Monday, December 31, 2012

RUSSIAN NEWS OUTLET PRAVDA PRINTS SURPRISING OPINION COLUMN WARNING USA: ‘NEVER GIVE UP YOUR GUNS’

From TheBlaze.com
Posted on December 31, 2012 at 3:45pm by Erica Ritz


Russian News Outlet Pravda Warns Americans: Never Give Up Your Guns
An LAPD officer stands before collected assault weapons during the LAPD Gun Buyback Program event in the Van Nuys area of north Los Angeles, on December 26, 2012. Los Angeles’ no-questions-asked gun buyback event, where weapons could be exchanged for up to $200, was held five months early after the Connecticut school shooting. Gun owners could take their arms to one of two locations in return for a $100 grocery store gift card for handguns, rifles and shotguns, or a $200 card for automatic weapons. Credit: AFP/Getty Images
Back in November, the Russian news outlet Pravda (formerly the official press of the USSR), surprised everyone when it published a scathing opinion column labeling President Obama a “Communist without question promoting the Communist Manifesto without calling it so.”
And they appear to have done it again, this time weighing on in the gun control debate currently gripping the United States.
Written by Stanislav Mishin, the opinion piece, titled “Americans, never give up your guns,” begins:
These days, there are few few things to admire about the socialist, bankrupt and culturally degenerating USA, but at least so far, one thing remains: the right to bare arms and use deadly force to defend one’s self and possessions.
Mishin has rocked the boat before, writing in 2009 about American capitalism being “gone with a whimper.”  Like the current article, it was originally published on the author’s personal blog before being picked up by Pravda.
By and large, he uses Russian history as a warning for what could occur in a worst-case scenario:

One of the first things [the Soviets] did was to disarm the population. From that point, mass repression, mass arrests, mass deportations, mass murder, mass starvation were all a safe game for the powers that were. The worst they had to fear was a pitchfork in the guts or a knife in the back or the occasional hunting rifle. Not much [to worry about] for soldiers.
Mishin also reminds that retired military officers and other armed citizens were initially promised that if they stayed out of the way, they would be left alone.  When they objected, many citizens were asked to “register their weapons” and were “promptly shot.”
The article continues to examine the continuing denial of the “basic right” to self defense roughly two decades after the fall of the Soviet Union:
While President Putin pushes through reforms, the local authorities, especially in our vast hinterland, do not feel they need to act like they work for the people. They do as they please, a tyrannical class who knows they have absolutely nothing to fear from a relatively unarmed population. This in turn breeds not respect but absolute contempt and often enough, criminal abuse.
For those of us fighting for our traditional rights, the US 2nd Amendment is a rare light in an ever darkening room. Governments will use the excuse of trying to protect the people from maniacs and crime, but in reality, it is the bureaucrats protecting their power and position. In all cases where guns are banned, gun crime continues and often increases. As for maniacs, be it nuts with cars (NYC, Chapel Hill NC), swords (Japan), knives (China) or home made bombs (everywhere), insane people strike…
The excuse that people will start shooting each other is also plain and silly. So it is our politicians saying that our society is full of incapable adolescents who can never be trusted? Then, please explain how we can trust them or the police, who themselves grew up and came from the same culture?
No it is about power and a total power over the people…Do not be fooled by a belief that progressives, leftists hate guns. Oh, no, they do not. What they hate is guns in the hands of those who are not marching in lock step of their ideology.  [Emphasis added]
The surprising article concludes with one last warning to Americans: “…do not fall for the false promises and do not extinguish the light that is left to allow humanity a measure of self respect.”
Click here to read the entire article, which originally appeared on the author’s personal blog.

Millionaires, Billionaires, and Teachers

By Randall Hoven

Our President likes to use the phrase "millionaires and billionaires." A person whose net worth is $1 million or more is a "millionaire."

