Conservative Principles Now

If President Barack Obama’s New Year’s resolution was for the federal government to stop taking majority ownership in private corporations, he’s off to a bad start (or he decided to get one more in before 2010).

Yesterday, the government indicated it will provide $3.8 billion in additional aid to GMAC and increase its stake in the company from 35% to a whopping 56%. As The Washington Post reports, the federal government now has ownership stakes in GMAC, Fannie Mae, Freddie Mac, General Motors, and American International Group – and holds large stakes in Citigroup and Chrysler.

And the grand tally of government (read: “taxpayer”) investment in GMAC? $16.3 billion.

Where is the money going? It’s going to pay for GMAC’s billions of dollars in losses it suffered after it moved into the subprime lending business (away from its traditional lending to car buyers and dealers at GM and Chrysler).

From the Detroit Free Press:

All the money will essentially go to shoring up GMAC’s ResCap unit, the arm best known for Ditech.com and other subprime mortgage lending that generated $1 billion in profits in 2004 but has since suffered several billion dollars in losses as U.S. housing prices collapsed.

GMAC said Treasury’s move, along with a $3.3-billion write-down in mortgages at ResCap and Ally Bank, should allow it to explore a sale or other action for ResCap and return to profit by the first quarter of next year. It had asked the government last month for more time to decide what to do with ResCap.

The additional funding for GMAC isn’t shocking. GMAC and the Treasury Department were reported to be in advanced talks regarding additional funding in late October. The Washington Post notes that the big surprise here was the decision for the federal government to increase its ownership share in the firm:

The Treasury Department has said for months that GMAC would need more federal money, but the decision to increase the government’s ownership stake came as a surprise, cutting against the grain of the Obama administration’s recent efforts to wind down its bailout of large banks.

Never fear, though. “Treasury officials said the government intends to stick to its policy of leaving day-to-day business decisions about financing to GMAC management,” The Washington Times reports.

But then, there is the fact that the government will appoint four directors to GMAC’s nine-member board. And the Obama Administration’s pay czar will dictate the level of GMAC executives’ pay.

Old habits die hard.

Last year, with Michigan Governor Jennifer Granholm standing by his side, President-elect Barack Obama proclaimed the importance of rapidly passing a stimulus package, described his intense focus on job creation, and noted that a new president can have an “enormous impact” on the economy.

This week, The Detroit Free Press reported that Obama’s stimulus package has “created or retained virtually no jobs” in Michigan, despite $1.2 billion in federal spending and the administration’s report that it created or retained 22,500 jobs in the Great Lakes State.

One wonders whether Michigan’s governor would still stand by Obama’s side and how she would rate the success of the president’s “enormous impact,” given that her state is currently suffering from a 15.3 percent unemployment rate.

There’s even more to the story. The Detroit Free Press reports that those who received stimulus funds or who have been promised stimulus funds greatly overstated the number of jobs created or protected. Shockingly, the paper’s analysis also revealed the following:

Three of every four stimulus grants, contracts and loans approved in Michigan created or retained one job or less.

Fewer than 700 awards had received some money, and nearly half of those — 327 — had created one job or less, at a cost per job of $2.7 million.

Some job estimates were wrong: General Motors Co., for instance, reported 105 jobs saved or created for a government purchase of 5,000 vehicles but later said no jobs were saved or created. The City of Detroit reported 342 jobs it now says were projections — not jobs already created or retained.

The news out of Michigan is a local angle to a mounting national story. An ABC News report reveals that the Obama administration altered its stimulus job growth numbers because its estimates are woefully inaccurate.

From ABC News:

The Obama administration, under fire for inflating job growth from the $787 billion stimulus plan, slashed over 60,000 jobs from its most recent report on the program because the reporting outlets had submitted “unrealistic data,” according to a document obtained by ABC News.

But this isn’t the first time this story has come to light. The Foundry previously wrote about the $25 billion in stimulus funds allocated for energy-efficiency that didn’t produce any of the promised jobs.

And in California, 26,156 jobs were reportedly “saved” with 268.5 million in stimulus dollars. In actuality, none of those jobs were in danger of being eliminated.

Given the nation’s 10.2 percent unemployment rate, when will the Obama administration quit playing games with its jobs numbers and be straight with the American people?