CNN Money headlines an article “US loses 1.3 billion exiting Chrysler” and then says:
U.S. taxpayers likely lost $1.3 billion in the government bailout of Chrysler, the Treasury Department announced Thursday.
The government recently sold its remaining 6% stake in the company to Italian automaker Fiat. It wrapped up the 2009 bailout that was part of the Troubled Asset Relief Program six years early.
"The fact that the company has done so well — that they were able to go out and raise private capital to repay us the loan so quickly, is really the big story," said Tim Massad, Treasury assistant secretary for financial stability.
If the company has done so well, why are taxpayers out $1.3 billion?
Well apparently because the government couldn’t wait to sell their shares to a foreign company, Fiat, giving the Italian automaker a majority share in Chrysler:
Fiat paid the Treasury a total of $560 million for the remaining shares, as well as rights to shares held by the United Auto Workers retiree trust. Fiat now owns a 53.5% stake in the company.
And CNN continues to propagate the myth that Chrysler paid back its loans early:
Originally, the government committed a total of $12.5 billion to the struggling automaker, Old Chrysler, and the company’s newly formed Chrysler Group. Of those funds, $11.2 billion have been returned through principal repayments, interest and cancelled commitments, the Treasury said. The new Chrysler Group paid back $5.1 billion in loans in May.
Actually that’s not at all the case:
The Obama administration already forgave more than $4 billion of that debt when the company filed for bankruptcy in 2009. Taxpayers are never getting that money back.
The Obama administration’s bailout agreement with Fiat gave the Italian car company a “Incremental Call Option” that allows it to buy up to 16% of Chrysler stock at a reduced price. But in order to exercise the option, Fiat had to first pay back at least $3.5 billion of its loan to the Treasury Department. But Fiat was having trouble getting private banks to lend it the money. Enter Obama Energy Secretary Steven Chu who has signaled that he will approve a fuel-efficient vehicle loan to Chrysler for … wait for it … $3.5 billion.
So, to recap, the Obama Energy Department is loaning a foreign car company $3.5 billion so that it can pay the Treasury Department $7.6 billion even though American taxpayers spent $13 billion to save an American car company that is currently only worth $5 billion.
There’s your story. Taxpayers mugged again by the Obama administration. Film at 11.
The situation in California is critical with government there facing a 19 billion dollar shortfall and the budget yet to be passed. It pits an admittedly "moderate" Republican governor against a Democratically dominated legislature and their differences on how to close that huge budgetary hole.
The lack of a budget is forcing furloughs and the possibility of the state again issuing IOUs instead of payments to vendors, etc.
Until the governor and legislature negotiate that budget, not much will change. And the fight is classic:
Schwarzenegger has proposed slashing spending to balance the state’s books, an approach rejected by Democratic lawmakers. Their leaders in the state Senate and Assembly are trying to draft a joint plan likely to include proposals for tax increases to rival the governor’s budget plan.
There it is. Where the governor sees government as having to yeild and reduce itself, the legislature views government – at the size and scope it now occupies – to be a nonnegotiable necessity and entitled to more taxpayer cash to preserve it as is.
Funny that the "conservative" position in this fight – i.e. the attempt to maintain the status quo – is that of the "progressive" party in California.
However, the cut spending/more taxes fight is, in a nutshell, the difference between the two parties right now. I used to say there isn’t a dime’s worth of difference between the two (and on many issues that’s still true) but in terms of how to balance a budget, the “reduce government/ reduce spending” approach seems to now be solely owned by the GOP.
Whether or not they’ll actually do that should they again find themselves in the position of power to do so is obviously another question entirely.
In the case of the Democratic party – they’re now a wholly owned subsidiary of government unions, and their pandering to these unions is both short-sighted and destructive. The party that used to be able to claim the mantle of the working man’s party is now almost exclusively the government union worker’s party. And of course that means keeping government large and well funded.
It’s going to be interesting to see how this fight comes out – but even with Schwarzenegger representing the GOP side of things, it is clear which side is the taxpayer’s friend.