GM Bankruptcy: Par for the Course

So GM is dead-ish and the market did not raise an eyebrow. One of the largest manufacturing companies in the United States is being shepherded through a structured bankruptcy on the taxpayer's dime to the tune of $50,000,000,000, not including the $19,000,000,000 it has already received, and the market rallied several hundred points apparently overjoyed over other unrelated positive, though flimsy, economic data. Apparently investors felt that the GM thing was expected and already priced in so no big deal. Par for the course.

In the course of less than a year, another industry giant has been transferred to the taxpayer dole, let us not forget AIG, Fannie Mae, Freddie Mac and the dizzying array of financial firms that are now majority owned or significantly owned by the American Government. Smacks of that "S" word, doesn't it. Yech! Actually, I don't see any problem with socialism, we are trying to save America in this global economy, aren't we? Though it does look bad that the government of the country that is/was the economic powerhouse of the world is bailing out the firms that underwrote its superiority. Furthermore, this government is as bankrupt as they come. If the American government was a company, it would have sought chapter 11 a long time a go.

Why is the financial sanctity of this country so reputable when it has not been able to balance its books in nearly a decade? Now this government sits on the brink of skyrocketing legacy costs and it cannot negotiate any settlement. Sounds a lot like GM. The perceived strength of the US government lays upon its solid revenue source - the American taxpayer - but it cannot sell the prospect of higher taxes or reduction in services to the representative body of this bunch; it is considered political suicide. It has the largest military in the world and so cocoons its weakening financial condition with weapons. We are democratic, we are free, we are safe, we are broke.

But, we are saving GM and the rest of the funky bunch but the amount given to GM and Chrysler, which I still cannot understand why Chrysler is being sold to a foreign automaker but whatever, is still a drop in the bucket compared to what has been given to AIG and the financials. Now Wall Street is happy and the market is rallying while they criticize the President for spending too much money. How can anyone even mention free market in the same breath?

The government can save GM but at some point we will need to save the government. We will all have to pay a lot more taxes. Is there any other way?

Outrage

Last week I had a medical procedure done that required such detailed preparation and fasting that it drained the very life out of me and I couldn't write on Thursday. I came out of my stupor on Saturday, since I had to be sedated for the tests, to hear on Sunday that President Obama had finally done it; he was sticking it to the auto companies.

In finally taking bold action against the auto companies to come up with a sustainable plan for survival; the new administration has unleashed an avalanche of collateral criticism. This called for the ouster of Rick Wagoner at GM and a 60 day deadline for the company's major overhaul; it is rumored that President Obama prefers a structured bankruptcy for GM. Chrysler was given the directive to make a plan for a joint venture with Fiat in 30 days or else; the White House believes that Chrysler is essentially finished. I am not sure why Fiat is the chosen suitor. Even the market was spooked by this logic and fear in equities ensued again.

Nevertheless, it is finally nice to see the auto companies forced to face facts and deal with their fate. Business-as-Usual is truly over for them. They will not receive any more billions unless they comply. Unfortunately, the fallout from this decision-making process seems to underscore Obama's apparent elitism. Why force the auto companies to the comply with such draconian measures when the same was not required of the financial firms?

The auto companies received a mere fraction of what the financial firms have received to date. $30,000,000,000 for auto companies, nearly $1,000,000,000,000 for the financials. It doesn't even seem fair. It was likened to the President seemingly more "in bed" with "those who shower before they go to work," the white collar folk rather than "those who shower when they come home from work," the blue collar folk. Well, the whole stimulus situation is fraught with outrage. All the money and how it is delegated will continue to lead to outrage and I am sure there is more to come.