Most of us working stiffs have trouble thinking in terms of net worth; we are more used to the concept of annual salary. How does net worth translate into annual income, or vice versa? In round numbers, the annual income equivalent is 4% of an investment nest egg. So if you have $1 million socked away, consider that to be equal to $40,000 income every year.
Now this "4% rule" is based on a planning horizon of about 30 years, meaning it is used primarily for retirement planning, or people over 50. If you're young, you should probably go with, say, government bond yields. Today's 30-year US bonds yield about 2.8%. So if you are more like 30 years old, your $1 million life savings is more like an annual income of $28,000.
(By the way, this investment-income equivalence exercise is the same as pricing an annuity. I dare you to try to price an annuity. There are many web sites that will tell you how to build a watch, but virtually none tell you the time. I'll save you some research: the 4% rule is not far from the mark.)
So in round numbers, let's say a $1 million investment nest egg is equal to an annual income of $40,000. Suddenly, $1 million doesn't seem so rich. That relationship can be turned around: if you have an annual pension of $40,000, you are effectively a millionaire, especially if that pension is adjusted for cost of living.
Now let's look at public school teachers. In Illinois, where I live, the Illinois State Board of Education puts out a report on teachers' salaries. The table below is a pretty good summary of that 110-page report. A beginning teacher with a Bachelor's degree in a median school district might make about $40,000 per year. But by the time a teacher retires, she could be making $55,000 to $120,000, depending on how much graduate education she got and her school district.
 

And when that teacher does retire, what is her pension? If most school districts are like Chicago's, the teacher will make about 50% of her final salary if she retires at age 55, or 75%, the maximum, if she waits until age 59.
I compiled some representative values based on the assumptions noted above.
Equivalent Net Worth of Illinois Teachers' Pensions
Teacher Situation
Salary at Retirement
Annual Pension
Equivalent Net Worth
Quincy district, Bachelors, age 55
$55,595
$27,798
$694,938
Quincy district, Bachelors, age 59
$55,595
$41,696
$1,042,406
"Typical", age 55
$85,000
$42,500
$1,062,500
"Typical", age 59
$85,000
$63,750
$1,593,750
Aurora West, Masters plus, age 55
$103,277
$51,639
$1,290,963
Aurora West, Masters plus, age 59
$103,277
$77,458
$1,936,444
Assumptions: pension is 50% of salary if retirement is at age 55, and 75% if at age 59; annual pension is 4% of equivalent net worth.
In short, a lot of retired Illinois teachers are millionaires.
But that's not all. Teachers who retired from the Chicago school district get 60% of their health insurance premiums subsidized. In round numbers, let's call that a value of $8,000 per year.
Also, the above values do not include any other savings or investments made over the teachers' careers, including home values. If they have their own 401k's in addition to their pensions, those were not included. Social Security was not included either.
Wait, there's more. These pensions are for life. Many or most of them are also adjusted for cost of living. Every month, for the rest of their lives, retired teachers get checks or automatic deposits of a reliable amount, indexed for inflation and guaranteed by the government. They don't have to worry about investment risks.
Contrast the teacher's situation to that of an imaginary self-employed person I'll call Joe. Over Joe's career he was able to buy a house, currently valued at $300,000 (not much above average), pay off the mortgage and save up another $1.7 million. So he has a net worth of $2 million when he retires at age 59. Most of us would call Joe successful and we would also call him a millionaire. He now makes money from the capital gains, dividends and interest generated by his savings.
Joe now gets to live each year on 4% of his investable nest egg of $1.7 million, or $68,000 per year. That's not too far different from the pensions of many retired teachers in Illinois.
But Joe doesn't get monthly checks of a reliable amount, indexed for inflation. If inflation heats up, the value of his net worth goes down, and so does the effective value of his annual income. If investments don't live up to the 4% rule's assumptions, he doesn't get that 4% return, or he runs out of money before he dies. Every day he has to worry about what dies first: his principal or him.
Joe also has to pay for his health insurance premiums, all 100% of them.
Now, of these two situations, your average retired public school teacher and Joe, which one gets demonized? Joe, of course. Joe is a millionaire -- twice over. Joe makes all his money from capital gains, dividends and interest; he doesn't "earn" it. Joe was "successful in the 90s." Tax him, tax him, tax him.
The situation of the retired public school teacher is also not that much different from fire fighters, policemen, postal workers and other public employees. Nor is it that much different from a lot of other retired workers, especially union members such as General Motors retirees. If such people are getting pensions and benefits of $40,000 per year or more, not an exceptional amount, they are millionaires.
In short, a whole lot of retired workers are millionaires, especially when you include 401k's, Social Security and any other benefits such as health insurance subsidies on top of these pensions. And much of that comes as inflation-adjusted, virtually risk-free monthly checks.
The main reason the US Post Office, the federal government and many state and local governments face unsustainable debt, bankruptcy and default is due to the costs of public employee pensions. GM went bankrupt largely due to the costs of its retirees' pensions and benefits.
Businesses go bankrupt, governments face default and economic growth slows to a near standstill. Meanwhile, retired public school teachers, who had to work 9 months of the year during their careers, now pull in checks 12 months a year, indexed for inflation and guaranteed by the government, in amounts that often make them millionaires, maybe twice over.
My point is not to vilify public school teachers or other public employees. My point is that the stereotypes need to be re-visited. Who thinks of retired public school teachers as millionaires on easy street? Who thinks a guy with a million or two in the bank and who makes all his money from capital gains, dividends and interest has about the same standard of living as that retired teacher? Who thinks Joe the Millionaire has the more realistic fear of destitution in his old age than the retired teacher?
Think about these stereotypes when you want to raise taxes on capital gains, dividends and "unearned" income. Or when you want to sock it to the "millionaires." Or when you want to "invest in education." Or just when you say anything about the "middle class" or any other "class."
And also think about who is really pushing the "us versus them" paradigm.
Randall Hoven can be followed on Twitter or randallhoven.com.
P.S. You might notice from the table of teacher salaries that a Masters Degree with extra graduate hours can add $20,000 or more to a teacher's annual salary. Just for fun I want to show you two course descriptions. The first one happens to describe an engineering course I teach which is for undergraduates, required of all engineering students and generally taken in a student's 2nd or 3rd year of college.
Engineering Mathematics: The Laplace transform and applications; series solutions of differential equations, Bessel´s equation, Legendre´s equation, special functions; matrices, eigenvalues, and eigenfunctions; vector analysis and applications; boundary value problems and spectral representations; Fourier series and Fourier integrals; solution of partial differential equations of mathematical physics.
This second course description is taken from the University of Missouri St. Louis bulletin. It describes a graduate level course in the Education school.
The Educational Role of Play: Emphasizes play as a constructive process with applications to cognitive and social development. Special attention to facilitating play in early childhood classrooms.

