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Posts Tagged ‘General Motors’

I was on Fox News last week and unloaded on the General Motors bailout.

I’m surprised I wasn’t foaming at the mouth.

My conclusion is that people with honor and integrity should refuse to buy cars from companies that stole money from taxpayers.

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The President wants us to believe that the recent IPO for General Motors was a smashing success. And it was…if you believe that it’s a good idea to lose money (the direct cost of the bailout) and make the economy less efficient by misallocating resources (the indirect cost of the bailout). The always superb John Lott has a good explanation at Foxnews.com, and here is an excerpt.

Only the government would consider it a success to buy stock at $43.84 a share and sell it at $33. — But President Obama and those who supported his bailout of General Motors and Chrysler are claiming just that…  It simply doesn’t account for the over $50 billion in direct bailout funds and the tens of billions of dollars in other breaks President Obama gave the company and its unions. It also ignores that GM’s stockholders and particularly its bondholders had their wealth stolen from them when the government took over ownership of the company. Traditional property right protections were shredded by the Obama administration, making corporate investments in America riskier as a result.

By the way, Mickey Kaus is surprised that investors were willing to buy GM shares, but he hypothesizes that they were fools or that they expect GM to hollow out its American operations and build cars in China.

Either way, not a good way to squander the tax dollars of the American people. Another legacy of Bush-Obama statism. Way to go, guys!

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Here’s a change of pace. Instead of doing separate blog posts on the following two stories, I’m curious to see which one generates the most irritation/anger/disgust from you readers. The first option comes from the Wall Street Journal’s editorial page, which is appropriately upset that Government Motors…oops, I mean General Motors…is back in the business of lobbying and dishing out campaign contributions. I don’t think there’s anything wrong with petitioning government and participating in the political process, but I don’t think individuals or companies should be doing it with money taken from me by a coercive government.

General Motors is 61%-owned by American taxpayers, who were less than thrilled when forced to buy GM by Presidents Bush and Obama. We can only imagine how GM’s unwilling owners will react now that the company is once again spending freely on lobbying and political campaigns. The Journal reports that the company has been particularly kind lately to Midwestern Democratic incumbents while shovelling out a total of $90,500 in campaign donations so far in the current election cycle. On the lobbying side, The Hill newspaper reports that GM has spent $7 million in the four quarters since exiting bankruptcy, retaining a who’s who of Washington hired guns. This may sound like the business model of Fannie Mae and Freddie Mac all over again, but remember that the failed mortgage giants at least had to shut down most of their Beltway influence operation once they explicitly became wards of the state. GM has your money and now it apparently has the license to use it to lobby Congress and support its political friends. …There’s also the intriguing legal matter of the United Auto Workers union still lobbying Congress and supporting political campaigns even after becoming a partner with the government in the automobile business.

The second option embarrasses me greatly, because it is a sign of bureaucratic nonsense from my beloved University of Georgia. A student got in trouble for sending an email to the Parking Services division to gripe about the lack of scooter parking. The snot-nosed bureaucrat who received the email apparently got the vapors because of this sentence: “Did you guys just throw darts at a map to decide where to put scooter corrals? Can I expect you guys to get off your asses and put in a corral near there some point before I fucking graduate and/or the sun runs out of hydrogen?” This led to the student being subjected to real threats and potential disciplinary action. Fortunately, the great folks at the Foundation for Individual Rights in Education came to the rescue and the craven bureaucrats at UGA backed down.

The University of Georgia (UGA) has withdrawn charges of “disorderly conduct” and “disruption” filed against a student after he sent a mocking e-mail to UGA Parking Services to complain about the lack of parking spaces for scooters on campus. Although Parking Services specifically asks students for both “negative & positive” comments on its performance, student Jacob Lovell spent nearly a month under the threat of punishment after submitting his e-mail. UGA backed down after Lovell came to the Foundation for Individual Rights in Education (FIRE) for help.

“Jacob Lovell just wanted to park his scooter on campus, and when he found it a frustrating experience he sent a joking e-mail to the department that had asked for his feedback. But when it received his e-mail, he was threatened with punishment!” said FIRE President Greg Lukianoff. “Only on a college campus could a clearly flippant response to requests for complaints about parking on campus be turned into a judicial investigation for disorderly conduct.”

…On August 17, 2010, Lovell e-mailed Parking Services with his complaint about its service. His flippant and joking e-mail mused, “Did you guys just throw darts at a map to decide where to put scooter corrals?” and otherwise made fun of the department for what he perceived to be its poor job of providing parking for scooters.

