The gift that keeps on giving

Uncategorized

| August 17, 2012

President Obama has remained proud of his purported success in bailing out General Motors. In fact, he’s so proud that, just days ago, he told supporters in Colorado that he wanted to bail out “every industry” just like he did with the automotive industry.

See it yourself:

And now, after this stunning pronouncement, it’s becoming clear that GM is again headed toward bankruptcy. This time, however, American taxpayers will be left holding around 500,000,000 shares. As reported by Forbes, the price of a GM share closed at $20.21 this week as consumers continue to favor GM’s competitors in the automotive industry.

In order for taxpayers to break even on the 2009 bailout, the government would need to get $53.00 per share. It is now sitting on an unrealized loss of $16.4 billion.

To put this another way, GM is now worth 39 percent less than it was just two years ago. Its share of the U.S. car and truck market has fallen to 18.0 percent in 2012, down from 20.0 percent last year and 48.3 percent in the 1960s.

This is the type of success that the Obama Administration wants to expand to “every industry?”

What’s truly scary is that the Administration likely wouldn’t tolerate the political fallout of allowing GM to fail after its 2009 bailout and, therefore, is likely to offer the company a second bailout package if still in office.

Public bailouts are quickly becoming the gift that keeps on giving for GM.

At some point, don’t we have to consider that America’s largest rent-seekers are just “too big to bail out?”

Geoffrey Lawrence

Geoffrey Lawrence is director of research at Nevada Policy. Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission. Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association. From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society. Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics. He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation. Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke. He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.