Friday, December 28, 2012

$1 Trillion Obamacare Tax Hike Hitting on Jan. 1


Obamacare contains twenty new or higher taxes. Five of the taxes hit for the first time on January 1.  In total, for the years 2013-2022, Americans face a net $1 trillion tax hike for the years 2013-2022, according to the Congressional Budget Office.
The five major Obamacare taxes taking effect on January are as follows:
The Obamacare Medical Device Tax:  Medical device manufacturers employ 409,000 people in 12,000 plants across the country. Obamacare imposes a new 2.3 percent excise tax on gross sales – even if the company does not earn a profit in a given year.  In addition to killing small business jobs and impacting research and development budgets, this will increase the cost of your health care – making everything from pacemakers to artificial hips more expensive.
The Obamacare Flex Account Tax: The 30-35 million Americans who use a pre-tax Flexible Spending Account (FSA) at work to pay for their family’s basic medical needs will face a new government cap of $2500. This will squeeze $13 billion of tax money from Americans over the ten years. (Currently, the accounts are unlimited under federal law, though employers are allowed to set a cap.)
There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  There are several million families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. This Obamacare tax provision will limit the options available to these families.
The Obamacare Surtax on Investment Income: This is a new, 3.8 percentage point surtax on investment income earned in households making at least $250,000 ($200,000 single).  This would result in the following top tax rates on investment income:

Capital Gains
Dividends
Other*
2012
15%
15%
35%
2013+ (current law)
23.8%
43.4%
43.4%
The table above also incorporates the scheduled hike in the capital gains rate from 15 to 20 percent, and the scheduled hike in dividends rate from 15 to 39.6 percent.
The Obamacare “Haircut” for Medical Itemized Deductions: Currently, those Americans facing high medical expenses are allowed a deduction to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).  This tax increase imposes a threshold of 10 percent of AGI. By limiting this deduction, Obamacare widens the net of taxable income for the sickest Americans.  This tax provision will most harm near retirees and those with modest incomes but high medical bills.
The Obamacare Medicare Payroll Tax Hike:  The Medicare payroll tax is currently 2.9 percent on all wages and self-employment profits.  Under this tax hike, wages and profits exceeding $200,000 ($250,000 in the case of married couples) will face a 3.8 percent rate instead. This is a direct marginal income tax hike on small business owners, who are liable for self-employment tax in most cases. The table below compares current law vs. the Obamacare Medicare Payroll Tax Hike:

