So I was wrong, it seems...

[innonimatu]

The state doesn't need to hold ownership to avoid that. All it has to do is to declare that any and all bailouts automatically result in all stock declared null and void on the spot.

How exactly does that make the past profiteers pay? That's what those who pump and dump - your typical corporate raiders "Gordon Gecko stye" - want you to believe! And that also applies to bankers and their bonuses: are you going to be able to force them to return all they siphoned off over the past decade as they destroyed their bank's balance sheet?

All those you punish by voiding stock at collapse are the fools who were caught with corporate stock at the time of the collapse. Ironically they're likely to be individuals, the corporation's own pension funds and other slower-moving investors. Not the ones who set the collapse in motion and have long since moved to other prey.

As for the success of TARP and its kind in Europe, I'll also point out that the banks are only marginally "healthier" today thanks to playing with the differential from the zero-interest loans from national central banks while lending back to states and individuals at much higher rates...

 

[Cutlass]

How exactly does that make the past profiteers pay? All you get is the fools who were caught with corporate stock at the time of the collapse. Likely not the ones who set it in motion and have long since moved to other prey.

Most of the time the people responsible for the screwups of a publicly traded company are the management, not the owners. In the modern sense in the US, with the big companies the owners are essentially irrelevant to management. And while a lot of stock gets traded day to day, most of it sits for extended periods of time. So by nullifying the stock, the people who should have been running the show are punished for failing to do so. And the ones that were running the show get a lot of their compensation in the form of stock options, so they are punished as well.

Ultimately no one will invest in the companies unless the bad management is removed. The risk becomes too high.

 

[innonimatu]

In the modern sense in the US, with the big companies the owners are essentially irrelevant to management.

Oh, I'm fully aware of that, even like to insist on it. One interesting consequence of it is that the state would actually be more effective stockholder than the many indifferent individual ones, because it would have full control over the company. But that's besides the point I was making here...

And while a lot of stock gets traded day to day, most of it sits for extended periods of time. So by nullifying the stock, the people who should have been running the show are punished for failing to do so. And the ones that were running the show get a lot of their compensation in the form of stock options, so they are punished as well.

Ultimately no one will invest in the companies unless the bad management is removed. The risk becomes too high.

And yet removing management is incredibly difficult. Have any of the bank mangers been removed from the system? Have the GM executives? Or have they just rotated to another big company? Or remained in their positions? And have they returned the profits from any of their past realized stock options? Because the consequences of mismanagement are immediate; plenty of time to cash in on those options and move, especially for someone with inside information of how they screwed up.

 

[amadeus]

Apparently, when a business goes under, the factory, all of the knowledge, the warehouses, the goods stored in the warehouses, it all just disappears. Worse yet, since there's absolutely zero capital in the world, there are no investors to come and fill the void.

Unfortunately, GM learned that you didn't actually need to sell cars to stay in business. As it turns out, you could just steal all the money you needed, kick some of it back to the people that gave you the stolen money, then rub it in the faces of the people that had their money stolen.

Ain't "free markets" grand?

 

[Cutlass]

Oh, I'm fully aware of that, even like to insist on it. One interesting consequence of it is that the state would actually be more effective stockholder than the many indifferent individual ones, because it would have full control over the company. But that's besides the point I was making here...



And yet removing management is incredibly difficult. Have any of the bank mangers been removed from the system? Have the GM executives? Or have they just rotated to another big company? Or remained in their positions? And have they returned the profits from any of their past realized stock options? Because the consequences of mismanagement are immediate; plenty of time to cash in on those options and move, especially for someone with inside information of how they screwed up.

The law doesn't allow for it. The law can be changed.

Apparently, when a business goes under, the factory, all of the knowledge, the warehouses, the goods stored in the warehouses, it all just disappears. Worse yet, since there's absolutely zero capital in the world, there are no investors to come and fill the void.

Unfortunately, GM learned that you didn't actually need to sell cars to stay in business. As it turns out, you could just steal all the money you needed, kick some of it back to the people that gave you the stolen money, then rub it in the faces of the people that had their money stolen.

Ain't "free markets" grand?

In fact it does all disappear. It is destroyed when the economy collapses. Your version of "free markets" is an endless broken window.

