Auto Bailout Loss to Hit $25 billion
As President Obama keeps touting the success of his auto bailout of GM and Chrysler in Michigan and elsewhere, the red ink associated with that action keeps flowing.
According to the Treasury Department, if the government were to sell all the stock it bought to prop up the two auto giants, the taxpayers would be out $25 billion.
David Shepardson of the Detroit News:
The Treasury Department says in a new report the government expects to lose more than $25 billion on the $85 billion auto bailout. That's 15 percent higher than its previous forecast.
In a monthly report sent to Congress on Friday, the Obama administration boosted its forecast of expected losses by more than $3.3 billion to almost $25.1 billion, up from $21.7 billion in the last quarterly update.
The report may still underestimate the losses. The report covers predicted losses through May 31, when GM's stock price was $22.20 a share.
On Monday, GM stock fell $0.07, or 0.3 percent, to $20.47. At that price, the government would lose another $850 million on its GM bailout.
The government still holds 500 million shares of GM stock and needs to sell them for about $53 each to recover its entire $49.5 billion bailout. At the current price, the Treasury would lose more than $16 billion on its GM bailout.
The steep decline in GM's stock price has indefinitely delayed the Treasury's sale of its remaining 26 percent stake in GM. No sale will take place before the November election.
Treasury spokesman Matt Anderson said the costs were still far less than some predicted.
"The auto industry rescue helped save more than one million jobs throughout our nation's industrial heartland and is expected to cost far less than many had feared during the height of the crisis," Anderson said.
The Obama administration initially estimated it would lose $44 billion on the bailout but reduced the forecast to $30 billion in December 2009.
But the recent estimates are not as optimistic as last year.
The Treasury Department said in a May 2011 report that its estimate of auto bailout losses was $13.9 billion. The Congressional Budget Office also estimates a $14 billion loss. The CBO has written off $8 billion of the government's auto bailout as an unrecoverable loss.
Of course, taxpayers are out far more than $25 billion. The total "investment" in GM and Chrysler is, according to the CNNMoney bailout tracker, $77.6 billion, of which about $12 billion has been paid back by the auto companies.
What did we get for the money? The Obama administration says that the bailout saved a million jobs. That would have been true if GM and Chrysler declared bankruptcy and slid into oblivion.
But that was never going to happen. General Motors, at least, would have emerged stronger and leaner vis a vis the union. Chrysler would probably have been bought out. No doubt some jobs at the auto companies and in the auto parts sector would have been lost -- a consequence of poor decisions by management. But a million jobs saved? Only one study, done by the Center for Automotive Research (CAR), has made that claim. The Wall Street Journal describes CAR:
CAR is an Ann Arbor, Mich., nonprofit research organization that is closely followed in the auto industry and by the White House’s former auto taskforce. The organization receives funding from the federal government and from corporations, according to its financial disclosures.
This is a decision Mitt Romney will have to make if he is elected in November. What are the chances that GM stock will bounce back to $53 a share? Or even make it into the 30's? With the chance of another downturn in the economy, it may behoove the next president to dump the stock, take the loss, and move on.
Article printed from PJ Media: http://pjmedia.com/tatler
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