Monday, November 10, 2008

Two Months Of Fun With The Fed!

How did a $700 billion dollar bailout package turn into $2 trillion dollars in taxpayer funded loans?

Fed Defies Transparency Aim in Refusal to Identify Bank Loans

Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of
emergency loans from American taxpayers or the
troubled assets the central bank is accepting as collateral.
Fed Chairman
Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in
return.

GM Volt - What took Detroit so long to come out with an new electric car?
Meanwhile, the Detroit Big Three, which avoided building fuel efficient cars and still can get an electric car to the market until 2010, is asking the taxpayers for their share of the pie too.
Regarding your editorial "Dining at the Taxpayer Buffet" (Oct. 31): Representatives of the Detroit Big Three met with House Speaker Nancy Pelosi to request $25 billion more in taxpayer money. They've already received commitments for $25
billion from taxpayers to modernize their facilities. Now they want more to pay into the UAW retiree health-care trust. Even this isn't enough as they are apparently also looking for access to the Federal Reserve discount window, a privilege reserved for banks.

Let's see if there are any politicians who can read a
balance sheet and stand up for the American taxpayer. The Big Three claim that the credit crunch and economic downturn suddenly and unexpectedly caused their financial reversal, but their problems have been decades in the making and were obvious before the current credit crunch. As of the end of this year's second quarter, a quarter in which the economy grew at around its typical rate, GM had a negative net worth of $57 billion. It had assets of $137 billion, owed $67 billion to suppliers and for payroll, $44 billion to banks and bondholders, $59 billion in retiree claims and $21 billion to "other." How is it not insolvent to have $191 billion in debts backed by only $137 billion in assets? GM's financial position isdeteriorating rapidly, hemorrhaging cash to the tune of at least $1 billion
per month.

How much taxpayer cash should be injected into supporting a company that needs at least $57 billion just to even out its assets and debts? Why should taxpayers bail out Big Three stockholders and Cerberus, the private equity holders controlling Chrysler and GMAC? Why should 140 million taxpayers be forced to pay for the retiree health benefits of just 300,000 people?
A lot has happened in the last two months.
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2 comments:

Deja Pseu said...

GM has pursued a stupid business plan; building and pushing SUV's at the expense of their electric and other fuel efficient cars. Once again chasing the short-term good has resulted in long-term losses. Meanwhile foreign car makers (including those with plants in the US) are laughing all the way to the bank. GM is a dinosaur; it needs to evolve or face extinction.

Belle de Ville said...

But the question is...do the taxpayers need to finance GM while it evolves?
I don't think we should have to keep bailing out failing businesses that should changed strategy a decade ago.

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