Investors Business Daily does the math on the GM bailout.
Sale of the U.S. government’s stake in General Motors Corp. ends a sorry saga. Not only were Americans lied to about the costs, but the bailout underscores why replacing market forces with federal bailouts doesn’t work.
The Obama administration says it will unload 200 million shares — or about 40% of its holdings — back to GM right away. The rest, 300 million shares, are to be sold by March 2014.
[…]Well, GM on Wednesday said it will buy back the 200 million share government stake for $5.5 billion, or $27.50 a share.
The break-even point on the government’s total holdings was $53 a share. But now, with $20.9 billion in taxpayer funds left to pay off from 300 million shares, the break-even point has risen to $69.72 a share.
In other words, at current prices, taxpayers are sitting with a loss of 61%, or nearly $15 billion, on their investment.
So where did the money go, then?
According to a study last summer by the Heritage Foundation, the $80 billion auto bailout gave the UAW and its members nearly $27 billion due to the fact that GM couldn’t shed its outrageously expensive labor contracts, something it could have done in a normal bankruptcy.
As such, Obama didn’t bail out the auto industry; he bailed out the unions. Without the unions’ added costs, taxpayers would have owed nothing.
It’s not hard to see how this happened. The UAW and its affiliates give tens of millions of dollars each election cycle, almost entirely to Democrats.
This union influence explains why Obama’s auto czars, Steve Rattner and Ron Bloom, arranged a government bankruptcy for GM that flew in the face of hundreds of years of bankruptcy law and violated investor rights.
Bondholders took huge losses, while unions got a big chunk of ownership in GM stock that they weren’t legally entitled to.
In a shocking display of favoritism and blatant unfairness, GM’s union workers kept their pensions, while nonunion workers at GM spin-off Delphi lost theirs.
Those unions paid Obama back by working hard to get him re-elected. That’s how socialism works.