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Forum Post: Why didn't we nationalize GM instead of lining the pockets of the board room?

Posted 2 years ago on May 27, 2012, 11:46 p.m. EST by CarlosFenito (36)
This content is user submitted and not an official statement

I'll tell you why, because O-bomb-ya, just like Bush, takes any excuse he can get to line the pockets of the rich. The auto fail-out was just another opportunity to further the income inequality within the ranks of GM.



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[-] 6 points by TitusMoans (2451) from Boulder City, NV 2 years ago

Why didn't we nationalize the banks instead of making the CEOs and shareholders even wealthier? The obvious reason is because the 1% not only own the major businesses including banks, but the politicians as well.

[-] 4 points by shadz66 (17705) 2 years ago

Re. "Banking as Utility ; Publicly Owned Banks & The Nationalization of Private Banks", please see the following forum-post and thread :

fiat lux et fiat justitia ...

[-] 2 points by zoom6000 (430) from St Petersburg, FL 2 years ago

He had excellent opportunity not just to nationalize GM also the Banks but instead he give them our money

[-] 0 points by CarlosFenito (36) 2 years ago

Good thing he's on our side and stuff!

[-] 1 points by Misaki (893) 2 years ago

This post has a good description of how to allow "too big to fail" companies to fail:


[-] 1 points by penguento (362) 2 years ago

I might add that in in addition to the ownership reshuffle I just mentioned, GM got a tax break that's absolutely unprecedented. In a normal bankruptcy, your debts are wiped out, but so are any deductions you could take for losses (business can normally off-set profits against losses incurred within some period of time). Seems fair -- the slate is wiped completely clean and you start fresh. Not so GM. Even though it's a brand-new corporation, it is being allowed to carry forward all of those billions of dollars in losses from the prior corporation and pre-bankruptcy, and use them to offset its tax bill on its current billions in profit. The net results that GM is making billions of dollars in profits tax free, and will probably not be paying any taxes for several years. This is completely contrary to long-standing bankruptcy law, entirely unprecedented, and required a special act of Congress.

Pretty sweet deal, huh? Goes to show you how valuable those campaign contributions really are. That's why the UAW makes 'em.

[-] 1 points by penguento (362) 2 years ago

Nope. Wasn't the rich this time. GM got bailed out because the United Auto Workers is a big contributor to the Democratic Party. Everybody else got wiped out, and their ownership shares got handed over to the UAW pension fund. At the end of the restructuring, the two biggest shareholders were the US government and the UAW pension fund.

[-] 0 points by CarlosFenito (36) 2 years ago

So the UAW is starving for cash? LOL okay!



[-] -1 points by RealityTime (-224) 2 years ago

The government's involvement lined the pockets of the UAW.

[-] 2 points by TitusMoans (2451) from Boulder City, NV 2 years ago

You have a real sense of humor, too bad it has nothing to do with reality.

[-] 2 points by penguento (362) 2 years ago

You need to check your facts on this one. See my post above. The restructuring had the effect of making the UAW pension fund and the US government the de facto owners of GM and Chrysler. Maybe that's good, maybe that's bad, but that's what happened.


[-] 1 points by TitusMoans (2451) from Boulder City, NV 2 years ago

That may have been true in 2009, but that has since changed. Here is a direct quotation from Wikepedia: "On July 10, 2009, with financing partially provided by the US Government, General Motors emerged from reorganization. GM was re-listed on the NYSE on November 18, 2010, setting the record for the largest IPO in US history with a value of $20.1 billion.[66] This company was formed by the United States government with a 60.8% stake, the federal government of Canada and provincial government of Ontario with a 11.7% stake, the United and Canadian Auto Workers unions VEBA fund[67] with a 17.5% stake, and the unsecured bondholders of General Motors with a 10% stake.[68] Before the IPO, the U.S. government owned a 27% stake in GM, and the Canadian government still owns a 12% stake in the company. The Ontario government has owned a 3.8% stake in the company since 2009.

