Tuesday, April 1, 2014

Government Insider Trading?

As GM stock falls, timing of the government's exit looks shrewd

The Exchange
 
If the government could investigate itself for insider trading, the timing of a recent stock sale might have triggered a few alerts.
In December, the Treasury Dept. sold the last of its shares in General Motors (GM), wrapping up the controversial bailout that began when GM declared bankruptcy in 2009. Taxpayers ultimately lost about $10 billion on GM, and some critics argued the Treasury could have recouped more of its investment if it held on to its GM shares longer and waited for the price to rise. But now the timing of the sale looks superb, especially since a mushrooming safety controversy — which the government knew about for years but the public didn’t — has been pushing down the value of GM shares.
In February, GM announced the recall of about 1.4 million Chevrolet Cobalts, Pontiac G5s and other vehicles for a faulty ignition switch that’s been linked with 13 deaths in 31 crashes. As more information about the safety problem has surfaced, it's become apparent GM knew about it for nearly 10 years and did nothing to fix it, which has now prompted Congress to investigate and the Justice Dept. to consider pressing criminal charges. Had the Treasury held on longer to its GM shares, that could have led to a bizarre situation in which the government ended up investigating and perhaps even prosecuting a large business entity it held a controlling interest in.
A strange situation
The whole situation is weird enough as it is. A chronology of events GM provided to the government’s auto-safety regulator, the National Highway Traffic Safety Administration (NHTSA), shows GM was internally investigating the ignition-switch problem even in the midst of the company’s 2009 bankruptcy filing and government bailout, which gave the Treasury Dept. a 61% ownership stake in GM. There appears to have been a lull in GM’s internal inquiry from 2009 to 2011, but the probe intensified from 2012 to early 2014, leading to GM’s decision to mount a recall in February.
General Motors returned to public markets in November 2010. On Dec. 21, 2012, the Treasury Dept. announced it planned to unload its GM shares over the course of the next 12 to 15 months, and it completed that process by Dec. 9, 2013. During that time, the price of GM shares mostly rose, ranging from about $27 to $41. The peak price in GM's post-bankruptcy era occurred about two weeks after Treasury sold its final GM shares, at the end of 2013. So the Treasury sold as the stock price was rising, finally exiting its position with the share price near its peak — and about to fall.
In a normal investing situation, that would constitute excellent timing, perhaps even raising questions about whether the sellers knew more than they were letting on. Treasury, for its part, said all along it was not involved in operational issues at GM. And by selling GM shares at a $10 billion loss, when it could have waited longer, the Obama administration signaled its eagerness to disentangle itself from the automaker and from awkward questions involving executive pay, regulatory issues, political posturing and other matters. A Treasury spokesperson reiterates the department was not involved in the day-to-day management of the company, and had no prior knowledge of the ignition-switch issue.
The NHTSA did know about the problem, however, and raised it with GM no later than 2007. The NHTSA is part of the Transportation Dept., not the Treasury Dept., and even though most Americans may think of “the government” as one organization, it’s actually hundreds of agencies that don’t necessarily communicate with each other and don’t even have the same computer systems. So it’s quite plausible information held at NHTSA never reached Treasury and had no bearing at all on its sale of GM stock. Still, it’s a connection Congressional investigators — representing the arm of the government charged with oversight of the executive branch — will undoubtedly explore.
The timing of Treasury’s GM stock sales, meanwhile, could end up being a better deal for taxpayers than it initially seemed. The median price of GM stock in 2013, when Treasury sold most of its shares, was about $34. GM shares are now down around 14% for 2014 and are trading around $35. So if they fall much more, 2013, in retrospect, will look like a good year to have sold. And if the shares recover, at least the government won’t have to investigate itself as the GM saga develops.

 http://finance.yahoo.com/blogs/the-exchange/strange-new-questions-about-the-government-s-sale-of-gm-stock-155925152.html

12 comments:

  1. This comment has been removed by the author.

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  2. You William just cannot be happy with anything. This recall didn't start until February so selling stock 2 months earlier is hardly insider trading. Now 2 days earlier or even two weeks earlier and maybe you're on to something. You Bitched because the government got into the deal and now you want to find something to bitch about as they get out. I don't think anything in this world makes you happy. Like any good tea bagger just keep throwing at the wall and hope it sticks.

