Taxpayers, Economic Outlook to Lose Big on the Auto Bailouts

By:  Brian Koenig
07/29/2013
       
Taxpayers, Economic Outlook to Lose Big on the Auto Bailouts

Despite surges in revenue and a catalog of new vehicles from the U.S. auto industry, taxpayers are still suffering from the auto bailouts.

Despite surges in revenue and a catalog of new vehicles produced by the U.S. auto industry, taxpayers are still suffering from the 2009 bailouts, as General Motors (GM) would have to peddle their stock for $95.51 per share for taxpayers to break even, according to a government watchdog report published Wednesday. Even with a 25-percent spike in the price this year, that’s still well over twice what shares are selling for today, with the price currently lingering around $37 per share — meaning there’s little faith that taxpayers will break even on the nearly $50-billion GM bailout.

The inspector general for the Troubled Asset Relief Program (TARP) asserts that taxpayers are still at least $18 billion in the hole, which government officials insisted GM needed to endure its bankruptcy restructuring in 2009. Since its escape from bankruptcy, the automaker has earned about $17.2 billion, and in exchange for its federal endowment, the government secured a bulky portion of the company’s stock.

Over the past couple of years, the government has slowly been liquidating its stock, with a target to fully retire its investment by April 2014; it still owns about 189 million shares, or about 14 percent of the company. But according to many experts taxpayers will remain the ultimate losers.

"There's no question that Treasury, the taxpayers, are going to lose money on the GM investment," Special Inspector General Christy Romero, who delivered the July quarterly report to Congress, noted in a recent interview.

If the government sells its remaining GM shares for its current stock price, it would take in only $7 billion, putting taxpayers on the hook for more than $11 billion on the overall bailout cost. In addition to GM’s bailout in 2008 and 2009, Romero’s report continues, domestic automaker Chrysler was bailed out for $12.5 billion, which cost taxpayers nearly $3 billion.

Ally Financial Inc., which previously was GM’s lending arm, still owes taxpayers $14.6 billion, and the Treasury owns about 74 percent of that company, with an additional $5.9 billion worth of preferred stock. Ally has made only one principal payment equaling $2.5 billion since the bailout in 2009.

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Photo: AP Images

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