Quote:
Originally Posted by burn_this_city
They are just trying to get away from the stigma of owing the taxpayers money. I know plenty of people who won't buy GM because they got a bailout. Besides if they other money they owed was converted to stock, havent they technically paid back the cash loans?
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They shouldnt buy GM because of the bailout. They ran their company poorly, and people are paying a premium on GM product for overpriced labour and past service pension plans. Why?
They 'repaid' the cash loan using another Government cash loan held in escrow as working capital. Now they've technically 'spent' their working capital and are now petitioning the Federal Government to float them a low interest loan to the tune of $10B to retool their factories. Well ladies and gents,
that was what the working capital in escrow WAS FOR! Not for paying the cash loan just so you could say you did.
End of the day, GM paid out its $8.6B cash debt out of escrow and are now asking for $10B more. So they're actually planning on incurring an additional $1.4B worth of Government debt.
As for trading shares as collateral for the loan, no they havent technically 'paid it back' they'll only have technically 'paid it back' when the Government can sell those shares for the outstanding value of the pure Cash they gave GM. When that sale transaction happens and the Government makes as much if not (hopefully) more than they gave.
Well, thats just never going to happen kids. Main reasons why? First of all, they're probably just ignoring interest and time value for the loaned cash, so that plays in GM's favour, but the general gist of it is this:
Selling Enormous quanitites of stock is a declining balance game. As soon as that much stock hits the market the price per share is going to be going down so fast it'll make your head spin. Not to mention no company can survive their major shareholder effectively liquidating.
So, that means that it obviously cant happen all at once, it'll have to be a very slow and gradual progression. But the Fed cant just simply throw it out there and say, 'hey, who wants this?' they'll want those outstanding shares to be owned by American companies, stable American companies. The ideal situation would be for GM to buy their own stock back except for the minor annoyance of them not having anywhere close to the required capital available and the fact that the only lender willing to give them money is the one that would then be asking for money back.