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    1. Human life means so little to you ric. Thirteen people died because GM and the regulators failed to address a very fixable problem.

      The tax payers had to eat 10B to bail out the motor unions. You're the first to call for corporate heads to roll. How about we track down the GM, union, and regulators involved and criminally prosecute?

      Where is our Justice department?

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    2. You are being flippant William, but you ask a fair question that I will rephrase in a rhetorical manner. "If corporations are people too, why doesn't someone ever go to jail for the corporation when they do things that kill people or defraud people?" For the union, if this was a matter of workmanship, that would be one thing. Initially, this seems more like a matter of a design flaw. As for the regulators, well, that's bit more a question that does need to be asked. What were they there to regulate? In the case of BP down in the gulf, they regulated nothing and let the company do whatever it wanted to.

      Overall, this article is easy to dismiss based on conservative logic. If the government is full of nothing but idiots, it's doubtful they were smart enough to figure this out and perfectly time the selling of their stock. What I think conservatives are TRULY pissed about is that the government didn't sell after this came to light. They still have the philosophical talking point, which is very important to them, but they don't have a bigger loss of money to scream about.

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  3. William there you go again changing the subject. Human life means a great deal to me, I am a progressive it's what it is all about. But you were talking about insider trading by the government. As usual when you original idea is shot down you go off on some other tangent. Corporate heads? Yes those who ran GM at the time. Mary Barra, I feel, is handling this crap she inherited just fine.

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    1. GM was up against the wall due to high union labor rates and had to make it up somewhere else in their cars due to competition. People on the committee reported that the replacement ignition would have been $.50-$.90 extra per unit. They didn't even change the part number when they finally changed the part.

      Somebodies balls should be hanging in a tree over this cover up. But I guess this will be just like the IRS cover up. Plead the fifth and just make the entire thing go away.

      Where o where is our justice department? Down in Arizona checking on wedding cakes for gay people.

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    2. "Somebodies balls should be hanging in a tree over this cover up. But I guess this will be just like the IRS cover up. Plead the fifth and just make the entire thing go away."

      Sigh, someday it would be nice if you felt this way about every corporate or government screw up. But, just as we saw with Benghazi, all that matters to you is using death for dramatic effect when it suits your purpose. GM's decision, to me, represents what the free market is all about. You hear about a problem, maybe make some changes and then hope the rest go aways. You wait to make the recall notice until you basically have to. Instead of issuing a recall, they sent out inserts and told them to fix the problem if customers complained. But, this case represents a chance to slam the government and a company that was bailed out. Your motive is clear, and it has nothing to do with sympathy for the dead.

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    3. At least the government is consistent. No justice for Benghazi deaths, no justice for GM deaths.

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  4. William where were you when Toyota was killing people with a sticky accelerator. You pick on GM for no other reason then it is GM.

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  5. President Obama took a lot of heat for saving GM, but now, it looks like our government actually made a lot of money buying this corporation and selling it at the right time. Mr Obama has done a great job as President and if you need proof of his accomplishments, just look at all the things the GOP was beating him up on over his first five years and how few of those issues the GOP even mentions anymore. Obamacare is the next topic the Republicans don't want to talk about anymore, anyone here notice that?

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    1. Got drugs???

      In more fallout from the recession and financial crisis, the US government lost $10.5 billion on the General Motors bailout, but it says the alternative would have been far worse. The Treasury Department has sold its final GM shares Monday, recovering $39 billion of the $49.5 billion it spent to save the automaker five years ago. Treasury Secretary Jacob Lew says that without the bailout, the US would have lost more than a million jobs, and the economy could have slipped from recession into a depression. Research by the Michigan-based Center for Automotive Research says the bailout saved 1.2 million jobs.

      http://abcnews.go.com/blogs/business/2013/12/gm-bailout-costs-taxpayers-10-5-billion/

      What they don't talk about is the lost jobs at Saturn, Hummer, Pontiac, all their suppliers, 2600 dealerships. Forgotten is the giveaway of an American company to Fiat.

      Can't wait to talk about the cost of the ACA when the real numbers are finally in.

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    2. That doesn't count the interest lost on 49.5 billion dollars.

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