"GM had filed for Chapter 11 reorganization on June 8, 2009. Only the US Subsidiary was forced into bankruptcy. Shareholders were left without access to assets from GM owned assets in Asia or Europe. On July 10, 2009, General Motors emerged from Chapter 11 reorganization.[69][70][71] The Company was listed on the New York Stock Exchange and the Toronto Stock Exchange again on November 18, 2010 following a US$33-a-share initial public offering of US$23 billion, including preferred shares. The shareholding in the Company by the U.S. Treasury department is reduced from about 61% to about 33%, including preferred shares and accounting for stock options given to former GM bondholders.[72][73] Disposal of such shares gave the Treasury department about US$13.6 billion in proceeds. It was previously estimated that the Treasury would have to sell GM shares at an average of $43.67 a share to break even. SAIC Motor, partner of GM in China and India, acquired just less than 1 percent of the GM shares for about $500 million.[74][75] (Prior to chapter 11, the former GM stock hit a high of $93.63 on April 28, 2000.)."

[-] 2 points by penguento (362) 2 years ago

Yes indeed, there was an IPO; and a very successful one. But who makes money on an IPO? The parties that owned the shares prior to the IPO, that's who. That's what IPO's are for -- so that the original investors can cash in. And who were those parties in this case? The UAW and the US government, primarily. See Facebook for an excellent example of this. Regardless of what happens to the price of those Facebook shares, Mark Zuckerberg will be just fine.

And to the extent that the UAW has held onto some of its shares, it gets the benefit of that really remarkable tax break that GM was granted. That's hardly showing solidarity with other workers, and with the taxpayers that funded the bailout, is it now?

[-] 2 points by TitusMoans (2451) from Boulder City, NV 2 years ago

Actually the UAW is acting in the best of its members. The pension was the major beneficiary, and pension funds usually get priority. I don't believe the UAW is beholden to non-members or the taxpayers, since neither would have stepped forward to solely bail out the UAW or the pension fund.

My point initially was responding to your assertion that the United States Government and UAW pension fund, et al, were for all intents and purposes the owners of GM, which was false.

[-] 2 points by penguento (362) 2 years ago

But they were, until they elected to cash in by selling off some of their holdings in the IPO. And the UAW still is. The UAW through its agent the Brock Capital Group is the single largest shareholder in GM. And pension funds don't normally get preferential tax treatment with respect to their shareholding. If some pension fund has a stock and that company declares a profit and dividend, the company must pay taxes on that dividend regardless of who the recipient is, retirement fund or not. The GM deal was a one-off special treatment for them and them alone. Nobody, anywhere or any time has gotten a similar deal, at least not in this country.

And of course, your other point raises a larger question. If the UAW isn't beholden to the taxpayers or anyone else, and can ethically cash in on a one-of-a-kind tax break legislated especially for them, why shouldn't anyone else be able to do the same thing? Is the UAW somehow magically exempt from the obligation that the rest of us share to pay taxes? Anyone who claims that a special tax break for GM is okay but complains about it in other cases is being hypocritical.

[-] 1 points by TitusMoans (2451) from Boulder City, NV 2 years ago

Of course they're magically exempt, poof! Just like the banks, Fannie Mae, and Freddie Mac, and every crooked politician: all received and continue to receive special treatment.

Incidentally, the UAW is far from the majority stockholder of GM, which would place it in an ownership position. The UAW pension fund received special favor in legislation, on the face of it, because GM owed about $100 billion to the fund. Supposedly, since the bailout that liability has been substantially reduced.

[-] 1 points by penguento (362) 2 years ago

You're working awfully hard to give GM and the UAW a free pass.

  1. Stock ownership IS ownership. Your shares as a percentage of all shares are your proportional share of the ownership of the company. There isn't some percentage below which you're not an owner. And the UAW is the largest shareholder outside of the US government, which doesn't hold a majority stake anymore either. The UAW gets to vote on corporate matters like any other shareholder, and it's vote is proportional to its shareholding, which means it and the US government have the greatest say-so. Between them, they're collectively deciding who's on the board and other key decisions. It's no different than when George Soros or some other financier buys a big stake in a company.

  2. Lots of other people and institutions either owned shares in GM or were owed money by it and their positions were wiped out. That includes other pension funds that were GM shareholders. The UAW got special treatment in preference to other groups that would have received something under normal bankruptcy law (and which other pension funds in other bankruptcy proceedings don't get), and it got it because it's a major Democratic Party campaign contributor.

