It was kind of an open secret that politics had a lot to do with the General Motors bailout. The question was to what degree that Democrats were paying back their allies in the United Auto Workers. Now we learn that in the wake of GM's recent stock offering, the UAW got a pretty sweet deal:
The union's health car and pension trust fund earned $3.4 billion through the sale of one-third of its shares in GM last week. Analysts estimate that it would break even if it sells the remaining two-thirds of its shares at an average price of $36 — close to where the stock traded shortly after the offering hit the market. GM shares closed at $33.45 on Wednesday.
For taxpayers to break even, by contrast, the stock would have to rise to at least $52 and by some estimates as high as $103 — levels that would take years to achieve.
And how did GM's original stockholders make out? Pretty poorly:
Perhaps the biggest losers are the investors in the old GM. None of the bankrupt company's previous stockholders got any money, while the claims of thousands of investors who purchased the company's bonds are still being kicked around in a Manhattan bankruptcy court.
“It gives outraged flashbacks to the old GM bondholders,” who remain mired in the bankruptcy proceedings and are unlikely to recover more than 30 percent of their investments, [Glenn] Reynolds [an analyst at CreditSights] said.
He compared the deal to the corrupt crony capitalism in Russia under President Vladimir Putin.