A lot has happened in the past year, as hope and change continue to rain down hard upon the land. It can be hard to remember that it was a little more than a year ago that GM and Chrysler were in the throes of bankruptcies that were supposed to make everything all better. Megan McCardle gets us caught up with what's going on: GM is still losing billions of dollars, and both companies are still facing pension payments that will make it virtually impossible for them to return to healthy profitability. What was the point of the bailout/bankruptcy again? GM: More Troubles Coming Down The Road
Make no mistake, these companies are still on life support. The CBO expects that the lion's share of the government's losses on TARP will come, not from anything the Bush administration did, but from the Obama administration's decision to bail out the automakers and to a lesser extent, its bailout of homeowners. It seems that a big chunk of our cost may come from picking up the gold plated pensions . . . "Cadillac Plans", if you will . . . of the automakers. And lest you think I'm picking on unions over management, it was management that used the UAW as a prop to extract these gargantuan sums from the pockets of innocent taxpayers.
The scandalous deal-making and high handedness of health care reform may have taken up all of the attention for the last 8 months, but I don't think any of us should forget the scandalous deal making and high handedness that went into the auto bailouts. As McCardle notes, the UAW was given precedence over bondholders to which they were not legally entitled. And the end result? GM is still facing the same unsustainable pension costs that ran it into the ground in the first place, plus the US will lose money on the auto bailouts, even as it breaks even or profits on the bank bailouts. Yet, by some magical process, no one wants to discuss this too loudly.
If a scandal falls in the forest, can anyone hear it?