First $200,000
($250,000 Married)
Employer/Employee
All Remaining Wages
Employer/Employee
Current Law
1.45%/1.45%
2.9% self-employed
1.45%/1.45%
2.9% self-employed
Obamacare Tax Hike
1.45%/1.45%
2.9% self-employed
1.45%/2.35%
3.8% self-employed

Saturday, December 22, 2012

Where was the liberal “outrage” over Clinton’s “COPS in School” federal grant program?

Flashback:
"We just have to be repetitive about this. It's not enough to have a catchy ad on a Monday and then only do it every Monday. We have to do this every day of the week and just really brainwash people into thinking about guns in a vastly different way."
Then-US Attorney, now Attorney General Eric Holder, 1-30-95

Another day, another sad yet infuriating adventure into “that was then, this is now” Democrat hypocrisy – via Bryan Preston:
Turns out, it wasn’t a new idea. President Bill Clinton proposed the same idea in April 2000. He implemented it, too, only to see Barack Obama cut the funding for it.
So, if you’re keeping score, the NRA agrees with a 12-year old Bill Clinton position on school security. The left just called a former Democrat president “crazy.”

Wednesday, December 19, 2012

Active shooters in schools: The enemy is denial


From PoliceOne.com

Doug Wyllie, PoliceOne Editor in Chief10-43: All Units...
with Doug Wyllie, PoliceOne Editor in Chief

Preventing juvenile mass murder in American schools is the job of police officers, school teachers, and concerned parents


