# So we own GM. Now what? **URL:** \ **Category:** Great Debates\ **Created:** [June 3, 2009, 8:28am UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559 "2009-06-03T08:28:25Z")\ **Posts on this page:** 19\ **Page:** 6
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 18, 2010, 7:19pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/101 "2010-11-18T19:19:59Z")
What nonsense. No precedent was set. Are you under the impression that federal bailouts are a new idea? In the early 1970s, the Federal Government bailed out the Penn Central Railroad, Lockheed, Franklin National Bank and _New York City._ The men behind the bailouts were noted progressives Richard Nixon and Arthur Burns. ---
**Author:** ![The\_Flying\_Dutchman](https://avatars.discourse-cdn.com/v4/letter/t/9fc348/32.png) [@The\_Flying\_Dutchman](https://boards.straightdope.com/u/The_Flying_Dutchman)\ **Post date:** [November 18, 2010, 7:50pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/102 "2010-11-18T19:50:43Z")
> [@Really\_Not\_All\_That\_Bright](#): > > What nonsense. No precedent was set. Are you under the impression that federal bailouts are a new idea? > > In the early 1970s, the Federal Government bailed out the Penn Central Railroad, Lockheed, Franklin National Bank and _New York City._ The men behind the bailouts were noted progressives Richard Nixon and Arthur Burns. Your corporate bail out examples don’t exactly show positive results for bailouts. The Penn Central bilout wasn’t working until the Staggers Rail Act deregulation took effect some 5 years later. The Lockheed bailout for the Tristar jet didn’t work out that well either. In fact Lockheed bailed out of aircraft production 10 years later. Your corporate examples aren’t exactly positive precedents. By all accounts the GM rescue is positively glowing and sure to lend support to future government bailout proposals. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [November 18, 2010, 7:52pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/103 "2010-11-18T19:52:23Z")
> [@furt](#): > > If someday we do end up in the corporate-owned dystopia that so many scifi stories predict, progressives can take their fair share of the credit. Ahhh, that great progressive, George Bush :rolleyes: ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [November 18, 2010, 7:55pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/104 "2010-11-18T19:55:26Z")
We purchased the former largest car manufacturer in the world and now we have the world’s [largest pension fund in the world](http://www.time.com/time/business/article/0,8599,1981958,00.html). We’ll have to rescue that too in a couple of years. We didn’t rescue a car company as much as a retirement fund. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 18, 2010, 8:05pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/105 "2010-11-18T20:05:26Z")
> [@furt](#): > > And that is precisely the problem that us small-government types have with it. > > Even if we grant that the GM bailout “worked” in the sense of bringing that company back from the brink of bankruptcy, the issue is what kind of precedent is set. Other corporations have seen the precedent and are going to act accordingly. If we’re gonna bail out GM, there’s no reason not to do the same for Wal-Mart or Exxon when they go belly up. I would have a hard time conceiving of a scenario where a bailout of WalMart would be good. For Exxon, however, what if Exxon going belly up was going to result in a major reduction of refinery capacity and oil production until things got sorted out? The two positions are not bailouts are always bad vs bailouts are always good. They actually are bailouts are always bad versus bailouts are good when there is a good reason that they would further the national interest. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 18, 2010, 8:14pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/106 "2010-11-18T20:14:37Z")
> [@Jas09](#): > > I’m not sure it’s either - I think imputing bad intentions on people with different political ideals is a bad idea in general. > > I think it’s just very difficult to allow for exceptions to firmly-held beliefs. And a large government bailout of private industry goes against many firmly-held beliefs of libertarian and small-government types. > > I certainly wouldn’t want to use the apparent success of the GM bailout as a carte-blanche for future government intervention, but I think it is at least an indication that there are circumstances in which using public money to make restructuring of a private company possible is not by default a bad idea. For your last point, definitely. Each case needs to be looked out carefully, and a rapid exit strategy (like we’re seeing for GM) defined.. As for the first, ideological rigidity is fine in church or academia, but is dangerous in the real world. That goes for left or right. One of Regan’s great assets was that no matter what his previous beliefs were, he raised taxes, saved social security, and talked to the Russians when it made sense. We’d be in much better shape if Bush had shown that kind of flexibility earlier, before he became the lamest of lame ducks. Any nasty thoughts about the opposition comes from them being really upset by the prospect of people not being thrown out of their homes or tossed out of work or getting “undeserved” health insurance. ---
