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Ausm

Lifer
Oct 9, 1999
25,215
13
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I have heard as high as $150/share for GM to breakeven, however those numbers probably include investment banking and other fees. However here is a link from MSNBC.

http://www.msnbc.msn.com/id/39316448/ns/business-autos/t/governments-break-even-price-gm/#.TzFJL8jjtJ4

Every share they sold at $36 was a loser. Especially for retail which was lining up to buy it in groves.
What's stopping the Treasury from holding these assets until they make a profit? I never saw anything remotely close to 150/share anywhere before.
 

The-Noid

Diamond Member
Nov 16, 2005
3,117
0
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What's stopping the Treasury from holding these assets until they make a profit? I never saw anything remotely close to 150/share anywhere before.
That is what they are doing. Look at the major holders I posted.
 

crashtestdummy

Platinum Member
Feb 18, 2010
2,894
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Proof with link....
He's right. In the first link I posted, we bought shares at $33, and GM is currently at $26. Thus, we'd be selling these stocks at a loss if we sold them now. The government will also likely sell the shares piecemeal to avoid suddenly flooding the market and undercutting their value.
 

michal1980

Diamond Member
Mar 7, 2003
8,019
43
91
Lol wut????

What do you mean WUT?

Do you even read the stuff you link?

http://www.nytimes.com/2010/05/02/business/02gret.html

Heres your link again. READ.

"“Much of it will never be repaid,” Mr. Grassley added. “The Congressional Budget Office estimates that taxpayers will lose around $30 billion on G.M.”"

I also posted a CBO document that stated a ~20 billion dollar loss.

But pointing out facts to you is meaningless.
 

michal1980

Diamond Member
Mar 7, 2003
8,019
43
91
Let the Big banks fail then we have something to talk about.
They should both have been slowly wound down, with the goal of failed companies being closed down. So that the healthy companies can thrive and grow.
 

Genx87

Lifer
Apr 8, 2002
41,083
490
126
Let the Big banks fail then we have something to talk about.
We have plenty to talk about since you just made a statement about letting one business fail over another. So I will ask again. Why would we let any business fail based on the logic such a failure would reduce taxes collected from the business and its former employees?

And after you answer that question lets get onto the second subject. You talk about collateral damage from the auto industry. Why is that collateral damage not ok but the meltdown of our financial industry is fine in your book? Which one would have had a worse impact on the country and every American?
 

Ausm

Lifer
Oct 9, 1999
25,215
13
81
What do you mean WUT?

Do you even read the stuff you link?

http://www.nytimes.com/2010/05/02/business/02gret.html

Heres your link again. READ.

"“Much of it will never be repaid,” Mr. Grassley added. “The Congressional Budget Office estimates that taxpayers will lose around $30 billion on G.M.”"

I also posted a CBO document that stated a ~20 billion dollar loss.

But pointing out facts to you is meaningless.
Yes I read but arguing with a Republicant like yourself is equivalent to banging your head against a wall...look no further then your moronic posts in the Walker thread.

I consider it a success with the American jobs saved...you obviously don't give a shit about 1,000,000+ Americans losing their jobs. That's were we stand on this issue.
 

Ausm

Lifer
Oct 9, 1999
25,215
13
81
We have plenty to talk about since you just made a statement about letting one business fail over another. So I will ask again. Why would we let any business fail based on the logic such a failure would reduce taxes collected from the business and its former employees?

And after you answer that question lets get onto the second subject. You talk about collateral damage from the auto industry. Why is that collateral damage not ok but the meltdown of our financial industry is fine in your book? Which one would have had a worse impact on the country and every American?
My question to you is do we let everything fail....
 

crashtestdummy

Platinum Member
Feb 18, 2010
2,894
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Then the Rightist in here shouldn't be crying over a so called "loss" then.
Money isn't static. We only come out ahead if that money in GM is better than any other investment that could (or would) be made. This is unlikely. Put another way, if/when we hit a break-even point, it will be as if we had taken $82 billion dollars and hit it under a mattress for three years, rather than putting it to some other worthwhile economic use.

There's really no way around the fact that all of these bailouts and stimulus programs hurt. The fortunate part is that they are all as cheap as they could be because they've managed to serve their purpose of keeping vital industries afloat and US debt interest is running below inflation right now (meaning that there's actually a slight profit to taking out debt).
 