The tax break is icing on the cake. It's in addition to the preferential ownership stake, and is again unprecedented. No other group, no other pension fund, has ever received such a tax break before.

The fact remains that, ownership stake aside, the tax break is one of the most egregious rip-offs in the history of pork politics, and the UAW, as the largest private shareholder in GM is the greatest beneficiary of that rip-off. A cavalier statement that others get improper breaks too begs the question. If it's wrong for them, then it's equally wrong for the UAW. If OWS was intellectually honest, it'd be having demonstrations outside the UAW headquarters protesting such a blatant inside job. But it's not and it won't.

[-] 1 points by TitusMoans (2451) from Boulder City, NV 2 years ago

I will say that if everyone were perfectly neutral, the UAW would not be in the lucrative position it is now. On the other hand one of the major reasons for bailing out GM was to save the pension fund, so those workers, who had retired and were approaching retirement would not lose their benefits and pensions. Furthermore, OWS does not claim to be a neutral organization; it professes to represent the workers, the proletariat

Currently the US Gov't holds about 26% of GM, the UAW about 17.5%. As part of that bail out, the UAW agreed not to strike Chrysler or GM, which of course means the union should have a decision-making part of the business. Realistically the government and the UAW do not share the same goals or vision of the future for the company. In fact with the vagaries of politics the government's position can change at any time. That means the two are not a unified bloc of shareholders able to dictate terms to the board.

You may not like the situation and blame the UAW, but Congress, including some Republicans, signed off on the deal. I didn't like the bail outs. I didn't like the bank or the AIG bail outs. The boards and executives of the banks, of AIG, of GM, of Chrysler should have been held accountable. Workers consistently lose jobs, their livelihoods, for making bad decisions. When the companies made all the bad decisions many workers lost their jobs, their homes and are still looking for work and struggling with financial disasters. Literally, not even a handful of the bad-decision makers had to pay in the same coin of suffering, which the affected workers have paid.

Do I believe the UAW received preferential treatment? Yes, but so did GM, so did Chrysler, so did AIG, the banks and nearly all the bad-decision makers (private and public), who put the companies and a vast amount of workers' lives at risk. For a change the workers got a good deal. Good for them.

Personally, I believe the bailed-out companies should have been nationalized. I know that opens a whole new can of worms and returns to the intent of the original post, but perhaps another thread or post can field that question.

[-] 1 points by penguento (362) 2 years ago

Fair enough. I don't like bailouts for anyone, but GM wasn't fundamentally different than any of the others, except for maybe the tax break. It's certainly possible to disagree about whether it was a good or bad thing, but it may well have been better than the alternatives.

Now go back and re-read this whole thread and you'll see why our little colloquy got started: This thread started as a series of shrill denunciations of "corporate greed" and "the rich" and all the other standard villains by a bunch of people who were not - and presumably still are not -- aware of the most basic fact of the GM bailout, that it was engineered primarily to save the union pension fund; a fact that was all over the front page of every newspaper and news web site in the country for a year or more.

That's what annoys me about this place. There's a lot of posturing and noise from people who apparently don't even read newspapers and who don't bother to acquaint themselves with even the most basic facts of political, economic or business theory, or of a particular situation, before they commence with the denunciations.

[-] 1 points by CarlosFenito (36) 2 years ago

Yeah! The UAW came away from the bailout totally RAPED!

[-] -3 points by farmer88 (40) 2 years ago

If we nationalized GM, it would be an even worse failure than it already is.

[-] 2 points by TitusMoans (2451) from Boulder City, NV 2 years ago

You did see the profit figures for GM for the first quarter, didn't you? http://topics.nytimes.com/top/news/business/companies/general_motors_corporation/index.html

Or are you purposely myopic?

[-] 1 points by farmer88 (40) 2 years ago

Yeah, I'm seeing a 69% total decline in earnings. Not exactly something impressive. Rather something horribly bad.

[-] 1 points by DKAtoday (34861) from Coon Rapids, MN 2 years ago

Hammer - Nail - square on the head.