**Author:** ![furt](https://avatars.discourse-cdn.com/v4/letter/f/439d5e/32.png) [@furt](https://boards.straightdope.com/u/furt)\ **Post date:** [November 18, 2010, 8:24pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/107 "2010-11-18T20:24:26Z")
> [@Ludovic](#): > > Ahhh, that great progressive, George Bush :rolleyes: Sorry, you’re going to have to have a point if you want a response. Are you under the misimpression that I’m a fan of GWB? Hint: conservatives can take their fair share of the credit, too. ---
**Author:** ![furt](https://avatars.discourse-cdn.com/v4/letter/f/439d5e/32.png) [@furt](https://boards.straightdope.com/u/furt)\ **Post date:** [November 18, 2010, 8:38pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/108 "2010-11-18T20:38:27Z")
> [@Voyager](#): > > I would have a hard time conceiving of a scenario where a bailout of WalMart would be good. 😕 Are you kidding? Walmart is the largest corporation on the planet and, by a mile, the number one employer in America (8 times bigger than GM). They represent over 10% of the entire retail market. If they were faced with a bankruptcy or restructuring, the possible consequences would dwarf GM. You don’t think saving hundreds of thousands of jobs would be a good reason to bail them out? > [@](#): > > For Exxon, however, what if Exxon going belly up was going to result in a major reduction of refinery capacity and oil production until things got sorted out? “Gas prices will soar! We have to bail out Exxon of we’ll have $6 a gallon gasoline and that will destroy the economy.” > [@](#): > > The two positions are not bailouts are always bad vs bailouts are always good. They actually are bailouts are always bad versus bailouts are good when there is a good reason that they would further the national interest. Uh-huh. And who gets to pick which bailouts “further the national interest?” If a Republican administration says that bailing out an oil company, or Halliburton will “further the national interest,” you’re okay with that? ---
**Author:** ![Kearsen](https://avatars.discourse-cdn.com/v4/letter/k/82dd89/32.png) [@Kearsen](https://boards.straightdope.com/u/Kearsen)\ **Post date:** [November 18, 2010, 8:44pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/109 "2010-11-18T20:44:57Z")
> [@Really\_Not\_All\_That\_Bright](#): > > What nonsense. No precedent was set. Are you under the impression that federal bailouts are a new idea? > > In the early 1970s, the Federal Government bailed out the Penn Central Railroad, Lockheed, Franklin National Bank and _New York City._ The men behind the bailouts were noted progressives Richard Nixon and Arthur Burns. You and I have different definitions of ‘precedent’ ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 18, 2010, 8:46pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/110 "2010-11-18T20:46:18Z")
> [@The\_Flying\_Dutchman](#): > > Your corporate bail out examples don’t exactly show positive results for bailouts. > > The Penn Central bilout wasn’t working until the Staggers Rail Act deregulation took effect some 5 years later. > > The Lockheed bailout for the Tristar jet didn’t work out that well either. In fact Lockheed bailed out of aircraft production 10 years later. > > Your corporate examples aren’t exactly positive precedents. By all accounts the GM rescue is positively glowing and sure to lend support to future government bailout proposals. Lockheed certainly didn’t bail out of aircraft production. Lockheed bailed out of the _commercial jetliner_ business. Its successor company is still by far the largest supplier of military aircraft in the US. In any event, perhaps the point to be made here is that Democrats are better at bailouts, or something. _My point,_ which you missed entirely, is that bailouts are not a “progressive” idea. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 18, 2010, 8:56pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/111 "2010-11-18T20:56:17Z")
> [@Kearsen](#): > > You and I have different definitions of ‘precedent’ What is your definition? ---
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [November 18, 2010, 8:56pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/112 "2010-11-18T20:56:54Z")
> [@Voyager](#): > > I wonder if they are so blind to reality that they refuse to accept that in this case the government did something good, or if for some reason they want a new Depression, and were thwarted by that traitor Bush who actually did the right thing. I suspect the former (many are true believers in other things, after all) but I sometimes wonder if the latter isn’t the real answer. Perhaps not exactly wanting a new Depression, although bear in mind that not everyone lost money during the depression of the 30’s - those who had cash as well as an amount of ruthlessness were able to make their fortunes. In this case some folks may have been looking forward to picking up assets for tiny sums, and flipping them for quick profit. When a large company goes into the toilet, there are plenty of opportunities for vultures to make a lot of money. ---