Ausm

Lifer
Oct 9, 1999
25,215
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81
They should both have been slowly wound down, with the goal of failed companies being closed down. So that the healthy companies can thrive and grow.
Wound down is NOT letting them fail...You are picking and choosing....
 
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Ausm

Lifer
Oct 9, 1999
25,215
13
81
Money isn't static. We only come out ahead if that money in GM is better than any other investment that could (or would) be made. This is unlikely. Put another way, if/when we hit a break-even point, it will be as if we had taken $82 billion dollars and hit it under a mattress for three years, rather than putting it to some other worthwhile economic use.

There's really no way around the fact that all of these bailouts and stimulus programs hurt. The fortunate part is that they are all as cheap as they could be because they've managed to serve their purpose of keeping vital industries afloat and US debt interest is running below inflation right now (meaning that there's actually a slight profit to taking out debt).
I realize this but my idea of an American success is different then the Republicants.
 

Genx87

Lifer
Apr 8, 2002
41,083
490
126
My question to you is do we let everything fail....

I am fine with letting the banks fail and head into bankruptcy reorganization. Like any other industry their assets would be purchased and the excess shed. You apparently are also fine with such a position. But the collateral damage would be far worse from the banks failing than the auto industry. And that is what I want to know from you. Why do you think the auto industry was a worthy cause to save collateral damage? But you would let the banks fail causing far more reaching effects on the country.
 

fskimospy

Elite Member
Mar 10, 2006
70,068
18,808
136
Then why let any business fail using that logic?
Well in all fairness some business failures would have much, MUCH larger collateral damage (like the auto industry) than others. I think someone could very reasonably support bailing out some businesses but not others on such a principle.

I don't get why someone would hold this position for the auto industry but not the banks though. While I believe the banks should have been treated much differently after the financial crisis, there is no question in my mind that they had to be bailed out in the short term.
 

Wreckem

Diamond Member
Sep 23, 2006
9,058
435
126
Management team gets credit? Why?

Before bailout:
GM losing 3k+ per car

Afterbailout
GM makes money per car.

Change: Goverment bailout allowed GM to dump debt.

Management had almost nothing to do with GMs recovery.


Now look a ford. No similar bailout, make profit because they actually dug themselves out of a hole.

They would have beeen doing even better if crappy car companies were given handouts by the goverment. They wouldn't have to compete against subsidized goverment motors.
Ford leveraged itself to the hilt before the crash. GM and Chrysler did not. When the crash hit GM and Chrysler could no longer take out the loans they needed to survive.

Ford is ANYWHERE but out of a hole. They are massively in debt and another recession could easily bankrupt them.
 

Ausm

Lifer
Oct 9, 1999
25,215
13
81
Well in all fairness some business failures would have much, MUCH larger collateral damage (like the auto industry) than others. I think someone could very reasonably support bailing out some businesses but not others on such a principle.

I don't get why someone would hold this position for the auto industry but not the banks though. While I believe the banks should have been treated much differently after the financial crisis, there is no question in my mind that they had to be bailed out in the short term.
Simple....Big Banks fail they could lose THEIR cash and THEIR investments. While on the other hand, the Rightist in here who flip burger at McDonald's or aren't linked to the manufacturing industry could give a flying fuck about its failure.

Shameful greedy bastards.
 

rudder

Lifer
Nov 9, 2000
19,431
82
91
What's stopping the Treasury from holding these assets until they make a profit? I never saw anything remotely close to 150/share anywhere before.
For one, the government should not own any part of a corporation, Just for the potential conflict of interest. You think Ford and its shareholders would be happy if GM received preferential treatment because 1/3 of the company is owned by the government? How about Nissan, Volkswagen, Hyundai etc that all have manufacturing plants in the U.S.? Does the government offer $20,000 tax credits for the Volt and $100 for the Nissan Leaf? More tax credits for the volt mean more sales and better stock prices.

That angle aside... for GM to be profitable in the long term, they need to pull in a shit ton of cash. They have something like $128 billion in future liabilities with $22 billion being unfunded... maybe more than that. This has pushed GM in bankruptcy in the past... what would happen to those stocks if it happened again?