“How many kids have been killed by school fire in all of North America in the past 50 years? Kids killed... school fire... North America... 50 years...  How many?  Zero. That’s right.  Not one single kid has been killed by school fire anywhere in North America in the past half a century.  Now, how many kids have been killed by school violence?”
So began an extraordinary daylong seminar presented by Lt. Col. Dave Grossman, a Pulitzer Prize nominated author, West Point psychology professor, and without a doubt the world’s foremost expert on human aggression and violence. The event, hosted by the California Peace Officers Association, was held in the auditorium of a very large community church about 30 miles from San Francisco, and was attended by more than 250 police officers from around the region.
Grossman’s talk spanned myriad topics of vital importance to law enforcement, such as the use of autogenic breathing, surviving gunshot wounds, dealing with survivor guilt following a gun battle, and others. But violence among and against children was how the day began, and so I'll focus on that issue here.
“In 1999,” Grossman said, “school violence claimed what at the time was an all time record number of kids’ lives. In that year there were 35 dead and a quarter of a million serious injuries due to violence in the school. How many killed by fire that year? Zero. But we hear people say, ‘That’s the year Columbine happened, that’s an anomaly.’ Well, in 2004 we had a new all time record — 48 dead in the schools from violence. How many killed by fire that year? Zero. Let’s assign some grades. Put your teacher hat on and give out some grades. What kind of grade do you give the firefighter for keeping kids safe? An ‘A,’ right? Reluctantly, reluctantly, the cops give the firefighters an ‘A,’ right? Danged firefighters, they sleep ‘till they’re hungry and eat ‘till they’re tired. What grade do we get for keeping the kids safe from violence? Come on, what’s our grade? Needs improvement, right?”
Johnny Firefighter, A+ Student
“Why can’t we be like little Johnny Firefighter?” Grossman asked as he prowled the stage. “He’s our A+ student!”
He paused, briefly, and answered with a voice that blew through the hall like thunder, “Denial, denial, denial!”
Grossman commanded, “Look up at the ceiling! See all those sprinklers up there? They’re hard to spot — they’re painted black — but they’re there. While you’re looking, look at the material the ceiling is made of. You know that that stuff was selected because it’s fire-retardant. Hooah? Now look over there above the door — you see that fire exit sign? That’s not just any fire exit sign — that’s a ‘battery-backup-when-the-world-ends-it-will-still-be-lit’ fire exit sign. Hooah?”
Walking from the stage toward a nearby fire exit and exterior wall, Grossman slammed the palm of his hand against the wall and exclaimed, “Look at these wall boards! They were chosen because they’re what?! Fireproof or fire retardant, hooah? There is not one stinking thing in this room that will burn!”
Pointing around the room as he spoke, Grossman continued, “But you’ve still got those fire sprinklers, those fire exit signs, fire hydrants outside, and fire trucks nearby! Are these fire guys crazy? Are these fire guys paranoid? No! This fire guy is our A+ student! Because this fire guy has redundant, overlapping layers of protection, not a single kid has been killed by school fire in the last 50 years!
“But you try to prepare for violence — the thing much more likely to kill our kids in schools, the thinghundreds of times  more likely to kill our kids in schools — and people think you’re paranoid. They think you’re crazy. ...They’re in denial.”
Teaching the Teachers
The challenge for law enforcement agencies and officers, then, is to overcome not only the attacks taking place in schools, but to first overcome the denial in the minds of mayors, city councils, school administrators, and parents. Grossman said that agencies and officers, although facing an uphill slog against the denial of the general public, must diligently work toward increasing understanding among the sheep that the wolves are coming for their children. Police officers must train and drill with teachers, not only so responding officers are intimately familiar with the facilities, but so that teachers know what they can do in the event of an attack.
“Come with me to the library at Columbine High School,” Grossman said. “The teacher in the library at Columbine High School spent her professional lifetime preparing for a fire, and we can all agree if there had been a fire in that library, that teacher would have instinctively, reflexively known what to do.
"But the thing most likely to kill her kids — the thing hundreds of times more likely to kill her kids, the teacher didn’t have a clue what to do. She should have put those kids in the librarian’s office but she didn’t know that. So she did the worst thing possible — she tried to secure her kids in an un-securable location. She told the kids to hide in the library — a library that has plate glass windows for walls. It’s an aquarium, it’s a fish bowl. She told the kids to hide in a fishbowl. What did those killers see? They saw targets. They saw fish in a fish bowl.”
Grossman said that if the school administrators at Columbine had spent a fraction of the money they’d spent preparing for fire doing lockdown drills and talking with local law enforcers about the violent dangers they face, the outcome that day may have been different.
Rhetorically he asked the assembled cops, “If somebody had spent five minutes  telling that teacher what to do, do you think lives would have been saved at Columbine?”
Arming Campus Cops is Elementary
Nearly two years ago, I wrote an article called Arming campus cops is elementary. Not surprisingly, Grossman agrees with that hypothesis.
“Never call an unarmed man ‘security’,” Grossman said.
“Call him ‘run-like-hell-when-the-man-with-the-gun-shows-up’ but never call an unarmed man security.
"Imagine if someone said, ‘I want a trained fire professional on site. I want a fire hat, I want a fire uniform, I want a fire badge. But! No fire extinguishers in this building. No fire hoses. The hat, the badge, the uniform — that will keep us safe — but we have no need for fire extinguishers.’ Well, that would be insane. It is equally insane, delusional, legally liable, to say, ‘I want a trained security professional on site. I want a security hat, I want a security uniform, and I want a security badge, but I don’t want a gun.’ It’s not the hat, the uniform, or the badge. It’s the tools in the hands of a trained professional that keeps us safe.
“Our problem is not money,” said Grossman.  “It is denial.”
Grossman said (and most cops agree) that many of the most important things we can do to protect our kids would cost us nothing or next-to-nothing.
Grossman’s Five D’s
Let’s contemplate the following outline and summary of Dave Grossman’s “Five D’s.” While you do, I encourage you to add in the comments area below your suggestions to address, and expand upon, these ideas.
1. Denial — Denial is the enemy and it has no survival value, said Grossman.
2. Deter — Put police officers in schools, because with just one officer assigned to a school, the probability of a mass murder in that school drops to almost zero
3. Detect — We’re talking about plain old fashioned police work here. The ultimate achievement for law enforcement is the crime that didn’t happen, so giving teachers and administrators regular access to cops is paramount.
4. Delay — Various simple mechanisms can be used by teachers and cops to put time and distance between the killers and the kids.
a. Ensure that the school/classroom have just a single point of entry. Simply locking the back door helps create a hard target.
b. Conduct your active shooter drills within (and in partnership with) the schools in your city so teachers know how to respond, and know what it looks like when you do your response.
5. Destroy — Police officers and agencies should consider the following:
a. Carry off duty. No one would tell a firefighter who has a fire extinguisher in his trunk that he’s crazy or paranoid.
b. Equip every cop in America with a patrol rifle. One chief of police, upon getting rifles for all his officers once said, “If an active killer strikes in my town, the response time will be measured in feet per second.”
c. Put smoke grenades in the trunk of every cop car in America. Any infantryman who needs to attack across open terrain or perform a rescue under fire deploys a smoke grenade. A fire extinguisher will do a decent job in some cases, but a smoke grenade is designed to perform the function.
d. Have a “go-to-war bag” filled with lots of loaded magazines and supplies for tactical combat casualty care.
e. Use helicopters. Somewhere in your county you probably have one or more of the following: medevac, media, private, national guard, coast guard rotors.
f. Employ the crew-served, continuous-feed, weapon you already have available to you (a firehouse) by integrating the fire service into your active shooter training. It is virtually impossible for a killer to put well-placed shots on target while also being blasted with water at 300 pounds per square inch.
g. Armed citizens can help.  Think United 93. Whatever your personal take on gun control, it is all but certain that a killer set on killing is more likely to attack a target where the citizens are unarmed, rather than one where they are likely to encounter an armed citizen response.

