The Washington Post reports that “many analysts say the [TARP] pot isn’t big enough to address current plans to fix the financial system, let alone prop up the auto industry.” Since the first round of auto industry bailouts came from TARP, many considered the Toxic Asset Recovery Program the logical source for tranche deux. But if that money is needed for banks, as analysts indicate, the Obama Administration may have to return to congress for more funds. “From where I sit, it’s an executive decision,” says Republican Senator and bailout critic Bob Corker. “[The Treasury] fully understands we’re coming in with additional requirements,” said GM’s Ray Young after GM’s viability plan was released on Tuesday. “It will come as no surprise.” Who looks surprised?
In hopes of emboldening Obama to do whatever it takes to ensure delivery of the most recent funding requests, GM now tells the New York Times that full funding of its latest request would be sufficient to carry the automaker through restructuring.
“There are no guarantees in life,” GM CFO Fritz Henderson tells the Times. “But I do think we’ve sized the funding requirements, as well as the actions necessary for us to take, based on conservative assumptions.”
Oh, so $30b will do the trick? So then why does the GM viability plan call for a $14b shortfall for 2009? More importantly, does anyone really believe that the General will turn that into a $6.6b surplus by 2012?
As the Times puts it “beyond the $7 billion it says the cuts will save, G.M. is counting on a steady recovery in vehicle sales and revenues to return it to the black.”
So, no worries then.
Ah hah…so this begs the question ‘ How well is GM doing in other countries in raising bailout bucks?’
What is GM’s total sales number total reciepts for 08, and how much for 09.
I’d like to compare contrast what 30b looks like when converted into a non currency form relevant to GM’s gross product number? May be time to shoot this cow in the head, ya think?
This issue makes me grind my teeth. History lesson. TARP was designed to take a bunch of worthless financial assets off of the hands of banks. These bad assets were preventing the liquidity needed to lend to new borrowers. The analysts screamed about a fast-approaching financial gridlock where nobody could get credit for anything. With all this coming right on the eve of an election, the politicians went into full panic mode. “We have to do something, RIGHT NOW!” So they went to congress and got a $700 Billion check for the treasury dept to spend as necessary for this purpose.
The TARP money was NEVER about saving jobs or propping up any particular industry. See, e.g., Lehman Bros., that was allowed to fail. The TARP money was solely to prevent a credit meltdown that would harm EVERY industry, all up and down the economy.
The (completely forseeable) problem was that once Treasury got its hands on the money, the hogs came running. Suddenly, everyone thinks that this money is for propping up particular industries and even particular companies. But I suppose that was idealistic of me to expect a government agency with a bunch of money in its hand to stay on-mission. I figured that once the Treasury Secretary said “TARP is not for the auto industry” and once congress voted down new money, life would go on as it should. Until Bush pried open the TARP box and dispensed several billion bucks to GM and Chrysler.
Now, SURPRISE! The TARP fund is short! Who’d a figgured. Bush disappointed me because I thought that he would back his Treasury Sec. and follow Congress’ lead and say “Sorry guys, we have no money to give you.” Obama will not disappoint me, because I do not expect such an outcome. With all the UAW and other sympathetic union votes he got in November, plus all those middle-class/middle-american votes that had eluded the Dems for so long, Obama is not about to pull the plug on GM and Chrysler. They will raid TARP again, then later go back to congress for more TARP money. They will not go to congress on GM/Chrysler money, because congress will vote it down again.
There. I’ve said it. Maybe I’ll just go home and take a nap.
This will now go on and on till the government runs out of money. And they will since contrary to popular opinion the government has limits to how much money they can print and spend.
Wow, nice picture. The only thing that could make it more photorealistic is if the building were cracked open and burning while being looted by corporate suits.
At least GMAC and Chrysler Financial took the money they got from the feds and started offering 0% loans. Most of the TARP funds going to bank holding companies, on the other hand, have not been made available to their subsidiary banks to loan out. The bank holding companies are investing that money elsewhere or sitting on the cash. That’s one reason why there’s still a credit crunch. Also, the feds borrowing a trillion dollars for the “stimulus” package isn’t going to make credit more available to businesses and individuals.
Stu Sidoti :
“Ah hah…so this begs the question ‘ How well is GM doing in other countries in raising bailout bucks?’”
Stu, please don’t remind me that… FYI, GM and Chrysisler already got a commitment by both the Canadian and the Ontario governments to give them 20% of whatever they get in the US.
So basically, here in Canada we have 1/10 of the US population and GDP but we will pick up the bill for 1/5 of whatever your Honorable elected representatives decide to hand out to these loosers.
To make it more clear, we Canadians will be twice as fucked as you will be.
Ronie Schreiber:
Most of the TARP funds going to bank holding companies, on the other hand, have not been made available to their subsidiary banks to loan out.
No disagreement. Also, GMAC was stuck with a bunch of bad mortgages and needed some help. But in both cases, the TARP money was spent for its intended purpose. Whether the recipients used it properly is a discussion for another place. But the money is still spoken for and the fund is now short. But just because some recipients have not done what they were supposed to does not help make the argument that we now start throwing the money in other directions, particularly when there will not be enough of it to finish the original job.
The Treasury here is like the irresponsible relative who comes to you because he can’t make his rent payment. You lend him the money but before he pays the rent, he spends a third of it on other stuff. Then he comes back to you and says he still needs more to pay the rent. Maybe there was nothing wrong with the other stuff that he bought, but that wasn’t why you lent him the money.
jpcavanaugh – good comments. Thanks.