U.S. Senator Lamar Alexander (R-Tenn.) said yesterday on the Senate floor that he will introduce legislation authorizing the U.S. Treasury to distribute to individual taxpayers all the stock in auto companies acquired during recent bailouts. The senator’s proposal followed an announcement that the Treasury will own 60 percent of General Motors when it emerges from bankruptcy proceedings. Already the Treasury has a small stake in Chrysler.
“Instead of the Treasury owning shares in the new GM and Chrysler, you would own them if you were one of the 154 million individual federal taxpayers who filed on April 15th,” Alexander said. “The stock certificate would be in your name, not that of your government. To keep it simple, and to help the little guy also have an ownership stake in America’s future, Treasury would give each taxpayer an equal number of the available shares. Those shares might not be worth much now, but put them away and one day they might help pay for a college education.”
Alexander said that GM shares had dropped to 75 cents per share before the bankruptcy but were worth $40 per share two years ago. The senator’s proposal would not affect loans the Federal Reserve Board has made to companies in trouble.
“You know what would happen if the Treasury owns 60 percent of the new GM for the next several years,” Alexander continued. “Members of Congress will hold hearings saying “we are the owners” and demanding to know:
• “Why are you building this model?
• “Why are you closing this plant and not that one?
• “Why are workers not paid more?
• “What about these work rules?
• “Why is this battery being built in South Korea and this engine being shipped from Mexico?
“When the company negotiates with the federal government on such things as, for example, fuel efficiency standards, won't it be negotiating with itself? And as the elections approach, might not the White House be tempted to build plants in states it might carry instead of states it might not?”
The senator said that this proposal would add “a few billion to the federal debt. But whose debt is it anyway?” Alexander asked. “It belongs to the 154 million American taxpayers—so why not give individual taxpayers the ride up, if there is one?”
Alexander said the advantages of his proposal would be to create:
• “154 million new investor-cheerleaders – think of the fan base of the Green Bay Packers, whose ownership is distributed among the people of Green Bay. This new GM investor fan base could produce more customers.”
• “Better odds for success – Does anyone really think Washington can run car companies? Did you ever ride in a Lada—the clunky Soviet car made by a government-run company? The standing joke was, ‘How do you double the value of a Lada? Answer: Fill up the tank with gas.’”
• “Fairness – Decisions about these companies would be made by the collective decisions of people in a marketplace rather than by lobbyists with access to Washington.”
• “Any benefits are more likely to go to taxpayers than to some government program. For example, the law says that all proceeds made from the Trouble Assets Relief Program purchased assets should go to reduce government debt. Yet that’s not happening because Treasury hasn’t purchased “toxic” assets and has not made any profit yet. My proposal would make sure taxpayers get the profit rather than recycling the money into more bailouts.”
• “Finally, this is the fastest way back to the wise principle, ‘If you can find it in the Yellow pages, the government probably shouldn’t be doing it.’ More than the money, it’s the principle of the thing.”
A full transcript of Senator Alexander’s speech is available upon request.
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