Thursday, May 21, 2009

Buy Your People's Car with a Loan from the People's Bank!

When you thought it couldn't any worse, President Teleprompter is going to take over GMAC, thus vertically integrating the manufacture, sale, and financing of cars in the United States. It is hard to believe this is actually happening.

In previous posts, "Killing Chrysler," "The Rule of Law is an Absolute Priority," and "Goodbye GM, Hello People's Car," I wrote about the gross aggregation of financial power by President Teleprompter, and his control over a large portion of the U.S. economy. By the way, nationalizing health care is next (socialized medicine), but I digress. Executives & Professionals: Changing Jobs?

The Wall Street Journal reports in the May 21 edition:

"The Treasury Department is poised to inject more than $7 billion into GMAC LLC, the first installment of a new government aid package that could reach $14 billion,... The GM plan being devised by President Barack Obama's auto task force calls for the government to emerge with a majority stake."

This move vertically integrates the production, marketing, sales, and financing of cars in the United States. This is a frightening thought. The government is using a large portion of industrial productive capacity to promote a political agenda, pay back union backers, and hope to modify consumer behavior. Guard against ID Theft with 15 Points of Protection from TrustedID, including our $1,000,000 Warranty. Click Here!

What makes this behavior worse is:

"Many of the loans to GM and Chrysler are likely to be written off, administration officials say. Other programs, such as the government aid to auto suppliers, are essentially a revolving credit line that is meant to be replenished."

In other words, this becomes a state-run, money-losing, union payback, with little hope of returning to private hands. While this may sound hyperbolic, I can't help but coming to the conclusion, based on the evidence.

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Bill said...

If the "loans" are "likely to be written off" and "President Barack Obama's auto task force calls for the government to emerge with a majority stake", then the express purpose of the "loans" is twofold: hasten the bankruptcy of GMAC by piling on the "debt", and, more importantly, enlarge the stake of government in the bankruptcy. This will facilitate a cramdown for greedy, secured creditors along with fat equity positions (sans debt) for the government. This is straight out of Goodfellas.

I predict we'll soon get the "cash for clunkers" program coupled with a GMAC corporate loan policy similar to that found in the Community Reinvestment Act. Thus, the government will ensure that uncreditworthy buyers can get low interest loans for new GM and Chrysler vehicles using their overvalued clunkers as a downpayment. GMAC will become the Fannie Mae and Freddie Mac of the auto business. Sales will go through the roof!

People's car, people's bank, indeed.

WRGII said...

Bill, great comment as always! I disagree in only one part. Secured creditors aren't greedy, they are just trying to get their due, as provided for by law.

Otherwise, your remarks are spot on!

Bill said...

I should have put the word "greedy" in scare quotes or just left it out all together. It was a lame attempt at sarcasm.

WRGII said...

Great comments all the same! Please continue to share your insight.

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