 

[IdiotsOpposite]

@VRWC: Anyone who can admit that they were wrong on a political issue is highly worthy of respect, at least in my book.

 

[RobAnybody]

The state doesn't need to hold ownership to avoid that. All it has to do is to declare that any and all bailouts automatically result in all stock declared null and void on the spot.

Did this happen? As I mentioned above, I got most of my information from an HBO movie, so I don't know much about the after-effects, but, well, did this happen? I think not, but I don't know, which is why I ask.

 

[GoodGame]

IDK, can Chrysler honestly blame banking deregulation for it's problems?

The problem was partly leadership in the auto industry and trade imbalance, not just banks, IMHO.
Government took over because the industry leadership was spotty. Offloading industry debt at a loss is just transferring that flaw in leadership to the taxpayer.

I think main underlying consideration is if global free market trade is that sacred of a value for the USA to put us in debt for it.

 

[Zelig]

Apparently, when a business goes under, the factory, all of the knowledge, the warehouses, the goods stored in the warehouses, it all just disappears. Worse yet, since there's absolutely zero capital in the world, there are no investors to come and fill the void.

Unfortunately, GM learned that you didn't actually need to sell cars to stay in business. As it turns out, you could just steal all the money you needed, kick some of it back to the people that gave you the stolen money, then rub it in the faces of the people that had their money stolen.

Ain't "free markets" grand?

Using loaded words like that makes your argument extremely difficult to take seriously.

 

[dido]

Apparently, when a business goes under, the factory, all of the knowledge, the warehouses, the goods stored in the warehouses, it all just disappears. Worse yet, since there's absolutely zero capital in the world, there are no investors to come and fill the void.

Unfortunately, GM learned that you didn't actually need to sell cars to stay in business. As it turns out, you could just steal all the money you needed, kick some of it back to the people that gave you the stolen money, then rub it in the faces of the people that had their money stolen.

Ain't "free markets" grand?

You have a very idealistic view of the free market

All the factories, knowledge, etc. would indeed be lost (as in "of no value") if there are no investors willing to invest in a new auto manufacturer (and hence make use of what GM/Chrysler left behind), which would require tens of billions just to start up, with no promises of return. Good luck finding that investor

 

[bhsup]

@VRWC: Anyone who can admit that they were wrong on a political issue is highly worthy of respect, at least in my book.

Oh, I'm wrong lots. Just don't ever tell Lucy or Bill.

 

[amadeus]

Using loaded words like that makes your argument extremely difficult to take seriously.

I can't think of a better way to describe it.

 

[Zelig]

I can't think of a better way to describe it.

You can't think of a more accurate way to describe it, but a description isn't very useful if everyone who doesn't already agree with your rather extreme view immediately discounts it because of the wording.

 

[azzaman333]

So, yeah, only read the thread title and glanced at the OP, but good on you VR for admitting you were wrong about something. Takes a brave man to do it, especially on a political issue.

 

[Cutlass]

Did this happen? As I mentioned above, I got most of my information from an HBO movie, so I don't know much about the after-effects, but, well, did this happen? I think not, but I don't know, which is why I ask.

Yes and no, but mostly no. The laws didn't allow for a nationalization like that. The automakers stock took huge hits because the government insisted on ownership as a term of the loans. Banks and financial institutions were often forced into arranged marriages where the owners took a beating but didn't lose everything. To make them lose everything will require a change in the law.

IDK, can Chrysler honestly blame banking deregulation for it's problems?

The problem was partly leadership in the auto industry and trade imbalance, not just banks, IMHO.
Government took over because the industry leadership was spotty. Offloading industry debt at a loss is just transferring that flaw in leadership to the taxpayer.

I think main underlying consideration is if global free market trade is that sacred of a value for the USA to put us in debt for it.

The automakers problem is partly the banks, and partly the fact that they were themselves some of the biggest banks in the country.