Coming Soon: External Threats
Today we must not only prepare for juvenile mass murder, something that had never happened in human history until only recently, but we also must prepare for the external threat. Islamist fanatics have slaughtered children in their own religion — they have killed wantonly, mercilessly, and without regard for repercussion or regret of any kind. What do you think they’d think of killing our kids?
“Eight years ago they came and killed 3,000 of our citizens. Do we know what they’re going to do next? No! But one thing they’ve done in every country they’ve messed with is killing kids in schools,” Grossman said.
The latest al Qaeda charter states that “children are noble targets” and Osama bin Laden himself has said that “Russia is a preview for what we will do to America.”
What happened in Russia that we need to be concerned with in this context? In the town of Beslan on September 1, 2004 — the very day on which children across that country merrily make their return to school after the long summer break — radical Islamist terrorists from Chechnya took more than 1,000 teachers, mothers, and children hostage. When the three-day siege was over, more than 300 hostages had been killed, more than half of whom were children.
“If I could tackle every American and make them read one book to help them understand the terrorist’s plan, it would be Terror at Beslan  by John Giduck. Beslan was just a dress rehearsal for what they’re planning to do to the United States,” he said.
Consider this: There are almost a half a million school buses in America. It would require every enlisted person and every officer in the entire Army, Navy, Air Force, and Marine Corps combined to put just one armed guard on every school bus in the country.
As a country and as a culture, the level of protection Americans afford our kids against violence is nothing near what we do to protect them from fire. Grossman is correct: Denial is the enemy. We must prepare for violence like the firefighter prepares for fire. And we must do that today.
Hooah, Colonel!


Treasury announces GM exit strategy; automaker buying 200 million shares from U.S.

