GM Again

Today GM announced that it was going to spend $3.5 billion to purchase a sub-prime car lender.  CEO Ed Whitacre said that the lack of a financing arm (since GMAC was sold off in 2007) put GM at a competitive disadvantage with buyers who had trouble getting credit.

I've read over the stories a few times and am completely stunned.  A few points to consider:

1. GM seems to have trouble producing cars good enough to sell at a profit.  Since they've shown that they are a car company that is not very good at producing cars, what makes them think that they are going to be so good at evaluating the creditworthiness of those who have been deemed to be not worthy of credit....and hence are subprime borrowers?
2. What will happen if the economy turns south again and these sub prime car borrowers stop making payments?  Will GM suffer losses that will require another bailout?
3. If GM has $3.5 billion kicking around in the bank, perhaps they should pay back some of the $40 billion that is still outstanding to the taxpayers?
4. Was there another buyer for this sub prime lender?  If so why is a taxpayer owned entity trumping a private sector bid?  If not, then isn't this just another bailout one step removed?

We will soon see another absurdity.  The government will divest itself of GM via, what may be, the largest public offering of stock in history.  To do this GM will engage several banks (some of which have been bailed out by the taxpayers).  GM will pay an underwriting fee to the Investment banks.  So the car company that got bailed out by the taxpayers will be paying an enormous fee to the banks that got bailed out by the taxpayers.

The depressing thing about this whole thing is that it just seems to keep getting more absurd.  The seeds for the credit crunch were sown during the Clinton Administration.  George W Bush became a tax and spend Conservative who created a moral hazard with an orgy of bailouts.  Barack Obama has followed in their footsteps.  At each step the policy decisions seem to get worse and worse.