**Author:** ![Kearsen](https://avatars.discourse-cdn.com/v4/letter/k/82dd89/32.png) [@Kearsen](https://boards.straightdope.com/u/Kearsen)\ **Post date:** [November 18, 2010, 9:21pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/113 "2010-11-18T21:21:03Z")
> [@Really\_Not\_All\_That\_Bright](#): > > What is your definition? Whether or not THIS bailout set a precedent, one of them did. And more have followed. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 18, 2010, 9:28pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/114 "2010-11-18T21:28:21Z")
Of course one of them did. In fact, that’s exactly what I was pointing out. Now, in what way do you think your definition of precedent differs from mine? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 18, 2010, 9:46pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/115 "2010-11-18T21:46:28Z")
> [@furt](#): > > 😕 Are you kidding? Walmart is the largest corporation on the planet and, by a mile, the number one employer in America (8 times bigger than GM). They represent over 10% of the entire retail market. If they were faced with a bankruptcy or restructuring, the possible consequences would dwarf GM. You don’t think saving hundreds of thousands of jobs would be a good reason to bail them out? On the retail side, the cost of entry is pretty low, and I suspect the customers and the employees would be picked up by existing retailers expanding. More at risk would be factories in China with a significant amount of their business turning out WalMart stuff, but protecting them is not in our national interest. > [@](#): > > “Gas prices will soar! We have to bail out Exxon of we’ll have $6 a gallon gasoline and that will destroy the economy.” The issue would be a real shortage, not a manufactured shortage. Prices going to $6, while bad enough, would be less disruptive than rationing. > [@](#): > > Uh-huh. And who gets to pick which bailouts “further the national interest?” If a Republican administration says that bailing out an oil company, or Halliburton will “further the national interest,” you’re okay with that? I thought it went without saying that each case needs to be decided on its merits. The interesting thing here is not that the right opposed the bailout last year - it was hardly a slam dunk that it was going to work. The interesting thing is that they oppose it as a bad idea even after it did work. It has become an unfalsifiable matter of faith, just like creationism. Premise: bailouts are bad because they cost us lots of money and encouraging creeping socialism by unending government control of private industry. Fact: A bailout made a profit, and the government did not micromanage the industry and got out very quickly. Conclusion: Bailouts, especially successful ones, are really bad because they might encourage more bailouts and we know bailouts are always bad. I think this is an accurate summary of the position of some people in this thread. ---
**Author:** ![Kearsen](https://avatars.discourse-cdn.com/v4/letter/k/82dd89/32.png) [@Kearsen](https://boards.straightdope.com/u/Kearsen)\ **Post date:** [November 18, 2010, 9:49pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/116 "2010-11-18T21:49:34Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Of course one of them did. In fact, that’s exactly what I was pointing out. Now, in what way do you think your definition of precedent differs from mine? I don’t recall the reasons for bailing those 1970’s companies (and haven’t looked yet) but the precedent that is being set now is that a company can get too big to let fail ---
**Author:** ![Kearsen](https://avatars.discourse-cdn.com/v4/letter/k/82dd89/32.png) [@Kearsen](https://boards.straightdope.com/u/Kearsen)\ **Post date:** [November 18, 2010, 9:51pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/117 "2010-11-18T21:51:55Z")
> [@Voyager](#): > > On the retail side, the cost of entry is pretty low, and I suspect the customers and the employees would be picked up by existing retailers expanding. More at risk would be factories in China with a significant amount of their business turning out WalMart stuff, but protecting them is not in our national interest. > > The issue would be a real shortage, not a manufactured shortage. Prices going to $6, while bad enough, would be less disruptive than rationing. > I thought it went without saying that each case needs to be decided on its merits. The interesting thing here is not that the right opposed the bailout last year - it was hardly a slam dunk that it was going to work. The interesting thing is that they oppose it as a bad idea even after it did work. It has become an unfalsifiable matter of faith, just like creationism. > Premise: bailouts are bad because they cost us lots of money and encouraging creeping socialism by unending government control of private industry. > Fact: A bailout made a profit, and the government did not micromanage the industry and got out very quickly. > Conclusion: Bailouts, especially successful ones, are really bad because they might encourage more bailouts and we know bailouts are always bad. > > I think this is an accurate summary of the position of some people in this thread. I think the conclusion has not a lot to do with whether it was good or bad but rather the fact that it could have been disastrous. What would we be saying right now had we just thrown money at GM and it died anyway? ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [November 18, 2010, 11:01pm UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/118 "2010-11-18T23:01:42Z")
