Paul Ingrassia On Ed Whitacre's Publicity Stunt

Paul Ingrassia, the one-time Wall Street Journal reporter, bureau chief and senior executive, and Pulitzer Prize-winning author, wrote about Ed Whitacre's big publicity stunt on Wednesday, in this morning's edition of the Journal.

Echoing my own comments, Ingrassia explained that the amount of government equity in GM, versus the 'debt' it loaned the bankrupt company, was really a matter of discretion. Not some market-determined mix.

As such, Ingrassia pointed out that, while it's true Whitacre paid off a $5.8B loan far ahead of anyone's expectation, GM still owes the government, meaning you and me, about $52B in 'equity,' which was really just old GM debt converted, via government bailout money, into government ownership of the defunct car maker.

Ingrassia then smugly noted that market-leader Ford, a much healthier and better-managed competitor, by comparison, has a market cap of only $48B.

This reinforces the point I made in that post,

"It is just this process that is frustrated by crony capitalism such as we've witnessed in the GM bailout. Instead of the resources wasted at GM being freed up to be used elsewhere in the economy, they were allowed to remain in place, then more capital added, from taxpayers, as a free equity injection. Free to GM, but very costly to taxpayers and the economy in general.

Force GM off government life support, force it out into the private sector whole or in pieces, forcing taxpayers, the federal government and, most of all, you, Ed, to see what a discount to the government's bailout price is taken on the IPO.

Now, wouldn't that be eye-opening? Somehow, Ed, I doubt you'd be toasting that event."

Thanks to Paul Ingrassia's convenient provision of Ford's numbers, we can easily see that GM could not possibly get $52B from private investors to replace the government's "equity" position. It's underwater.

So far from repaying a loan in full, Whitacre merely made a downpayment of just over 10% of our taxpayer bailout to GM, or about $6B of the $58B in old GM balance sheet capital replaced with public money.

Quite the different picture, eh? A 10% payoff, not 100%.

Keep trying, Ed. You've got a very long way to go.