Feature

Issue of the week: ‘Government Motors’ goes public

The federal government sold almost half its stake in an initial public offering of GM common and preferred shares, leaving taxpayers owning 33.3 percent of the company.

Here we go again, said David Welch and Craig Trudell in Bloomberg.com. Controversy flared when the Bush administration initiated the bailout of General Motors in December 2008, and it flared anew last week with GM’s return to the public equity markets. But controversy aside, it’s becoming increasingly clear that “the national budget and economy might be better off” as a result of Washington’s rescue of the auto industry. In an initial public offering of GM common and preferred shares that raised about $23 billion, the federal government sold almost half its stake in the carmaker, leaving taxpayers owning 33.3 percent of GM. Had the government sold all its shares at the IPO price of $33, it would have lost $9 billion on the bailout. That’s not peanuts, but according to Michigan’s Center for Automotive Research, had the government not bailed out GM (along with its former finance unit, GMAC, and Chrysler), the resulting social-service costs and lost tax revenue would have amounted to $28.6 billion.

Can President Obama get a little credit? asked Rick Ungar in Forbes.com. Ignoring “cries of socialism” from partisan critics, Obama forced out “a CEO who had badly failed,” and “positioned the company to become competitive” in producing energy-efficient cars, including the Chevy Volt, Motor Trend’s Car of the Year. Along the way, he saved more than 1 million American jobs. Obama’s “brutal and temporary” nationalization of GM made clear that he “has no desire to own the commanding heights of industry,” said an editorial in The Economist. He may be “a gambler” and “an interventionist,” but he’s no socialist.

He’s no accountant, either, said Francine McKenna, also in Forbes.com. “GM has been reporting profits,” including $2 billion for the third quarter, “but who’s swearing by them?” The financial statements that accompanied the IPO are unaudited, and the company admits that its accounting controls are weak. My guess is that the Obama administration intends to “stick big Wall Street firms with this dog of an IPO” and let them eat the loss when investors discover that GM’s “financial statements have been put together with Band-Aids, string, and paper clips.” The taxpayers are sure to lose too, said The Wall Street Journal in an editorial. Just wait until the administration uses the GM rescue as “a precedent” for more so-called “partnerships” with private companies. GM’s IPO will embolden Obama to put taxpayer money into green technologies, education, and other pet causes. The president will no doubt call these subsidies “investments.” We’ll call them what they really are: “industrial policy.”

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