Trea­sury likely won’t re­coup full cost of GM bailout

Gov­ern­ment cites lost jobs and other con­se­quences if it hadn’t stepped in

The Washington Times Daily - - Business - BY PA­TRICE HILL

The Trea­sury said Thurs­day it ex­pects to sell its re­main­ing stock in Gen­eral Mo­tors by the end of the year, end­ing the gov­ern­ment’s con­tro­ver­sial bailout and takeover of the lead­ing au­tomaker and clos­ing an im­por­tant chap­ter in U.S. eco­nomic his­tory.

Trea­sury al­ready has re­couped $38.4 bil­lion of the $50 bil­lion auto bailout through sales of GM stock. It plans to sell its re­main­ing 31.1 mil­lion shares by year-end, if prices hold up, re­coup­ing another chunk of the re­main­ing debt owed to the gov­ern­ment, but al­most cer­tainly not enough to fully re­pay tax­pay­ers. GM shares rose 43 cents to $38.12 in New York trad­ing Thurs­day; at that price, the gov­ern­ment’s re­main­ing shares would fetch al­most $1.2 bil­lion.

Trea­sury’s an­nounce­ment about GM boosted the stock mar­ket Thurs­day and helped send the Dow Jones in­dus­trial av­er­age to more than 16,000 for the first time. For in­vestors, it was only the lat­est sign that the econ­omy is fi­nally set­tling into a nor­mal re­cov­ery and the ef­fects of the most dev­as­tat­ing re­ces­sion in mod­ern times are slowly re­ced­ing into his­tory.

Trea­sury Deputy As­sis­tant Sec­re­tary Tim Bowler said the in­vest­ment in GM at the height of the 2008 fi­nan­cial cri­sis and Great Re­ces­sion — first by the Ge­orge W. Bush ad­min­is­tra­tion and later by the Obama ad­min­is­tra­tion — paid div­i­dends for U.S. work­ers and the econ­omy. The auto sec­tor is the largest U.S. man­u­fac­tur­ing sec­tor and feeds an ar­ray of an­cil­lary in­dus­tries from auto parts to steel and plas­tics.

“Had we not acted to sup­port the au­to­mo­tive in­dus­try, the cost to the coun­try would have been sub­stan­tial — in terms of lost jobs, lost tax rev­enue, re­duced eco­nomic pro­duc­tion, and other con­se­quences,” he said.

He said tax­pay­ers can take some credit for the ro­bust re­vival of the auto in­dus­try that has oc­curred since 2009, which has brought auto sales close to their peak of around 16 mil­lion units a year set be­fore the re­ces­sion.

“Our ac­tions have en­abled the in­dus­try to re­bound,” he said. “All three Amer­i­can au­tomak­ers are now prof­itable, and more than 340,000 new auto jobs have been cre­ated since GM and Chrysler emerged from bank­ruptcy in 2009.”

In a state­ment, GM said that the com­pany con­tin­ues to trans­form it­self into a global auto ti­tan, hav­ing learned much from its brush with in­sol­vency in 2009.

“We’re mak­ing great progress in our ef­forts to make the most of this sec­ond chance by build­ing out­stand­ing cars and trucks, cre­at­ing jobs and rein­vest­ing in our coun­try,” it said.

While the Trea­sury may not re­coup all of the money it loaned GM through the stock sales, it al­ready has more than re­couped the to­tal costs of all the ma­jor bailouts of banks, auto com­pa­nies and insurance firms that the Trea­sury and the Fed­eral Re­serve car­ried out dur­ing the fi­nan­cial cri­sis.

The Trea­sury said it has raised $431.4 bil­lion through sales of the shares and port­fo­lios it took as col­lat­eral in those bailout deals, about $10 bil­lion more than its to­tal dis­burse­ments of $421.6 bil­lion un­der the main bailout pro­gram, the Trou­bled As­sets Relief Pro­gram.

More­over, in a once-unimag­in­able de­vel­op­ment, the Trea­sury is within shoot­ing dis­tance of re­coup­ing its $189 bil­lion bailout of Fan­nie Mae and Fred­die Mac, as the mort­gage gi­ants have been post­ing siz­able prof­its each quar­ter, which they must turn over to the gov­ern­ment un­der the terms of their bailout.

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