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Chrysler Won't Pay Back Government   May 5th, 2009
Part of their bankruptcy deal includes government forgiving debt       

 
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Surprise, surprise. The government money that Chrysler received won't be paid back. At the time the supporters tried to portray the bailout as a "loan" or a "bridge loan." But, as usual, we conservatives were right: It was money down the drain. It now seems obvious that it was a payoff to union supporters in Detroit who have been given 55% of the company by the government that didn't own it, and now don't have to even pay the government back for the gift of their 55% ownership.

Chrysler LLC will not repay U.S. taxpayers more than $7 billion in bailout money it received earlier this year and as part of its bankruptcy filing.

This revelation was buried within Chrysler's bankruptcy filings last week and confirmed by the Obama administration Tuesday. The filings included a list of business assumptions from one of the company's key financial advisors in the bankruptcy case...

"The reality now is that the face value [of the $4 billion bridge loan] will be written off in the bankruptcy process," said the official, who added that the 8% equity stake that Treasury will be receiving as part of the company's reorganization is meant to compensate taxpayers for the lost money.

"While we do not expect a recovery of these funds, we are comfortable that in the totality of the arrangement, the Treasury and the American taxpayer are being fairly compensated," said the official...

According to the filing, the company's financial advisor also foresees the need for an additional $1.5 billion loan from the Treasury Department by June 30, 2010.


The Treasury and American taxpayer are being fairly compensated? The Treasury and American taxpayer flushed more than $7 billion down the toilet to avoid a bankruptcy that we knew couldn't be avoided, and ultimately wasn't. In return we don't get the money back. How is that fair compensation?

It's also interesting that in addition to not getting the money back, we're going to have to "loan" another $4 billion to Chrysler to get it through bankruptcy and, as quoted above, they're anticipating needing another $1.5 billion loan from the Treasury next year. I'll bet that amount eventually grows and I wouldn't be surprised if that is eventually forgiven as well.

Last week I predicted that Chrysler would be our next Amtrak. Unfortunately that seems more likely every day. Let the Chrysler subsidies begin!

    Update 6/1/2009: Although the analogy is being drawn between Amtrak and GM, the fact that it's being drawn for the auto industry at all suggests I wasn't far off in my estimate last month.

    Some analysts say the federal government's effort to prop up the nation's largest auto manufacturer is eerily similar to a 40-year effort to revive the nation's ailing railroad system. Billions of taxpayer dollars later, Amtrak still needs the government to survive -- and critics say General Motors appears to be headed down the same track. >

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