You won't believe what you paid for GM bailout

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You won't believe what you paid for GM bailout

Precedents set also may now result in 'thousand new failing businesses'

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Posted: December 09, 2010

But analysts confirm that the real cost of the GM bailout, in jobs and precedent as well as dollars, is something along the lines of:


The concept that secured creditors can be punished while favored political allies such as the unions can be rewarded:


The $45 billion in tax-loss carry forwards GM was allowed to keep;


The lost opportunity to get billions of dollars in production assets (estimated at $65 billion to $82 billion) out of the hands of taxpayers who have been subsidizing them;


The collapse of what creditors were owed, from $54 billion to $15.6 billion, although the mix of secured and unsecured debt remains unclear;


The collapse of $20 billion that was owed to retirees down to $9.4 billion;
Based on these calculations, GM's creditors (the taxpayers) will come up some $30 billion short when the balance sheet for investments, loans, repayments and other money transfers is totaled, analysts say.

The bottom line, say analysts, is that there is the potential for large problems stemming from the situation, above and beyond the dollars that have flown.

Todd Zywicki, professor of law at George Mason University, wrote in the Wall Street Journal, "By stepping over the bright line between the rule of law and the arbitrary behavior of men, President Obama may have created a thousand new failing businesses. That is, businesses that might have received financing before but that now will not, since lenders face the potential of future government confiscation."