Obama says 'reasonable probability' of getting paid back on auto loans

Posted Jun 11th 2009 3:30PM by Zac Bissonnette
Filed under: General Motors (GM)

The average American family of four has, against its will, invested over $900 in the Detroit auto industry so it's fair to ask: Will we be getting our money back?

President Obama's auto task force told lawmakers yesterday that there is a "reasonable probability" that the federal government will be paid back. I don't buy that and here's why: Liquidation analysis of GM suggests that there would be just $10 billion in net proceeds from a liquidation. Given that the government has $80 billion invested in the industry with little collateral, long-time money losers like GM and Chrysler will need to earn spectacular returns on equity to pay back their loans. I just don't see it happening. Do you?

Senior auto task force advisor Ron Bloom told a Senate committee that "We strongly believe this is the last money that GM will require. I cannot make a promise about the future but I can assure you that it has been a vigorously debated and thought about question."

"I do believe that there is a reasonable probability that we can get most if not all of our money back," he added.

I love it: We were reassured again and again that these were short-term loans and now we're being told that there's a "reasonable probability" that we'll get most of our money back.

All's well that's Orwell, I guess.

Tags: Auto Industry, AutoIndustry, Chrysler, featured, General Motors, GeneralMotors, GM, Obama

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Reader Comments (Page 1 of 1)

6-11-2009 @ 7:14PM

william lindblad said...

Orwell and Huxley did not imagine economic problems. Try John Gresham.
I doubt that the taxpayer will recover much also, but I don't think much of double standards either. Wall St. the bankers and their minions all were on the verge of going down the proverbial sewer pipe until the Fed and Treasury stepped in.
While some of the big offenders were absorbed by other institutions you can also be sure that the government had a hand in making it happen. Now some want to return the "TARP" money because of it's strings and I see no real reason that this should not happen. Interesting, as this is a pretty quick turn around and I am one of the doubters - did they really need it in the first place? Probably, as without this injection of funds and backing their ability to raise private equity would have been in doubt. I guess in a few months AIG will follow suit. All of this brings up a point. All of the people in charge of these operations are still sitting behind 100,000 desks with 20 grand waste cans.
GM and Chrysler as they once were are now history, taken out by economic circumstances orchestrated by the financial wizards. The wizards have magic wands and keep their jobs. The rest of the population be damned. We should apply this concept to car insurance. You hit someone total their car and send them to the hospital for a week. Than all you have to do is say your sorry and all is forgiven.
If the government really wanted to make some head way they should repeal Glass Steagall and put banking and investment back into two separate entities. I should point out that this concept was one, although a minor, contributor to 1929 and doing it twice only proves that is does not work. On executive compensation a bill that would allow shareholders a Democratic vote would rein this devil in. There are many more sensible remedies, but I don't expect the government to do squat. Talk yes, but that's about it.
Without the economic mess GM and Chrysler still may have failed, but it would have taken time. Both would have kept downsizing and when and if they failed, the impact would not have been so great.