And, also, just poor decisions as automakers. for example, GM's worst case scenario didn't consider the effect on their production of $3/gallon gasoline. They got $4/gallon. This crushed sales of their most profitable vehicle lines. For those were the largest cars and SUVs, which got very poor mileage. Further, they had been using their banks to lease those poor mileage vehicles. Leasing depends for solvency on the resale value of the off lease vehicle. But with gas prices high, the value of the vehicles collapsed and so did the leasing banks. GM also had extremely poor internal financial management. When Obama fired the GM CEO, which wasn't really a legal action, but he had the power to do so, it was because as GM was struggling to survive they did not have the ability to look at their books and answer the question of what their financials actually looked like. Their bookkeeping was on the level of Greece.

So there was a series of poor decisions on the automakers part, and then the Great Recession hit at the same time. It was something of a perfect storm for the industry. GM and Chrysler were the ones that fell first because they were financially the weakest. If they had been allowed to fall all the way, like Lehman, then they would have taken much of the rest of the industry with them as Lehman took the banking industry.

 

[kochman]

News I heard last night of GM's fantastic profits for the last quarter and year prompted me to look at TARP results so far. At least according to the Wiki article on it ( http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program ), it's been a resounding success overall. Yes, some big losses here and there, but compared to keeping the entire country from tanking I guess that's a reasonable payoff.

My visceral reaction initally back in 2008/2009 of "let them fall, let it all crash and we'll rebuild without the added government debt"...well, let's just say Thank God I wasn't in charge.

Things like the government selling its share of Chrysler at a 1.6 BILLION DOLLAR LOSS to Fiat kinda still piss me off, but overall I have to admit I was so wrong and it's turning out pretty well. I'm incredibly impressed with the rate of bank paybacks and the auto paybacks.

Anyhoo, what about you others out there that also were opposed to it? Do you still think it was wrong as well, or have you changed your minds as well?

My main objection is how the government picked winners and losers... it let some things go under (such as green companies, Bears Sterns, Loehman, etc), but not others (Goldman Sachs is so corrupt and imbedded within the government it is ridiculous)...
Crony capitalism is bad.

I think we couldn't have let the financial system fail... but the auto companies? Yes. It is unfair to Ford that GM got bail outs... but, fair is irrelevant in the real world.
I think Ford would have filled the void, but maybe not...

I never thought it was wrong, but there should have been regulations to prevent the situation from happening in the first place - and as far as I can tell, there are still no such regulations in place.

There were such regulations in place, repealed under Bill Clinton with the almost total support of Congress, the repeal of the Glass-Steagal Act of 1933 (which was written precisely in reaction to the Great Depressions causes...)...

It's good that it worked out. I wonder why they aren't stepping up to save green tech companies from bankruptcy like they did with the auto industry.

Not too big to fail would be my guess.

Probably... they are still a net drain on the government, getting more in subsidies, etc than paying in taxes...
Hopefully they can turn the corner. I'd rather have them too big to fail than Jamie Diamonds.

 

[downtown]

I think we couldn't have let the financial system fail... but the auto companies? Yes. It is unfair to Ford that GM got bail outs... but, fair is irrelevant in the real world.
I think Ford would have filled the void, but maybe not...
.

Ford would have struggled to survive as well. The suppliers they depend on would have likely also gone bankrupt, if they lost GM and Chrysler as clients. If everybody in the supply chain could get a giant loan to tide them over their rocky cash flow period, Ford might have been able to ride out the storm, but that's pretty unlikely. The industry could survive losing ONE of the Big 3, but not two at once. Everybody would have gone bankrupt.

 

[kochman]

Ford would have struggled to survive as well. The suppliers they depend on would have likely also gone bankrupt, if they lost GM and Chrysler as clients. If everybody in the supply chain could get a giant loan to tide them over their rocky cash flow period, Ford might have been able to ride out the storm, but that's pretty unlikely. The industry could survive losing ONE of the Big 3, but not two at once. Everybody would have gone bankrupt.

I disagree.
I think the weakest links would have gone under... never underestimate the little guys.

This is the thing, I'm glad they recovered, but I generally am against any subsidies. I understand there is a subsidies/tariff war with the other auto producing nations, and if we didn't do this, they'd all go under, but it's a source of annoyance to me.

 

[Zelig]

edit: nvm, failed at reading.

 

[rugbyLEAGUEfan]

Is the being wrong thing and the admitting thing evenly shared when it comes to getting credit ? I hope so , cause I rarely admit my failings however they are so numerous that I figure I'm still way ahead.