Sell Those GM Shares: It's the Right and Proper Thing To Do
Thursday, June 4, 2009 | William Kurtz Is this Spam?When the Owner of the Business Also Makes the Regulations Under Which the Business is Compelled to Operate
This has no precedent in the United States: the Federal Government will own a controlling percentage of the shares of a reconstituted General Motors, while at the same time the Government promulgates the specifications of the cars which GM hopes to build – and sell. The Executive branch, through the regulatory agencies which have been created by Acts of Congress, may be salivating at the thought of being able to dictate – for the first time ever, without fear of opposition – the terms and conditions of the product.
On the one hand, while wearing its Owner’s hat, the Government has an interest in seeing to it that its captive manufacturer produce vehicles which will sell. On the other hand, while wearing its Regulator’s hat, some particularly activist elements within the regulatory agencies may see a golden chance to impose harsh conditions upon the captive, which may make it difficult for the captive to fulfill its obligations to make a profit and to repay funds. The regulatory side may have less interest in GM’s producing cars which will sell than in maintaining the purity of the regulations.
The conflicts are hardly only imaginary. They may be insurmountable. The man chosen to lead the reborn company is a product of the one which failed. How many ingrained ways of doing things will he carry with him?
I think that Governor Romney is correct in saying that the Government must dispose of its GM shares to the public. Whether that is better done in bulk lots or in retail fashion seems open to discussion. Nevertheless, the underlying principle seems inarguable: the conflicts which inhere in continued Government ownership of a controlling number of GM shares result in an inadmissible state of affairs.
There is also the question of basic fairness to Ford, which alone among the “Big Three” had the presence of mind to see the storm coming in time to take shelter and stow cash in the bank. So far, Ford has survived without subsidy, while GM has received billions of dollars – but died a bankruptcy filing death, nevertheless. With Government in the owner’s seat, how many more billions of taxpayers’ dollars may be invested in GM in an attempt to make the reborn company viable? That prospect appears to put Ford at a very substantial disadvantage and to penalize it – not for having done something wrong, but for having done something right.
Stanley Holloway’s character “Alfred Doolittle” in “My Fair Lady” finally married Eliza’s mother because it was “the right and proper thing to do.” The Federal Government ought to unmarry its shares in the new GM for the same reason: “it’s the right and proper thing to do.”
William Kurtz June 4, 2009 http://www.candelaabra.com
