Wow. Saving Detroit was Expensive

Posted: Mar 13, 2013 12:01 AM

Maybe President Obama didn’t significantly lower the unemployment levels, or the sea levels, or even the national debt. . . But at least he saved Detroit. And, of course, by “Detroit” the administration means: one particular company in one particular industry. (FYI: Detroit is still on the verge of Bankruptcy.)

We all know the story: America was failing. Financial institutions where tumbling due to the greedy CEOs who actually concerned themselves with delivering a substantial return to their investors. But then came Barack Obama. After throwing his weight – and your money - behind an Auto Industry recovery plan (read: General Motors Bailout, and United Auto Workers payoff initiative) the industry came booming back; marking the beginning of the great recovery.

Well. . . It turns out our auto industry bailout was not as cost-free as those on the left would like you to believe.  According to USA Today, “ The U.S. Treasury sold $489.9 million in GM shares in the month of February.” That might have been the headline, but that was not the punch-line:

The report says the government has recovered about $29.8 billion of its $49.5 billion bailout, leaving taxpayers still on the hook for $19.7 billion. . . In order to break even, taxpayers would have to see the government get more than double the recent share price, at least $71 a share, in order to break even on the GM stake.

Do you want some free stock advice? Don’t invest with the government.

Maybe, just maybe, this is the problem with government intervention in the market place. Without Government intervention, the alternatives for GM were limited: They could go bankrupt (which they did anyway) and re-structure their business plan; or they could have sold out to a company that would have utilized their assets and distributed their liabilities. But, at least the only money lost would have belonged to investors who engaged in calculated risk.

Instead, government had you and I pay into a failing enterprise. We are unwitting venture capitalists. Worse still: we were not induced by a high preassure sales person or a smooth talking investment guy. . . We’re invested in the faltering GM by way of IRS style coercion.

And that’s the problem. When Government plays “venture capitalist” with our hard earned tax dollars they rarely consider profit, business motive, or business efficiency. They consider only political risk.

If GM and Detroit represent Obama’s track record with “fixing” what is broken in America. . . I think I’d rather him go organize a small community, and leave capital investment to the professionals.