From The Detroit News


Washington — The Obama administration said Wednesday it will sell 200 million shares — or 40 percent of its remaining stake in General Motors Co. — back to the automaker and announced plans to completely exit the Detroit automaker by March 2014.
The Detroit automaker said it will purchase 200 million shares of GM stock held by Treasury for $5.5 billion — or $27.50 per share — nearly $2 above the stock's closing price on Tuesday. GM shares jumped sharply on the news and were up 7.5 percent to $27.36, or $1.90, early afternoon in very heavy trading.
The U.S. Treasury, after more than a year of refusing to say when it might start selling its remaining stake in GM, said it willannounce a written plan in January to shed its remaining 300 million shares over the next 12 to 15 months, likely in a series of small stock sales.
The Treasury's move is intended to minimize the impact of the stock sale on the share price — and the government's state will shrink from 26.5 percent to less than 19 percent — but the exit could be completed far more quickly.
The exit plan may prove to be a boost to GM's lagging stock price and to some car buyers, who have avoided GM because of the "Government Motors" label.
The exit timetable signals the end of one of the most extraordinary government interventions in the U.S. economy in history — the rescue and partial nationalization of two U.S. automakers and their finance arms supported by two U.S. presidents.
Still, taxpayers will almost certainly lose billions of dollars in the $49.5 billion GM bailout - and the government would need to sell its remaining shares for about $70 each to break even. If the government sold the rest of its stock at current prices, taxpayers would lose more than $13 billion. But profits from the bank and AIG bailouts will largely offset the auto bailout losses.
"The government should not be in the business of owning stakes in private companies for an indefinite period of time," Assistant Treasury Secretary Tim Massad said in a statement who oversees the $700 billion Troubled Asset Relief Program. "Moving to exit our investment in GM within the next 12 to 15 months is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests."
The Treasury has also agreed to waive its ban on GM using corporate aircraft — a condition it imposed on a few companies that got large bailouts in 2008 and 2009 — but government pay restrictions on top executives remain in force.
The restrictions limit most GM executives to no more than $500,000 a year in cash salaries. GM chief financial officer Dan Ammann said the issue is one of "ongoing discussions" between GM and Treasury.
The Treasury is also waiving a "vitality commitment" that required certain U.S. manufacturing volumes — but GM is already exceeding it and expects to continue, the company said.
Despite the government ownership, White House officials insisted they would have no role in GM's management, though there were some exceptions. In one notable move, the Obama administration vetoed a proposal by GM in 2009 to move its corporate headquarters from Detroit to Warren.
Ammann said the company has "no current plans" to buy or lease corporate aircraft - but company executives have long chafed at the fact they are forced to fly commercial - unlike other top corporate executives.
Ammann declined to discuss when the automaker and Treasury began negotiations about the sale or how it settled on the price. Ammann said GM doesn't expect to buy the remaining Treasury shares.
GM CEO Dan Akerson told company executives in an email that the move would help end a painful chapter in the automaker's life that nearly saw the company collapse in late 2008 without emergency government assistance.
"Today, GM and the U.S. Treasury are putting in motion a plan that will begin to close the books on the extraordinary government assistance that saved the company and our industry," Akerson wrote. "It has never been far from my mind that taxpayers rightfully expected us to change the way we do business in exchange for a second chance."
GM — which was criticized for corporate arrogance and for a moribund culture — has reshuffled its entire executive lineup since 2009 and made dramatic changes in how it does business.
"We are learning to be humble and to genuinely appreciate every customer," Akerson wrote.
In a Detroit News interview in 2011, Akerson said GM wasn't changing fast enough.
"Whoever comes after me; it's going to be a more important appointment than mine because he or she will have to carry on a cultural revolution here. It's just like the Communist Party in China in the 1960s, there has to be a cultural revolution here," he said.
GM — which last month obtained a new $5.5 billion line of credit — said its balance sheet will remain strong, with estimated liquidity of $38 billion at the end of 2012, following the closing of the share buyback.
Several analysts have suggested the company would use some of its liquidity to buy back shares.
"A U.S. Treasury sell-down was increasingly anticipated, although the actions were earlier than we expected and at a lower price," Peter Nesvold, an analyst with Jefferies & Co. wrote in a research note Wednesday. "The structure was probably more surprising, as it affords a premium to market price for a control stakeholder."
David Whiston, a senior equity analyst for Morningstar, said he was surprised the government didn't wait for a $33 a share price, but said investors likely were expecting an announcement following the quick AIG sale.
"This helps with the ("government motors") stigma, but there will always be a few hard line consumers who will never forgive GM," he wrote in an email Wednesday. "That doesn't bother me, as GM still sells plenty of cars and has great product. Some taxpayers will be upset by the loss, but I think those people will never be happy about the situation. Even if the sale had happened at $33 (the IPO price) those same consumers would have criticized Obama and GM."
The Canadian federal and Ontario governments — which gave GM a separate $10 billion bailout — still hold about 9 percent of GM's shares. Canadian officials said in Toronto they have no immediate plans to sell.
The announcement comes exactly four years to the day that President George W. Bush announced he would rescue GM and Chrysler with a $17.4 billion bailout in December 2008 using the $700 billion Troubled Asset Relief Program.
Bush stepped in after Congress failed to act. He added $7.5 billion for GM and Chrysler's auto finance arms and President Obama added $60 billion to the $85 billion auto bailout.
"The auto industry rescue helped save more than a million jobs during a severe economic crisis, but TARP was always meant to be a temporary, emergency program," Massad said.
Last week, the Treasury exited another major TARP recipient AIG.
GM stock is still trading far below its November 2010 initial public offering at $33 a share.
The repurchase price of $27.50 per share represents a 7.9 percent premium. The share buyback is expected to close by the end of the year.
The Treasury initially owned nearly 61 percent of GM as part of the bailout as it swapped about $42 billion of the loans for stock in the reorganized company after it exited bankruptcy in July 2009.
The Obama administration forced GM and Chrysler into bankruptcy as a condition of getting additional government aid. The administration forced out GM CEO Rick Wagoner and forced a tie-up with Fiat SpA.
The Treasury has said it expects to lose $24.3 billion on the $85 billion auto bailout.
Treasury also holds a 74 percent stake in Ally Financial Inc., the Detroit-based auto lender, as part of a $17.2 billion bailout.
Last year, the government exited Chrysler Group LLC and booked a $1.3 billion loss on its $12.5 billion bailout.
The government had planned an initial public offering of Ally in 2011 but put it on hold because of market conditions. Any IPO won't occur until after Ally's troubled mortgage unit ResCap completes its bankruptcy restructuring.
(202) 662-8735
Staff Writer Melissa Burden contributed.


