General Motors and the Citigroup Bailout
By Michael Barone, Thomas Jefferson Street blog.
Alex Taylor of Fortune provides a very interesting long-term take on General Motors. The structure of the company has proved to be a liability for many decades, but Taylor makes it clear that different executives have had different effects—and that alternative paths might have been taken at several junctures. He also helps me to understand why the GM board has stuck with CEO Rick Wagoner, under whom the stock price has fallen from $75 to $3.
Eugene Ludwig, comptroller of the currency (that is, a leading bank regulator) during much of the Clinton administration, has a smart article on the Citigroup bailout and the need to quarantine toxic financial assets in an Resolution Trust Corp.-like structure, where vulture capitalists can buy them for low prices and try to get more value out of them. This was, as I understand it, the original thrust of the argument Treasury Secretary Henry Paulson made for the TARP bill passed by Congress October 3, although by that time Paulson had apparently decided to rely on capital injections into the banks rather than purchase of toxic assets. We have to do both, Ludwig argues, and with the terms of the Citigroup rescue, we now are.
- Click here to read more by Michael Barone.
Tags: Citigroup | General Motors | government intervention
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Reader Comments
Taylor's wrong about Saturn
It was easily the greatest of GM's recent achievements. How many other American cars in the past few decades have developed a cult following?
Unfortunately, though, GM has spent the two decades plus trying to kill the brand by driving out everything that made it unique. Only made in Spring Hill? We'll make it everywhere! Dent-resistant panels? Gone! Unique design? We'll just repackage other GM models under the Saturn name! Brilliant!
Let. Them. Die. They deserve it.
Too many jobs in Big Banks -- time to downsize
The popping of the housing bubble, after over construction of houses (by about 2 million), has meant a loss of jobs for some 500-600 000 workers (legal), and perhaps twice that among illegals (many going home).
The FINANCE bubble built on top of this also means too many bankers, and too many banks.
We need to help the solvent banks, and quickly let the insolvent banks die. There should probably be some 500 000 fewer bankers before the finance crisis is over.
The Big Banks, like Citi, which were too foolishly risk-seeking to avoid the high-risk derivatives, already have most of the toxic assets. They already are insolvent. There's no need for a new holding area, just let the bankrupt banks go into Chapter 7 (not 11, they're insolvent), and dispose of their assets at 20% of book value or so -- and let the solvent banks take over the good business.
GM
Spin off the profitable foreign part to shareholders. Then let the USA operation die a slow death.
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