GM profits, but taxpayers still on hook

The Obama administration gave GM about $10 billion more than was strictly necessary to finance its bankruptcy. The money contributed to GM’s nice $33 billion cash cushion right now. GM could use this money to buy its own stock and bid up prices, mitigating taxpayer losses – or pay dividends. But McAlinden doesn’t believe that’s what GM will do. It could use the money to pay off its obligations to the union health care trust fund, making this a direct infusion of cash from taxpayers to unions.

Or it will use the money toward product development, putting its competitors at a disadvantage. Moreover, because all but $10 billion of the bailout money GM got was in the form of equity, the company has no debt service costs. Ford, by contrast, is still servicing the $23 billion in debt it took to avoid a bailout.

This is unfair, and the Obama administration knows it, which is perhaps one reason it quickly approved a $5.6 billion retooling loan for Ford. That, in turn, elicited howls of protest from Chrysler’s Sergio Marchionne. The administration gave Marchionne’s parent company, Fiat, the majority stake in Chrysler without asking Fiat to contribute a single euro of its own.

Yet Marchionne complains that the administration hasn’t been generous enough. In contrast with GM, it forced Chrysler to service the bailout loan. Now it’s dragging its feet in approving Chrysler’s new retooling loans, he claims.

Bailout supporters maintain that it was a one-time deal necessary to shore up companies in acute economic times. In reality, the rush for the bailout’s spoils has produced ripple effects that may well haunt the economy for a long time.

As President Obama campaigns to keep his job, he will spin the bailout as a success story that saved millions of American jobs. But taxpayers should bear in mind that the hit to their wallets will be substantial and will probably grow in years to come.