This Year’s Failed Business Deals
Many people have been watching the markets with trepidation. And, of course, looking at some of the deals that went down earlier this year. Some of them were real losers. CNN Money offers 3 deals this year that really should have been done differently:
- Cash for Clunkers: While many people got a new car, the program created unintended consequences, such as benefiting foreign automakers, creating a huge cleanup for junked clunkers and running up prices. On top of that, Cash for Clunkers diverted discretionary income from other spending and directed it toward more consumer debt. Not to mention the fact that it didn’t actually boost consumer confidence in a meaningful way.
- Citi undersold Phibro: Instead of driving a hard bargain on its sale of Phibro, Citi basically got the shaft as it only went for book value just to unload. And, of course, with the U.S. government owning 34% of Citi, that means that the taxpayers got a bum deal as well.
- How to sell TARP warrants: CNN Money analyzes the way TARP warrants worked — and how they cut us out of some potentially valuable earnings: “The smartest part of the Troubled Asset Relief Program, as far as taxpayers are concerned, was the Treasury’s getting stock purchase warrants from the institutions that borrowed TARP money. The dumbest: Forcing the government to immediately sell back the warrants to institutions that repaid TARP loans and were willing to go through a complex pricing procedure.
Consequently the strongest borrowers, with the most attractive stocks, repaid the loans early and got their warrants back just as their stocks were rising. In the real world, the idea is to cut your losses short and let your profits ride. At TARP our gains were cut short.”
But it’s not all horrible. GM plans to return its bailout money, and that means the bailout isn’t as expensive as we thought:



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