Four hours later, Parking Services replied, “Your e-mail was sent to student judiciary.” On September 3, 2010, Associate Dean of Students Kimberly Ellis sent Lovell a letter charging him with two violations of UGA’s University Conduct Regulations, stating, “Specifically, it is alleged that Mr. Lovell engaged in disorderly conduct and disrupted parking services when he sent an email to them that was threatening.”

…The letter required Lovell to make a disciplinary appointment by September 13. Ellis informed Lovell that failure to do so would result in his record being “flagged,” rendering him unable to add, drop, or register for classes. Lovell complied with this requirement on September 13.

Meanwhile, on September 10, FIRE wrote UGA President Michael F. Adams, explaining that Lovell’s grievance was protected by the First Amendment. FIRE also repeated to President Adams that UGA maintains unconstitutional speech codes in addition to the regulations used against Lovell’s protected speech, and that administrators could be held personally liable by a court for the violation of students’ constitutional rights, as a federal judge in Georgia ruled recently.

On September 14, Ellis informed Lovell that she “did not find sufficient evidence to move forward” with the charges and that the matter was now “closed.”

So which story is more nauseating? In the grand scheme of things, the General Motors story is more meaningful because the company is stealing our money and then using our money to lobby for more handouts. Yet I can’t help but think the UGA story is very symbolic of arrogant and stupid bureaucracy. as many of us have experienced on our trips to a DMV or our efforts to get through security at airports. Every encounter creates the risk that a job-for-life bureaucrat may decide to make your life miserable.

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No CAP bedwetter to debate in this segment.

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General Motors, having been bailed out by the government, is preparing for its massive initial public offering, which could be the biggest in U.S. history.  Some will no doubt look at the bailout and conclude that GM investments now come with explicit government backing.  But there’s a catch, as caught by CEI’s OpenMarket:

Government ownership poses unique dangers for new shareholders, according to GM’s own preliminary prospectus filed with the SEC.

Among the very last items in 16 pages of “risk factors” is a small disclaimer containing a bombshell. This IPO is largely exempt from from federal and state anti-fraud laws and corresponding lawsuits.

“Your ability bring a claim … under the federal securities laws may be limited,” says the prospectus on page 27. The document explains that because the main “selling stockholder is a federal agency,” the “sovereign immunity” doctrine “provides that claims may not be brought against the United States of America or any agency or instrumentality thereof unless specifically permitted by act of Congress.”

…GM’s new private shareholders, in contrast to shareholders who buy into almost any other IPO, will have virtually no recourse against fraudulent claims. To borrow a much-overused cliché with its genesis in a commercial for old GM’s Oldsmobile, this is not your father’s IPO. Nor that of your grandfather, though it may slightly resemble a stock offering your great-grandfather participated in before federal securities fraud statutes were enacted in the 1930s. But then again, even he would have been able to bring fraud suits under state law, something federal sovereign immunity expressly prohibits.

For IPOs with selling shareholders in the private sector, the federal Securities Act “creates liability for any person who offers or sells a security through a prospectus or an oral communication containing a material misstatement or omission,” notes Cornell University’s Legal Information Institute. GM and other IPOs pose risks, and shareholders assume those risks. But this may be the only IPO since the creation of the Securities and Exchange Commission in which the lead sellers are exempt from anti-fraud laws as well as lawsuits in general.

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If you’re an American taxpayer, you’re doubtlessly overjoyed to be an involuntary shareholder in General Motors. You’ll be even happier to know that the company is squandering funds on political causes. In other words, they have enough money to be greasing the palms of politicians, but somehow don’t have enough money to survive without stealing money from us. But this does give us a teachable moment (albeit a very expensive one). The behavior of GM illustrates how politicians manage to get kickbacks whenever they give away our money (though the story didn’t mention the biggest source of kickbacks – the money and other forms of political support from the United Auto Workers). This is Washington’s version of recycling. Politicians take money from us, give it to some interest group, and then the interest group gives a slice of the money back to the politicians. Everybody wins. Except people with ethics.

When General Motors went through bankruptcy last year, it suspended its political donations. Now that it’s owned by the U.S. government, it’s donating to lawmakers’ pet projects again.

The carmaker gave $41,000 to groups associated with lawmakers, the vast majority of it — $36,000 — to the Congressional Black Caucus Foundation, the company reported on a disclosure form last week. The CBC Foundation is a charity with 11 members of the Congressional Black Caucus on its board.

…The U.S. government now has a 60 percent stake in the reformed company.

…General Motors has not reactivated its political action committee, which can give to election campaigns, according to the latest reports with the Federal Election Commission. The PAC contributions come from senior employees who give to support the company’s political goals.

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