Pay no attention to the the Obama and Bush administration cheerleaders. The federal rescue of GM, along with the TARP in general, serves as an example of everything wrong with Washington.
The TARP was little more than a transfer of losses from inept corporations to the taxpayer, mistaking the redistribution of losses with their avoidance.
Let’s start with the easy part: The taxpayer is projected to take a loss of more than $20 billion on two of the TARP programs. About half of that loss is from the $50 billion GM bailout; the remainder is largely the result of various failed housing assistance programs.
It didn’t have to be this way. When GM entered bankruptcy, the creditors should have taken their losses, and the company could have been reorganized at no cost to taxpayers. The same is true of the banks. A conversion of debt to equity would have recapitalized the banks at no cost to the taxpayer. Any upside would have been shared with the creditors.