Early Reviews of Obama's GM 'Gamble' Don't Look Good

[cobra de capell]

Well, whatever the federal government projections are on the downside - triple it and triple it again practically every year from now on out.

The money finished to GM by BOO is probably in the old GM and will never be repaid.

By the way, why is it that GM always needs to come up with a plan for profitability but the federal government doesn't need to come up with a plan to get our money back from GM? This is a business transaction, not a war - therefore, what is the end game in this piece of business? Even a bank would not have forked over billions to GM, why is it that the federal government can do it? Actually, it's not even about GM, it's about the UAW.

The only light I see at the end of this tunnel is the mid-term election and, of course, 2012. Opportunities for Americans to do the right thing.

[1ntCobra]

Originally Posted by cobra de capell

...

Even a bank would not have forked over billions to GM, why is it that the federal government can do it? Actually, it's not even about GM, it's about the UAW.

...

The banks are the root of this problem with the credit crisis, they have trapped themselves in a situation where they could not lend the money to GM even if they wanted to.

Ford was lucky and refinanced their lines of credit prior to the financial crisis. GM and Chrysler had bad timing for their refinancing.

The banks have also refused financing to many consumers who would have lined up to purchase/lease new cars, but now they cannot. Causing pain to all automakers selling cars in the US. Plus you have the recession now.

The CEO of GM wanted to borrow money from the government and avoid bankruptcy. Much like Chrysler did back in the day. I'm sure GM brass was looking beyond this short term banking mess and recession. Hey they were the #1 automobile maker in the world for decades and only recently lost out to Toyota. Do you think the US market for new cars has permanently shrunk by something like 50%? Or do you think after the financial crisis and recession, we are not going to go back to buying new cars like we have been doing?

So what does the government do? They fire the CEO who sees beyond the short term, so they can force the company into bankruptcy and then put their cronies in charge to build the Pelosi-mobile. Hey the government has a 31 year old fresh out of grad school student to go in and run things. And they get to screw the shareholders and bondholder out of ownership.

I think GM is screwed with the forced bankruptcy and having government cronies put in charge. I'm sure if the government had acted this way in '79 firing Lee Iacoccoa, taking over Chrysler and setting up to build the Jimmy Carter mobile, there would have been a big mess. But instead they lent them money, let industry experts pull themselves out of a mess, and the government was paid back with a profit. I don't how GM is going to be able to fix itself if the government puts in a bunch of amateurs to run the show.

[cobra de capell]

The last part of your post is believable, but....

The banks are the root of this problem with the credit crisis, they have trapped themselves in a situation where they could not lend the money to GM even if they wanted to.

Ford was lucky and refinanced their lines of credit prior to the financial crisis. GM and Chrysler had bad timing for their refinancing.

The banks have also refused financing to many consumers who would have lined up to purchase/lease new cars, but now they cannot. Causing pain to all automakers selling cars in the US. Plus you have the recession now.

This all started with Congress; Freddie and Fannie and went downhill fast. Those entities relaxed the credit standards to a point that if your breath showed up on a mirror, you qualified for a home loan. Banks enter this puzzle through CRA (Community Reinvestment Act) )through threats by Congress) - money needed to be loans to poor people in a big way. Therefore: Housing/no qualifying/poor people = disaster.

Car loans - I was recently working at a bank that made car loans - big time. The only people that were turning down were in the under 650 FICO score range. Yes, credit standards were increased, but isn't that the right thing to do? The public should not have to step up to buy houses and cars for everyone, correct?

[1ntCobra]

Originally Posted by cobra de capell

The last part of your post is believable, but....

The banks are the root of this problem with the credit crisis, they have trapped themselves in a situation where they could not lend the money to GM even if they wanted to.

Ford was lucky and refinanced their lines of credit prior to the financial crisis. GM and Chrysler had bad timing for their refinancing.

The banks have also refused financing to many consumers who would have lined up to purchase/lease new cars, but now they cannot. Causing pain to all automakers selling cars in the US. Plus you have the recession now.

This all started with Congress; Freddie and Fannie and went downhill fast. Those entities relaxed the credit standards to a point that if your breath showed up on a mirror, you qualified for a home loan. Banks enter this puzzle through CRA (Community Reinvestment Act) )through threats by Congress) - money needed to be loans to poor people in a big way. Therefore: Housing/no qualifying/poor people = disaster.

Car loans - I was recently working at a bank that made car loans - big time. The only people that were turning down were in the under 650 FICO score range. Yes, credit standards were increased, but isn't that the right thing to do? The public should not have to step up to buy houses and cars for everyone, correct?

I'm sure Congress helped start this mess, but the banks compounded the problem with interesting new mortgages, like mortgages where you only had to pay interest (no principal). The banks were selling such things with the thought that the housing boom would keep going indefinitely. Why worry about increasing equity with principal payments when your equity will keep going up as your house continues to appreciate. The fine print on something like that certainly gives the bank the option to start charging you principal if they think you are going upside down. Just imagine if you combined that with a teaser rate arm and no money down. When you get hit with the new rediculous rate after the teaser and the market goes down, the bank can realize you equity is going negative and start piling on principal payments too.

I'm sure not everyone who took on some of the weird new mortgages was an complete idiot. They probably believed that they could refinance into a fixed rate easily down the road if necessary. Hey I know people who refinanced multiple times during the housing boom as rates kept falling. Well we see that became impossible for many people to refinance when the bubble burst.

Interestingly today on yahoo, there is a story about the government giving the OK for 10 banks to repay $68 billion in bailout money http://news.yahoo.com/s/ap/20090609/...ers_and_losers

I like this part: "The banks have been eager to get out of the program to escape government restrictions such as caps on executive compensation."

The banks want to get the government out of their business. At least the government did not force the banks into bankruptcy, take over a majority share of ownership and give a big chunk of ownership over to the bank tellers and janitors.