Wednesday, May 6, 2009

A billion here, a billion there

More outsourced criticism from JD Foster:

The Bush Administration pumped $4 billion into Chrysler to keep it alive long enough to go into bankruptcy well-prepared. Obama has waived the $4 billion and a $300 million fee. In exchange, taxpayers are receiving an 8 percent stake in a company likely worth zilch.

In addition, the Obama Administration loaned another $3.2 billion to keep Chrysler operating in bankruptcy. Expected repayment: zilch.

But the plan is to use Chrysler’s assets to pay off creditors and replenish the UAW’s fund for its retirees, with enough left over to make the new Chrysler a pretty bride for Fiat the Italian groom. There’s nothing wrong with Fiat acquiring a controlling position in a new Chrysler. But the taxpayers shouldn’t be asked to fund a $7.5 billion dowry. Before any monies are paid to the autoworkers’ union, Fiat, or any non-secured creditor, taxpayers should get their money back.
This is the inherent risk of the government making financial “investments,” which are always for political reasons rather than business reasons. If it looked like giving money to Chrysler was a bad investment, it’s because it was. The likely bankruptcy of Chrysler has been discussed and recommended for six months. So it’s not clear why the government gave them $7b in the first place, other than it was more politically convenient (for George Bush and Barack Obama) for Chrysler to file for bankruptcy April 30 rather than October 30.

A billion wasted here, a billion wasted there — eventually it adds up to real money.

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