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Today the Congressional Oversight Panel (COP) released a report on the automotive bailouts that clarified the ongoing risks taxpayers are facing. According to the COP, 66 percent of the $81.4 billion extended to GM and Chrysler through TARP remains outstanding, and taxpayers can expect to ultimately lose $14.7 billion on the deal.
The COP included a number of helpful summary tables and charts showing the administration of TARP funds to the auto companies and the amount of funds recouped. This chart shows the total disbursement of TARP dollars and the amounts still outstanding:
Keep in mind that these were not the only form of government assistance given to GM and Chrysler (Cash for Clunkers, various green initiatives, and other programs also benefited the auto companies). Also remember that the public never agreed to assist the automakers. Instead, President Bush and Treasury Secretary Hank Paulson redirected TARP, which was only supposed to affect banks, to help GM and Chrysler.
This more complicated graphic illustrates the GM bailout specifically (click for a larger version):
The bottom line is that the Treasury has committed almost $70 billion to GM though TARP, including a $17 billion bailout of their finance arm (formerly GMAC, now Ally Financial), a $2.4 billion bailout of GM’s suppliers, and a $361 million guarantee of its new vehicle warranties. Despite all this support, taxpayers are going to lose billions on their “investment.” Previous reports that GM had paid back the bailout funds it received were based on a little deception and a lot of transferring different government outlays into various accounts, as Shikha Dalmia reported when that claim was submitted to the media.
The government still has a 33 percent stake in GM, which presents the greatest potential for loss for taxpayers. The TARP investment in GM would be repaid if the government were able to sell those stocks at a price around $53 per share. GM shares are currently trading below $40.
The Wall Street Journal reported this morning on the government’s plans for that remaining stake in GM:
The Treasury’s point person on the auto bailouts, Ron Bloom, said Tuesday the government welcomes the recent rise in GM’s share price, and said the administration wants to sell its remaining shares “as soon as practicable.”
Former Sen. Ted Kaufman, a Delaware Democrat who is the Congressional Oversight Panel chairman, said the administration should more clearly define its goals regarding GM so taxpayers can properly analyze the bailout efforts. The administration should define whether its top priority is to sell its shares quickly or to recoup taxpayer funds, he said. The administration has said only that it is balancing those goals.
The administration would probably prefer to hold onto the shares until they reached the price at which they could claim that they made a profit on the bailout. Of course, whether or not the GM bailout is able to turn a profit with nearly unlimited government aid has little to do with whether or not the government should be involved in bailing out, owning, and managing auto companies.
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