From the New York Times:
President Obama will push General Motors into bankruptcy protection on Monday, making a risky bet that by temporarily nationalizing the onetime icon of American capitalism, he can save at least a diminished automaker that is competitive.
It's not so risky when it isn't your money. True, there's some political risk if it goes badly, but the pain will be spread across all of us while the gain, at least for now, is to his union cronies.
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What political risk? If it goes badly then he "inherited" the problem and capitalists undermined the system because the CEO of GM is a greedy fat cat who took private jets to….oh…er…nevermind.
I suppose I could calculate the P/E ratio of paying however many billions of dollars for 60% of a corporation with a market cap of $500 million and losing billions every year, but whatever the number, it is freakin' insane. Unless, just maybe, the whole point of the bailout is just to hand money to political favorites. Yes, that's got to be it, that makes perfect sense.
also, the likelihood it goes *that* bad before he runs for re-election is small. he really just needs it to hang together until 2012 so at least he can get voted back.
Randy, that is it. The biggest political payoff ever. Corrupt is what it is.
Randy, that P/E would be nonsensical as price divided by NEGATIVE EARNINGS is negative and a negative P/E ratio is a meaningless number. This is why P/E wasn't calculated on a lot of young tech stocks. Although, politicians all excel at meaningless crap so utterly useless metrics would be right up their alley….
"Temporary." Right.
No more Bailouts for the auto-industry! I'm sick of them!
http://www.youtube.com/watch?v=5B23TjfKRCA
Nationalizing GM certainly is payback to union workers at this firm that dutifully voted disproportionately, as usual, for the Democrat. The unintended consequences are many and not fully apparent. As this web site advertises, "orders emerge" as a result of market processes that cannot be fully foreseen; the future is unknown and unknowable with certainty. Risk is all about the unknown and unknowable future. History is littered with failed business ventures; these are hugely more valuable than the government subsidized ventures that persist. The reason is that business failures release resources to go ambiguously "elsewhere", to activities that have better prospects to be successful. But government-subsidized enterprises that go on and on and on, are retain resources year after year after year that would have, but for the subsidies, been reallocated "elsewhere" (again, to other activities that have greater odds of being sustainable and/or profitable). The "odds" are better when the resources are allocated via private decision-makers for a variety of reasons. For one, as Hayek is famous for emphasizing, the information possessed by individuals puts them at a huge advantage over central planners. For another, as others have mentioned above and Milton Friedman emphasized, "no one spends someone else's money as carefully as his own." Incentives matter. For another, as others have mentioned above, the time horizon and objective function of a politician seeking re-election are often at odds with making decisions that would allocate resources to highest valued uses.
Thanks Russ and Don for facilitating these discussions; the broad distribution of the ideas of Hayek and Friedman and Smith and so on may prove hugely influential in the unknown and unknowable future. Hope springs from this prospect.
No more bailouts, we bailed out banks and now they’re getting their bonuses back. Nice