From Zerohedge

Uncle Sam Books 50% Loss As Government Motors Buys Back 200MM Shares From Tim Geithner


A few days after divesting its stake in the firm that started it all, AIG, and at a profit at that (ignoring that the risk has merely been onboarded by the Fed whose DV01 is now $2+ billion as a result), the US Treasury continues to divest of all its bailout stake, this time proceeding to GM, where the channel stuffing firm just announced it would buyback 200MM shares from the US government at a price of $27.50. More importantly, the "Treasury said it intends to sell its other remaining 300.1 million shares through various means in an orderly fashion within the next 12-15 months, subject to market conditions. Treasury intends to begin its disposition of those 300.1 million common shares as soon as January 2013 pursuant to a pre-arranged written trading plan. The manner, amount, and timing of the sales under the plan are dependent upon a number of factors." Assuming a price in the $27.50 range, this implies a nearly 50% loss on the government's breakeven price of $54. So much for the "profit" spin. One hopes all those Union votes were well worth the now booked $40+ billion cost to all taxpayers.
One wonders why the US government did not open up this particular buyback to a public tender: after all some taxpayers may still care about the financial mismanagement of Uncle Sam. Then again, perhaps not.
General Motors today said it will purchase 200 million shares of GM common stock held by the U.S. Department of the Treasury for $5.5 billion, or $27.50 per share.  The share buyback is part of the Treasury’s plan, also announced today, to fully exit its entire holdings of GM stock within 12 to 15 months, subject to market conditions.
Treasury has announced its intention to sell its remaining shares of common stock into the market through various means and in an orderly fashion.  Treasury intends to begin its disposition of its remaining shares as soon as January 2013, consistent with a pre-arranged written trading plan.  In addition, Treasury has agreed to relinquish certain governance rights that were included in the U.S. Treasury Secured Credit Agreement with GM.
“This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM’s progress and our future,” said Dan Akerson, chairman and CEO of GM.
Dan Ammann, senior vice president and CFO added, “A fortress balance sheet has been a pillar of GM’s financial strategy and has enabled us to undertake today’s actions.  GM’s balance sheet will remain very strong, with estimated liquidity of approximately $38 billion at the end of 2012, following the closing of the share buyback.”
The repurchase price of $27.50 per share represents a 7.9 percent premium over the closing price on December 18, 2012.  The share buyback is expected to close by the end of the year.  This transaction will be accretive to earnings per share, as GM’s total shares outstanding on a fully diluted basis will be reduced by approximately 11 percent.  In association with this share buyback, GM expects to take a charge of approximately $400 million in the fourth quarter, which will be treated as a special item.
After the repurchase, Treasury will continue to own approximately 300 million shares of GM common stock, or approximately 19 percent of the outstanding shares on a fully diluted basis.  Government ownership of GM stock was the result of the auto industry rescue that began under President George W. Bush in 2008 and which was expanded by President Barack Obama in 2009.
The industry in general, and GM in particular, have rebounded sharply since the rescue.  Since the rescue, GM has announced investments of more than $7.3 billion in the U.S. and created or retained more than 20,000 jobs.
“We come to work every day grateful that taxpayers from the US and Canada stepped forward to rescue our industry, and determined to show this extraordinary help was worth it,” Akerson said.
* * *
And just because you asked for it again, here is GM's channel stuffing in its full glory: