What I was responding to: "When the government invests hundreds of billions of dollars into the market, by way of dumping money into the financial and automobile industries,..."
CWuestfield and I were discussing actions taken by the government during the bailout, not a business plan the UAW and GM entered into in the 60's.
During the bailout, the administration funneled billions of taxpayer dollars (many of which were paid by people earning less than UAW employees) to the UAW. In the process, they also screwed over bondholders (and ignored the rule of law) who had a legitimate claim to part of the proceeds of GM's liquidation.
That's an example of the government screwing over the rich (and middle class) for the benefit of the upper middle class.
"CWuestfield and I were discussing actions taken by the government during the bailout, not a business plan the UAW and GM entered into in the 60's."
Yeah, but the reason the bondholders were unhappy (as anamax said) is that it officially sanctions this sort of malfeasance, and therefore makes the bond market more risky.
Only sort of. There's a case to be made that, without government assistance, bondholders would be receiving less money in a liquidation than they'll wind up receiving post-haircut. Of course, they wouldn't get to blame unions for their poor investment decision, so it might not be worth the lack of emotional gratification :)
This may or may not be true, depending on specific details that I don't know.
But it's certainly true that equity holders came out quite a bit richer than they otherwise would have. Owners of common stock are last in line in a liquidation, so they likely would have gotten very little. But now they've got more equity than at the time of the bailout.
Thus, the government pumped taxpayer money into GM shareholders.
As far as I'm aware, GM shareholders received nothing.
In the bankruptcy, the Motors Liquidation Company purchased all the valuable assets (including the names and trademarks) from GM. The proceeds were (and are still being) used to pay bondholders and other creditors. Anything remaining would be given to shareholders, but the proceeds of the sale are not expected to be even close to sufficient for this to occur (that's why GM went bankrupt to begin with).
I wasn't aware of this. You're saying that the bankruptcy essentially created a new company, with the original stockholders left with dangling pointers to essentially nothing but a prayer that the new company might give them something?
I believe that's the general gist of it, though I freely admit I don't know a lot about it. I'd be very happy to defer to someone who knows more about it.
CWuestfield and I were discussing actions taken by the government during the bailout, not a business plan the UAW and GM entered into in the 60's.
During the bailout, the administration funneled billions of taxpayer dollars (many of which were paid by people earning less than UAW employees) to the UAW. In the process, they also screwed over bondholders (and ignored the rule of law) who had a legitimate claim to part of the proceeds of GM's liquidation.
That's an example of the government screwing over the rich (and middle class) for the benefit of the upper middle class.