Under what conditions would the government liquidate its proposed stake in the car companies? In short, what's the exit strategy.
Should the companies become profitable again, there may be considerable pressure for the government to stay in the game and collect dividends. And even if the car companies wanted to buy out the government, it might never be to their financial advantage to do so. If the shares are over-valued, it's to GM's advantage to let them drop before buying. If undervalued, GM's move to buy would be interpreted as such, and the government might well choose to them the shares appreciate.
But the real threat here is regulatory. The Big Three would find themselves with a friend in government, more able than ever - and with a profit motive to boot - to muck around with the rules to the benefit of rent-seeking auto companies, and with a proven disinclination to defer to market discipline.
Our own Diana DeGette, Congressman for Denver, is Chief Deputy Whip, thus a part of leadership. She's also the outgoing Vice Chairman of the House Energy and Commerce Committee, so will exercise considerable oversight of this monstrosity.
I just placed a call to her office for clarification (1:15 PM Denver time), and am awaiting a reply.
Should the companies become profitable again, there may be considerable pressure for the government to stay in the game and collect dividends. And even if the car companies wanted to buy out the government, it might never be to their financial advantage to do so. If the shares are over-valued, it's to GM's advantage to let them drop before buying. If undervalued, GM's move to buy would be interpreted as such, and the government might well choose to them the shares appreciate.
But the real threat here is regulatory. The Big Three would find themselves with a friend in government, more able than ever - and with a profit motive to boot - to muck around with the rules to the benefit of rent-seeking auto companies, and with a proven disinclination to defer to market discipline.
Our own Diana DeGette, Congressman for Denver, is Chief Deputy Whip, thus a part of leadership. She's also the outgoing Vice Chairman of the House Energy and Commerce Committee, so will exercise considerable oversight of this monstrosity.
I just placed a call to her office for clarification (1:15 PM Denver time), and am awaiting a reply.
Comments
You're inquiry is commendable, but don't hold your breath awaiting a reply from Diana DeGette. She's corrupt, she's elitist, she cares nothing about her constituent's opinions, and she's just plain lazy.
You might eventually get an explanation of how she knows better than you do of what's best for all of us after it's been decided. Maybe, if she feels like it. The clueless voters of Congressional District 1 are getting exactly what they deserve.
The clueless voters who elected Lois Court over you will get what coming to them as well...
Reply: I think this is a little unfair, although I appreciate the sympathy about the election. In the past, I have gotten calls back from DeGette's staff on questions of substance.
Posted by: peachdanish | December 11, 2008 12:45 AM