Dalmia on GM Bailout - The American Spectator | USA News and Politics
Dalmia on GM Bailout

Shikhia Dalmia continues to excel at dispelling confusion about the bailout of General Motors, especially Obama administration-generated confusion. In today’s Daily, she reviews the total amount of federal funds made available to GM, and concludes that any way you look at the bailout, taxpayers will suffer: 

Usually when companies declare bankruptcy, their tax liabilities increase, since they have no more losses to write off. But GM got Uncle Sam’s special bankruptcy package that allows it write off up to $45 billion of old losses going forward. That puts its total bailout at $105 billion. Even that’s not all. The Treasury gave GM $10 billion of the $60 billion as a loan; the rest was through the purchase of equity. (It has more or less paid back the loan.)

The equity means two things: One, GM has zero interest payments, something that gives it a distinct advantage over competitors….

And two, taxpayers have no guaranteed return as they would have with a loan. Therefore, market valuation of GM’s stock will determine what they will recover. 

…absent a miracle, taxpayers will lose anywhere from $13 billion to $19 billion on their principal and another $45 billion on taxes, for a grand total of from $58 billion to $64 billion in losses. And that’s just for GM. Chrysler is a whole different – and equally sordid – story. Even Treasury Secretary Timothy Geithner acknowledged last month, “We’re going to lose money in the auto industry.” 

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