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Signs stand in front of the General Motors world headquarters in Detroit, Michigan. The U.S. Treasury will sell its remaining stake in the company over the next year or so.
The day has finally arrived. The U.S. Treasury will sell off its stake in General Motors, the automaker that, along with Chrysler, was bailed out in 2009 before it declared bankruptcy and returned to the public markets via a massive $20 billion IPO in 2010.
The government put $50 million into GM and has gotten back about $30 billion. That figure includes a pre-loaded GM buyback of 200 million of its own shares from the Treasury at $27.50 a pop, a modest premium on Tuesday's closing price that amounts to $5.5 billion.
The remaining $2o billion (more or less) and the government's 300 remaining shares will be dealt with in slow motion fashion over the next 15 months, to avert a big dump of shares on the market. To make back the $20 billion, GM's stock price would have to rise to $72, a highly unlikely event. So the Treasury is admitting that it will "lose" money on the deal.
Goldman Sachs has been much in the news the past few days, what with Greg Smith's Muppets op-ed and the passing of the Fed's stress tests. Now Hank Greenberg, the former head of AIG who saw the firm he built completely destroyed during the financial crisis, comes pretty close to accusing Goldman of fraud, in the above clip from Bloomberg TV. He also says Goldman got a back-door bailout during the financial crisis — at the terminal expense of AIG.
Worth watching, just to see what an old Wall Street hand — one no stranger to controversy himself — thinks of the new Wall Street.
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An elderly man feeds pigeons on Syntagma Square on November 3, 2011 in Athens, Greece. Greece stands on the brink of economice collapse as political disagreements continue concerning the financial aid package proposed by the EU.
At this point, the Greek debt crisis probably seems like it's been going on forever. It hasn't, but it seems to defy resolution. Last Friday, the country finally defaulted, in a strictly technical sense, on part of its sovereign debt — an outstanding slice of private bondholder debt that was insured by the dreaded credit default swaps. The agency that determines whether those swaps — which amount to a bet that a country won't be able to keep up with its bond payments — should pay out said, "Yep, Greece has defaulted." Felix Salmon and John Carney provided a good explanation on Marketplace at the end of last week.
The main issue for Greece is just how long it's going to have to suffer. The austerity measures that are being forced upon it in exchange for more bailout money from the European financial authorities are setting it up for a decade of pain. On the plus side, Greece stays in the eurozone and has access to financing through the currency union; something can always be worked out...however...s-l-o-w-l-y. On the minus side...well, there's all that austerity and aforementioned pain.
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ATHENS, GREECE - FEBRUARY 12: People clash with police in the streets during a demonstration against the new austerity measures on February 12, 2012 in Athens, Greece. Greece's creditors have demanded further austerity measures before approving a new bailout from the European Union, European Central Bank and International Monetary Fund amid renewed concerns the country may default. (Photo by Vladimir Rys/Getty Images)
Here's the quote of the past weekend (from Bloomberg), stemming from the latest Greek bailout deal:
The euro area has...“bought time” for countries such as Portugal to prove they are more creditworthy than Greece and to erect stronger defenses in the form of a larger bailout fund, said Carsten Brzeski, an economist at ING Groep in Brussels.
“The often-cited Greek can has again been kicked down the road,” he said. “The good thing is that the can is still on the road, but it requires a huge amount of stamina and patience to keep it there.”
Translation: We're going to playing kick-the-can for...another eight years at least? Because it's hard to see Greek reducing its debt from the current 160 percent of GDP to 120 percent until then. The obvious question is, "Just how much road have we got it?" And, "Will that can hold up to another decade of kicking?"
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Republican presidential hopeful Mitt Romney holds a Caucus election night at Red Rock Casino in Las Vegas, Nevada, February 4, 2012. AFP PHOTO/Emmanuel Dunand (Photo credit should read EMMANUEL DUNAND/AFP/Getty Images)
Mitt Romney is doubling-down on his negative view of the the 2009 bailouts and bankruptcies of General Motors and Chrysler. In late 2008, he argued in the New York Times that a bailout of Detroit would mean the end of the U.S. auto industry. Today, in the Detroit News, he refuses to back off from his earlier position, says that a "managed bankruptcy" of GM and Chrysler was what was needed all along, and that the Obama administration practiced:
"...crony capitalism on a grand scale. The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better.
Before the companies were allowed to enter and exit bankruptcy, the U.S. government swept in with an $85 billion sweetheart deal disguised as a rescue plan.
By the spring of 2009, instead of the free market doing what it does best, we got a major taste of crony capitalism, Obama-style.
Thus, the outcome of the managed bankruptcy proceedings was dictated by the terms of the bailout. Chrysler's "secured creditors," who in the normal course of affairs should have been first in line for compensation, were given short shrift, while at the same time, the UAWs' union-boss-controlled trust fund received a 55 percent stake in the firm.