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The Spectacle Blog
The Obama administration hopes to reduce the deficit … apparently after it bankrupts the Treasury.
The federal government said Wednesday that it will take majority control of troubled auto lender GMAC and provide an additional $3.8 billion in aid to the company, which has been unable to raise from private investors the money it needs to staunch its losses.
The Treasury Department has said for months that GMAC would need more federal money, but the decision to increase the government’s ownership stake came as a surprise, cutting against the grain of the Obama administration’s recent efforts to wind down its bailout of large banks.
What initially appeared to be a closing act now looks more like year-end portfolio rebalancing, with companies including Citigroup and Bank of America allowed to repay aid even as the government deepens its involvement in mortgage financiers Fannie Mae and Freddie Mac — and now, GMAC.
The government now owns majority ownership stakes in those three firms, General Motors and insurance giant American International Group. It also holds large stakes in Citigroup and Chrysler.
The additional aid for GMAC underscores both its struggles and its importance to the administration’s efforts to revive the auto industry. GMAC, which already has taken $12.5 billion in direct federal aid along with other forms of government support, is the largest lender to General Motors and Chrysler dealerships and to their customers.
Well, with a $12 trillion national debt, at least $10 trillion more red ink expected over the next decade, and $107 trillion in unfunded liabilities for Social Security and Medicare—as well as who knows how many trillions more in debt if health care “reform” passes—what’s another $3.8 billion among friends?
View all comments (27) | Leave a comment
More Blog Posts by Doug Bandow
http://spectator.org/blog/2010/01/01/another-boondoggle-bail-out
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Sean| 1.1.10 @ 9:15AM
It seems the only thing Washington isn't willing to spend money on is controlling the border and deporting illegal immigrants.
Pingback| 1.1.10 @ 10:06AM
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dum & dummer| 1.1.10 @ 3:39PM
sean, can't be deporting all those folks that acorn will find a way to register and get to the polls, now can we?
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Bob| 1.1.10 @ 6:59PM
This isn't just an Obama thing... Remember that prior to Obama, Reagan and Bush2 had, by far, the largest increases in national debt. All of them should be hung by their gonads for their actions.
http://zfacts.com/p/318.html
If Washington cannot hold spending down, then the only real "conservative" thing to do is increase taxes.
Pingback| 1.1.10 @ 8:05PM
We’ll get to work on the defecit…as soon as we’re done bankrupting the country. « Win links to this page. Here’s an excerpt:
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Bert Gold| 1.2.10 @ 12:00PM
My friend Michael Phillips, a Republican but the founder of MasterCard, has powerfully argued for letting GM etc. go bankrupt. His position is that if the marketplace won't support it, why is it a government function to keep it going? Further, he argues that the inefficiencies bred into the Corporation that caused it to fail will never be cleaned if it is rescued. After several weeks of arguing, I find myself agreeing with Michael. The problem now is that Obama, Axelrod, and Emanuel don't seem to be sophisticated enough about economics to understand their two major challenges: To right the listing ship of the American economy and to reform American healthcare (which is nearly a fifth of that listing ship). Their main problem is that they don't want pain for the upper class which contributes to their campaign. Unfortunately, that's a strategy sure to lose the electorate and their popular sympathy. So, I'm guessing that the other party will occupy the White House and Congress in the short term future.
Bob| 1.2.10 @ 12:55PM
Bert, perhaps you and your MasterCard friend aren't "sophisticated" enough to grasp the GM situation. First of all, GM did go bankrupt -- I know, I held preferred stock in the company. Secondly, GM is the largest manufacturer in the U.S. The loss of that manufacturing capacity would further degrade the employment levels. In addition, there were thousands of small businesses dependent on GM including suppliers, distributors, and, of course, dealers. Arguing that the bankruptcy should have occurred earlier is probably sound, but arguing that the government should not have been involved shows a lack of understanding of the economic impact of a full loss of the company. Furthermore, that manufacturing capacity is necessary for our national security to build machinery for our military.
On the other hand, you don't mention the bailout of Wall Street firms -- and that is quite indicative of an elitist point of view. The Wall Street companies should have gone bankrupt instead of being bailed out as they do not produce products of material value to our economy. Most of the money made on Wall Street was due to the manipulation of the market with vehicles like derivatives, swaps, and trading revenues. They should have been held accountable for their decisions even if that meant a deeper recession.
And your argument that a change will occur in the White House is weak. We all know from history that people vote their pocketbook. If the economy turns around, Obama and the Dems will stay since Republicans do not offer a better alternative. Cutting taxes without reducing spending (as with Reagan and Bush), is far worse to our future than spending and taxing to cover that spending.
Mike M| 1.2.10 @ 6:42PM
Good! It wasn't until I seen a Dodge commercial during the Sugar Bowl that I realized there are no Dodge commercials anymore. The soon to be discontinued Chevy commercials will mean Obama will save GM money. GM will be in the black before you know it!
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Oldefarte| 1.3.10 @ 4:08PM
Even more apparent that the socialists-in-charge are slipping more of taxpayers' hard earned money under the carpet [or maybe pulling it out of th freezer, if you're a Louisiana congressman perhaps] than the government's funding [at labor unions's request] of GMAC; is their eliminating the financial caps previously put upon Fannie Mae and Freddie Mac at midnight pre-Christmas. This will allow the federal government, going forward, to completely provide AFFORDABLE HOMES [ie residential WELFARE] to any/all housing loan applicants providing governmental welfare documentation, food stamps, aid to dependent children vouchers, etc as PROOF OF THEIR QUALIFYING INCOME. What will be next-----an all-paid, month-long trip to Europe for these welfare recipients [all at taxpayer expense of course]?????????????
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