasons to throw shit at GM and I have no problem pointing them out here, but even I recognize letting them go bankrupt would have horrible repercussions for the entire country and would have decimated an already crumbling Detroit.
Best case is we're looking at loosing $25 billion. Worst case; $44 billion.
This figure varies wildly depending on where you're looking. Based on the CBO data, the projected total losses from the assistance to the auto industry (which includes both GM and Chrysler) is between $14 and $20 billion (the former being the CBO's number, the latter the OMB's.) It is not broken down any further in said report, so you'll need to show me your sources if you want to discuss this further (the 44/45 billion figure comes from the WSJ, which is over a span of 20 years, btw). Which is a drop in the bucket when compared to the rest of TARP.
The IPO has already happened. My point is people are going to try and wait the government out to get a bargain. In the meantime, the taxpayer is stuck with stock they way over paid for.
Right, yeah, I was making an analogy to Facbook but deleted it because it was stupid and I didn't modify the rest of my post. The IPO raised $18.1 billion, which is the second highest IPO ever.
Not necessarily. They wouldn't be getting a deal anymore, just paying what the stock is worth. And while theoriticly the market would know...who's to say that they wouldn't panic anyway? Especially if people who bought at today's close at $24.43 decided to take a profit?
The market is always looking to make a profit. GM's stock right now is in the shitter because there's really no incentive to buy right now. Opening the floodgates drives in more investors, bumping up the stock price.
Okay in 1987 I bough Batman comics for $0.75. By 1990 I was paying $1.00. Now it's $3.99. Guess what changed; the value of the comic book or the value of the dollar? The value of the dollar changed and it is now worth less than it was in 1987.
So because of inflation, the stock price adjusts not only to the intrinsic value of a company...but the intrinsic value of the dollar as well. So if the fed starts pumping out greenbacks (like it announced this week)...the value of GM will hit $53 about the time DC starts selling Batman for $8.
No, you're entirely wrong. Inflation does not effect stock prices the way it effects comic books, lol. Share prices do not rise in accordance to the rate of inflation. Stock prices actually go down due to inflation. Here's why: as inflation increases, central banks such as the Federal Reserve increase interest rates to reduce the money supply to slow down the rate of inflation. When interest rates are high, people tend to find it expensive to borrow, and therefore there is less money floating around. When interest rates are high, people require higher returns on stocks. You can't just increase the earnings for a stock, so its price has to adjust downward. Inflation compresses P/E values. So, no, what you're describing is not going to happen in this universe.
The rest of your post I don't really know how to respond to. We're through the looking glass.