Wednesday, November 17, 2010

Newsweek (what little is left of it) argues that GM's upcoming IPO proves wrong those who argued against GM's government bailout...

Let me respond:

* It is interesting that the liberal Newsweek takes the position that the end justifies the means. In the future, will we see Newsweek arguing that saving American lives justified torturing terrorists for information?.

* In trying to counter Texas Governor Rick Perry's argument that the bailout didn't 'necessarily save jobs', the author positions then-President Bush saying the bailout was necessary to save jobs. As with my first point, their relying on Bush is rather inconsistent as Newsweek has rarely before, if ever, viewed Bush as an authority on anything.

* The bailout providing a benefit to some (politically connected) groups doesn't prove that we as a country benefited. Given how unpopular the bailouts were, it isn't a stretch to argue that the negative impacts elsewhere in the economy more than offset whatever positive benefits may have resulted from the GM bailout.

* The author compares GM today to what 'could have happened', and picks a decidedly negative scenario to make that comparison, ignoring other potential - less negative - alternatives to the government bailout.

* The author doesn't address that criticism was directed not only at the money that was given and loaned to GM, but also at the way the government ignored established bankruptcy procedures and the Obama Administration giving preferential treatment to its labor union allies.

* In seeking to bolster his argument, the author cites Buick as being the fastest growing brand.... but so what, its sales are less than 15% of overall GM sales. He also reports GM as being profitable... but without mentioning that much of the profit is due to GM not having to fully account for its pension liabilities. And he glosses over the inconvenient fact that despite the supposed positive reaction to GM's new cars, GM's market share is still slipping.

* His argument basically comes down to that the bailout should be viewed as a success because of the upcoming IPO. Yet, even after the IPO, GM will still be in hock to the government. Getting some portion of our money back doesn't mean the 'investment' (as the author prefers to re-characterize the bailout) has been a good investment... any more than some of Bernie Madoff's victims getting a portion of their money back means it was wise for them to have given Madoff their money.

UPDATE: it turns out, for all the hype, the IPO is priced so low that the government is losing $9 billion on the sale of these initial shares. So tell me again, how does selling shares for less money than was paid prove that the bailout was a good idea?