Wall Street Journal: Corporations in the red, as GM was for years, are allowed to carry forward net operating losses that reduce their future tax liability when they are making money. GM had accumulated about $45 billion in such profit-shielding chits by 2008, with a book value of about $18 billion. When companies enter bankruptcy, carry-forwards disappear or are greatly limited under IRS section 382, which kicks in when ownership changes by more than 50 percentage points…
So when GM entered bankruptcy in June 2009, the government swapped the debt the auto maker owed it as a creditor for 61% of “new GM,” while handing another chunk to the United Auto Workers. But new GM also inherited the accumulated net operating losses that would have turned into a pumpkin in normal bankruptcy.
In a 2011 working paper, J. Mark Ramseyer of Harvard and Eric Rasmusen of Indiana University argue that by manipulating corporate tax rules by fiat, “Treasury gave the firm (and its owners, including the UAW) $18 billion more in assets.” Thus a Democratic Administration gave “a massive tax benefit to one of the party’s biggest supporters.” The other problem is that the move put Ford and GM’s other competitors at a disadvantage, as bailouts always do.
Go read the rest and check out the links to see just how the balance sheets have been falsified to support the narrative. Then there’s this news, from The Washington Free Beacon:
The Obama administration has awarded $341 million in loans to the Freelancers Union—a small organization with deep progressive ties whose board members have donated more than $11,000 to Democrats—despite a law suggesting the union should not be eligible for such a loan.
It was recently announced that health care cooperatives launching in eight states will be receiving a total of $638 million in federal loans. The White House hopes the program, created as part of Obama’s health care reforms, will create competitive alternatives to private insurers. Conservatives cite the program as another instance of cronyism.
The largest of these loans went to the Freelancers Union, a New York-based organization that helps independent workers gain access to health benefits, to start health insurance plans in three states.
According to the Freelancers Union, there are 42 million independent workers, of which 171,000—0.4 percent of the total—are members. Of those 171,000, about 93,000, or 54 percent, are based in New York City.
The federal loan is nearly three times the group’s $120 million annual budget.
The board of directors of the Freelancers Union has given at least $11,700 in political donations between 2007 and 2011, all to Democrats.
Questions have been raised as to the legality of the loan to the Freelancers Union.
Membership in the union is free. The organization covers costs through commissions on benefits bought by members. But members of the union own the Freelancers Insurance Company, a for-profit organization—and have since 2008.
The law governing the program forbids organizations that issued health insurance before July 2009 and for-profit organizations from receiving loans.
The two organizations share board members, employees of both determine the organizations’ direction, and the insurance company advertises on the Freelancers Union website.
Now that the DoE has squandered billions of dollars backing ventured that had fail written all over them, the news has begun to be the companies that queued up with expectations of receiving a big fat taxpayer-bamboozled loan and didn’t get it:
Another company has cried uncle and withdrawn from a federal program designed to help green companies invest in U.S. manufacturing.
Start-up auto company Bright Automotive, which was backed by Google, said it will close its doors in the next few days after it failed to secure a Department of Energy loan aimed at encouraging the development of alternative fuel vehicles. The outgoing CEO called the program “a debacle.”
The administration may now be too skittish to hand out investment loans: Its first investment went to solar-panel maker Solyndra, which filed for bankruptcy two years later. And then the feds agreed to give loans to a profitable Russian steelmaker, which turned out to be a big political misstep. After a public lashing which resulted in the head of the Energy Department’s loan office resigning, the loan program has become an embarrassment.
Bright Automotive, which makes hybrid delivery vans, tried for four years to get the loan. Bright, a joint venture created by the Rocky Mountain Institute, Google, Johnson Controls, the Turner Foundation and Alcoa, said it did everything the Department of Energy asked, even securing financing from General Motors — but to no avail.
Bright CEO Reuben Munger said the company tried to work with the Department of Energy, but the terms of the loan were too onerous. “Bright has not been explicitly rejected by the DOE; rather, we have been forced to say, ‘uncle,’” Munger said in a letter to Department of Energy Secretary Steven Chu. “As a result, we are winding down our operations.”
Failing to issue loans could end up forcing several more companies to close down or file for bankruptcy, putting a kink in President Barack Obama’s plans to have 1 million hybrid or electric cars on the road by 2015. The president’s goal was intended to cut oil consumption by 730 million barrels through 2030, and is part of an attempt to reduce reliance on foreign oil.
The mental pivot necessary to report the government’s failure to provide a start up enterprise a guaranteed loan as some form of anomaly is stunning, and shows just how divorced from reality progressives are on the entire matter.