A Model For Crony Capitalism And Corruption

The General Motors bailout was even worse than you thought.

Let's review the sordid history. Last year, the federal government bought a majority stake in GM for about $50 billion -- a sum equal to GM's market capitalization in 2000, when it was making record profits.

It should hardly be a surprise that the new GM, with so much money to work with (plus a special $16 billion tax benefit) would start inching into the black again. After all, Ford, without government help, has posted after-tax earnings of about $4.7 billion for the first half of this year -- more than twice GM's, even with the $1.3 billion second-quarter profit that "Government Motors" announced yesterday.

The bailout's announced goals required a more limited intervention than what Washington concocted. For example, a deal could have been brokered with strategic investors, as in a normal distressed sale, with GM's assets -- including its valuable Cadillac and Chevrolet brands and an expanding foothold in China -- passing from weak hands to strong.

But the fact that the administration mainly solicited advice from bankruptcy experts, rather than those in industry, is evidence that alternative solutions weren't considered.

Instead, politicians ran the company their way -- raining taxpayer money on key electoral states like Michigan and rewarding their staunch financial backers in the United Auto Workers union.

And, it goes rapidly downhill from there. If you are engaged enough to read this blog, you probably already knew all that. But as the authors note, the devil is in the details. Read the whole thing and you'll understand why we should never, ever trust government to do the right thing. Politicians will only do what helps themselves.

Read more: http://www.nypost.com/p/news/opinion/opedcolumnists/model_corruption_ttyHIpNuoQRwVTkBZuhHeM#ixzz0wUdLRA22