Well, it’s official.  GM ceased to be General Motors and has now filed for bankruptcy, and will become Government Motors.  60% of this new entity will be owned by the U.S. Government, while another 12% will be owned by Canada.  The UAW will own 17.5%, while the paltry remainder (about 10%) will be owned by bond holders.  That’s 10% which will be owned by the people who invested the majority of the money in the company through it’s lifetime.

“But Nick!”, you cry, “we invested millions of dollars last year in GM and Chrysler! We deserve to control these companies now and make sure our money is well spent!”  Well let me ask you this, exactly what did your money get you in the last several months?  As I predicted months ago when Paul Ryan created this kludge, absolutely nothing!  The only thing it did was buy politicians an excuse to subvert the rule of law.

I want to be extremely clear on this.  This was not about saving jobs, or keeping a plant in Janesville alive.  Bankruptcy for GM was inevitable, and anyone, including Paul Ryan, who told you otherwise when they got this boondoggle of a bailout snuck through was lying… plain and simple.  This was about enabling politicians to have influence in yet another area where they have never had influence before. In short, it is about ignoring the rule of law.

Perhaps I’m getting ahead of myself though. What do I mean exactly when I saw, “The Rule of Law”?  Simply put, Rule of Law is a concept where the law, as written, is applied consistently and equally for all parties, and is not at the discretion of any one individual.  In other words, the rules of the game are written down before everyone starts playing, and they are applied  fairly to everyone as such, no matter who the judge is.  As Aristotle so perfectly put it:

Where the law is subject to some other authority and has none of its own, the collapse of the state, in my view, is not far off; but if law is the master of the government and the government is its slave, then the situation is full of promise and men enjoy all the blessings that the gods shower on a state.

What’s important to realize here is that politicians are inserting themselves into a process that is well defined, and very orderly.  Bankruptcies are nothing new, and the rules for how they are structured, and how they proceed are well known to everyone.  In fact, the order in which parties are paid in a bankruptcy is in part used to determine the interest rates on loans to companies.  And when politicians insert themselves into the process, and subvert the rule of law, those people lose money in the end.

And we’re not simply talking about “speculators” and “corporate fat cats”… we’re talking about ordinary citizens and pension funds:

Remember how President Obama blamed Chrysler's bankruptcy filing last month on "a small group of speculators" who turned down Treasury's $2 billion final offer for their $6.9 billion in debt? Well, it turns out that hedge funds and other short sellers weren't the only secured creditors who got a raw deal from Uncle Sam.

Indiana Treasurer Richard Mourdock revealed this week that his state's police and teacher pension funds have lost millions of dollars in the Chrysler "restructuring." Indiana's State Police Fund and Major Moves Construction Fund, which finances roads and bridges, together lost more than $1 million. And the Teacher's Retirement Fund "suffered, at a minimum, a loss of $4.6 million due to the action of the Federal government," reports Mr. Mourdock.

Far from being speculators, these funds represent retired public employees, including cops and teachers. The funds paid a premium to buy "secured" status, only to discover that they were politically outranked by the United Auto Workers in the White House hierarchy.

Yes, that was an example using Chrysler, but don’t think that the same thing won’t happen with GM.  Those who have political pull will now win out, over those who invested according to the risk that normal bankruptcy laws created.

And exactly what makes people think that politicians know how to save this company from liquidation?  As Megan McArdle points out, the cars that politicians want to build aren’t the ones we want to buy:

The government is acting as if GM's main problem is that it stubbornly refused to enter the lucrative market for small, fuel-efficient cars.  But the market for small, fuel efficient cars is not lucrative--they're the cars with the thinnest margins.  And no one's making it up on volume, either:  at the height of last year's oil spike, when barrels of Brent Crude were being quoted in first-born sons, small cars soared to . . . 20% of the American market.  Yes, there was a glut of SUVs, but that's because American companies were making a lot of SUVs.  Foreign companies make money on small cars because they develop them for lucrative home markets before modifying them for American production.

GM's main problem is not that the market is unreasonably unwilling to finance a potentially profitable company.  Nor that it can't produce an awesome small car that shockingly few people want to buy.  (Believe me, as the owner of a tiny, ultra-efficient car, I would that there were higher demand for my rapidly depreciating asset).  GM's main problems are

1)  A terrible, bloated cost structure
2)  A terrible, bloated bureaucracy
3)  A bunch of meh car lines

Which of these is the government going to solve?  That terrible, bloated cost structure supports a bloated union whose jobs are the entire rationale for the government intervention.  Leaning on the parts suppliers just risks UAW jobs further down the supply chain.  Maybe we can take it out of the budget for copy paper and pencils.

And the reality is, not only do people not want their cars, they don’t want GM… period:

Only 21% of voters nationwide support a plan for the government to bail out General Motors as part of a structured bankruptcy plan to keep the troubled auto giant in business.

The latest Rasmussen Reports national telephone survey finds that 67% are opposed to a plan that would provide GM with $50 billion in funding and give the government a 70% ownership interest in the company.

Even when presented with the stark choice between providing government funding or letting GM go out of business, only 32% of voters support the bailout. Most voters (56%) say it would be better to let GM go out of business.

So not only does this “bankruptcy” (and you can hardly call it that since it bypasses all normal court proceedings") destroy the rule of law, it is also not even wanted by any resembling a majority of the people.  Democracy at work, right Barack?

And the reality is, GM will never be successful as long as it is beholden to the whims and wishes of politicians, who’s aims are to be reelected by satisfying a special interest group, rather than selling cars at a profit.  And as long as the claws of government money are in that company, GM will never be free, and thus, is already doomed to fail.

What started under George Bush and Paul Ryan is now complete under Barack Obama.  As I have said time and time again, Republicans and Democrats are really no different.  This is about political control, plain and simple.