Because as you know... unless you sell the stock for at least what you paid for it... you will lose money.
 

The-Noid

Diamond Member
Nov 16, 2005
3,117
0
76
Ford leveraged itself to the hilt before the crash. GM and Chrysler did not. When the crash hit GM and Chrysler could no longer take out the loans they needed to survive.

Ford is ANYWHERE but out of a hole. They are massively in debt and another recession could easily bankrupt them.
Net Debt is 1/2 of what it was in 2007. If Ford can make it through 2008, then they can make it through another recession in that they are in massively better shape.
 

The-Noid

Diamond Member
Nov 16, 2005
3,117
0
76
Simple....Big Banks fail they could lose THEIR cash and THEIR investments. While on the other hand, the Rightist in here who flip burger at McDonald's or aren't linked to the manufacturing industry could give a flying fuck about its failure.

Shameful greedy bastards.
Question, who has lost more employees, the TARP banks that were bailed out or the US auto sector post bailout?

I am not really sure using jobs is the best example for anything TARP related.

TARP was more or less to save the industries as a whole. As far as jobs, net/net there are less.
 
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The-Noid

Diamond Member
Nov 16, 2005
3,117
0
76
Money isn't static. We only come out ahead if that money in GM is better than any other investment that could (or would) be made. This is unlikely. Put another way, if/when we hit a break-even point, it will be as if we had taken $82 billion dollars and hit it under a mattress for three years, rather than putting it to some other worthwhile economic use.

There's really no way around the fact that all of these bailouts and stimulus programs hurt. The fortunate part is that they are all as cheap as they could be because they've managed to serve their purpose of keeping vital industries afloat and US debt interest is running below inflation right now (meaning that there's actually a slight profit to taking out debt).
There's only a profit to taking out debt if the investment has a multiplier that is equal to the savings rate of inflated debt (using 5x5 inflation expectations with a savings of 55bps a year that number is .9467). Most government projects unfortunately have a multiplier less than one, meaning that even with negative real rates the investment costs more than the fundamental value. This is known as the overhead effect in economics. Projects must generate positive NPV including all the costs of administration and fees associated with the project.

Simple example. If the Federal government decides to send out $1 to every citizen, it costs more than $1 to accomplish this. There is the cost of postage, the cost of making the decision, etc. The same takes place in a business. That is how you get a multiplier less than one. i.e. 1/real cost so will use .7 as the example. The project would cost 1.42 to get every dollar into the economy, meaning the multiplier is .7.

Even though we are paying economic rent (interest) that is less than the inflation rate on borrowed principal, the difference must equal the real rate differential as well as the multiplier difference in the project.

In the above example, assuming inflation runs at 55bps more than the 10 year nominal rate (using 5x5 inflation breakevens) the above project still costs ~3.0% per annum in real economic cost the savings.

The major problem is that many government projects don't generate positive multipliers. Real interest rate differentials can't fix this.

So no, we aren't doing ourselves a favor in borrowing as it is cheaper than 5x5 inflation breakevens.

(And again, don't take this as me making a position either way on the large fiscal deficits, just more or less trying to state facts as I like to watch you guys argue.)
 
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Atreus21

Lifer
Aug 21, 2007
12,017
571
126
I don't get why someone would hold this position for the auto industry but not the banks though. While I believe the banks should have been treated much differently after the financial crisis, there is no question in my mind that they had to be bailed out in the short term.
Investment banks, I got no issue with them failing. Normal banks should be held up by the Fed to stave off runs.
 

fskimospy

Elite Member
Mar 10, 2006
70,068
18,808
136
Investment banks, I got no issue with them failing. Normal banks should be held up by the Fed to stave off runs.
But investment banks and the rest of the banking system are inextricably intertwined. If the investment banks had gone down they would have taken a whole lot of the rest of the financial system with them, including normal banks.
 

michal1980

Diamond Member
Mar 7, 2003
8,019
43
91
Simple....Big Banks fail they could lose THEIR cash and THEIR investments. While on the other hand, the Rightist in here who flip burger at McDonald's or aren't linked to the manufacturing industry could give a flying fuck about its failure.

Shameful greedy bastards.
you need to visit a health professional.

Just replace big Bank with GM and chyrsler. Two peas in a pod.
 

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