> [@Kearsen](#): > > I think the conclusion has not a lot to do with whether it was good or bad but rather the fact that it could have been disastrous. What would we be saying right now had we just thrown money at GM and it died anyway? What would be saying right now had we _not_ thrown money at GM and it took down Ford as well, leaving us with no large domestic automobile manufacturer? The conclusion _must_ have something to do with whether the policy worked or not, or you’re not dealing in reality any more. And of course a company can get too big to fail - that’s why an essential role of the government (IMO) is to not allow them to get so big by not approving every merger and having strict regulations about spreading beyond a specific purpose (banks in particular need these limitations, IMO). Unfortunately, I don’t see a lot of support for this from the free-market types. The preferred method seems to be to let them get as huge as possible, and then crash disastrously, as if this will be some deterrence to the next company that comes along. ---
**Author:** ![furt](https://avatars.discourse-cdn.com/v4/letter/f/439d5e/32.png) [@furt](https://boards.straightdope.com/u/furt)\ **Post date:** [November 19, 2010, 2:11am UTC](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559/119 "2010-11-19T02:11:34Z")
> [@Voyager](#): > > On the retail side, the cost of entry is pretty low, and I suspect the customers and the employees would be picked up by existing retailers expanding. More at risk would be factories in China with a significant amount of their business turning out WalMart stuff, but protecting them is not in our national interest. And that exact same argument can be made for letting GM go belly up – others will fill in the market gap. (and you are aware that most Chevys are about 1/3 imported parts, right?) > [@](#): > > The issue would be a real shortage, not a manufactured shortage. Prices going to $6, while bad enough, would be less disruptive than rationing. Have you seen how Americans react to high gas prices? Are you implying that no president would try to placate the populace by bailing out > [@](#): > > I thought it went without saying that each case needs to be decided on its merits. The interesting thing here is not that the right opposed the bailout last year - it was hardly a slam dunk that it was going to work. The interesting thing is that they oppose it as a bad idea even after it did work. It has become an unfalsifiable matter of faith, just like creationism. Because some things are wrong as a matter of _principle._ Say I’m the Sales Manager at a car dealership and I loaned one of my employees $1000 to pay for his rent because he blew his money on beer this month. Say he repays me $1100. It’s safe to conclude that that transaction “worked.” It was still a bad idea for all kinds of reasons: [ul] [li]It still hasn’t addressed the fact that this guy is, apparently, an alcoholic.[/li][li]He may hit me up again, and then not pay, wiping out my investment. [/li][li]It increases the likelihood that other employees will hit me up for money in the future, and they may not pay.[/li][li]If I don’t pay them, now I’m seen as the bad guy and playing favorites.[/li][li]There’s going to be the perception, rightly or wrongly, that I’m going to send better customers to the guys that owes me money (so he can make it back and repay me).[/li][/ul] The fact that a manager can, on some occasions, loan money to employees and get it back doesn’t change the fact that it’s a bad practice that has the potential to lead to chaos. > [@](#): > > Premise: bailouts are bad because they cost us lots of money and encouraging creeping socialism by unending government control of private industry. > Fact: A bailout made a profit, and the government did not micromanage the industry and got out very quickly. You’re not under the impression that we’re out of GM, are you? We still own 26% of the company, and unless GM stock rises to $53 a share, we are still going to lose money. [QUOTE=WSJ] With Wednesday’s sale, including the overallotment, the Treasury lost roughly $4.5 billion on GM shares it acquired at an effective cost of $43.84 apiece. The Treasury would need to reap $26.4 billion, or an average of $52.79 a share, on its remaining stake to break even. [/QUOTE] [Cite](http://online.wsj.com/article/SB10001424052748704648604575620833385520438.html?mod=WSJ_hp_LEFTTopStories) There’s a looooong way to go before we know how this shakes out. > [@](#): > > Conclusion: Bailouts, especially successful ones, are really bad because they might encourage more bailouts and we know bailouts are always bad. Bailouts are really bad because when they fail, it’s taxpayer money down a rathole. But even when they succeed, they’re still a bad idea because 1. they prevent the marketplace from punishing bad management (and rewarding good management), and in the long run this hurts all of us, 2. they breed more bailouts, some of which are bound to fail (and as with most lending, one bad loan will wipe out twenty good ones) 3. they impede the government’s ability to perform its proper role as regulator, because it now has a vested interest in the game. [Previous page](https://boards.straightdope.com/t/so-we-own-gm-now-what/498559.md?page=5)