Delphi, AIG

http://www.futureofcapitalism.com/2009/10/delphi-aig

Today's New York Times has two stories that illuminate the risks of government ownership and "bailouts." One article highlights how, with AIG subject to government ownership and pay controls, it is ceding some ground to a privately held competitor controlled by its former CEO, Maurice Greenberg. The article has a slightly disapproving tone: "Mr. Greenberg's success may be at the expense of taxpayers. People who work in the industry say that if he is already luring A.I.G.'s people, he may soon be siphoning off its business and, therefore, its means to repay its debt to the government." But the same could be said of any insurance company that is profiting at AIG's expense. Just because the government takes over one insurance company, are all the other ones supposed to stop trying to build market share for fear that their success in competing in business might siphon off money from the taxpayers? By this logic, Toyota and Honda should stop trying to succeed in the auto business for fear they might profit at the expense of GM and Chrysler's ability to pay back funds to the taxpayers. A second article documents how, in the GM bankruptcy, unionized pensioners of the Delphi auto parts company were rescued, but salaried pensioners were not. Reports the Times:

Mr. Gump and others suspect the Treasury Department told G.M. to pay the supplements. The federal government is both the company's largest shareholder and the financier of its restructuring, through the Troubled Asset Relief Program. Obama administration officials confirmed that they brought the parties together to negotiate a resolution of Delphi's pension failure but said they did not dictate the outcome.

by Editor  |  Oct 27, 2009 at 10:16 am Related Topics:  AIG, Auto Industry, Government ownership receive the latest by email: subscribe to the free futureofcapitalism.com mailing list