Obama’s Gamble on GM Worse than JPM’s Trading Flub
When JPM Chase reported that it had lost $2 billion recently on risky derivative trades, the predictable call came from the Obama Administration to increase regulation on banks. The hypocrisy of the politically motivated proclamations becomes evident when you compare the JPM trades to Treasury's continued gamble on its taxpayer funded stake in General Motors, which has suffered an approximate $5 billion loss in value over the past year.
US taxpayers unwillingly own 500 million shares or 32% of General Motors' stock, courtesy of Team Obama. The Administration has had the ability to sell the stake for over a year now. Treasury's performance as market timer for America is lagging the overall markets. For the past year, GM shares have declined about 30% compared to a flat S&P 500 index. The performance is far worse than JPM's and Obama should take his own advice and stop gambling with taxpayer money.
When suggestions were made in the past to invest social security assets in equity markets, those in the Obama camp shunned the idea. After all, it was not the government's place to risk taxpayers' funds in the stock market. I could hit the thesaurus, but the word that continues to sum it up best is hypocrisy.
What makes this administration think it is better able to gamble in the markets than JPM? Sure, JPM's stake was in derivatives, but at least they are a financial firm in the business of trading the markets as they represented investors, unlike our government that has no business continuing to intrude where they do not belong as they risk taxpayer capital. The philosophy that government has the obligation to risk taxpayer money as they market-time holdings at GM might as well lead them to wager on the Facebook IPO or speculate on Apple stock.
It does not matter whether you believe GM shares will go up from here or decline. Treasury should have exited its GM stake as quickly as possible. If they had, taxpayers would now be better off by about $5,000,000,000. But it appears that the hypocrites in power are more concerned with political gain than with protecting taxpayer funds as they continue to gamble on their risky GM stake while criticizing financial firms that trade the derivatives market.
Mark Modica is an NLPC Associate Fellow.