Squeeze on Wall Street banks' fees for GM float

The Wall Street banks preparing General Motors for its stock market flotation are seething at Goldman Sachs for what they suspect was a ruse to reduce their fees from what is expected to be one of the biggest initial public offerings of all time.

The US Treasury, which owns a majority stake in the bailed out car-maker, imposed a 0.75 per cent fee on the banks leading the IPO process, it emerged yesterday, after Goldman submitted a low-ball offer at that figure. Depending on the size of the IPO, the banks could net $120m in fees.

Goldman is not among the lead underwriters of the offering, however, and its rivals say it could never have expected to get the business. It works extensively for GM's rival Ford. It will have a much smaller role in the deal, expected to be launched within days, but the Treasury used its low-ball offer to pull down the price it charged other big banks, including JPMorgan Chase and Morgan Stanley. The IPO could be the largest ever in the US, with the exception of Visa, and the chief executives of the investment banks pitching for the business turned up in person to meetings at the Treasury on 19 May.

Wall Street's most prestigious banks typically charge 3 per cent of the offering size, and even with competition to get in on an act of GM proportions, analysts expected them to reap 2 per cent on this deal. The Treasury was concerned about the political damage, had it been revealed that it did not go with the lowest offer.

The US taxpayer owns 61 per cent of GM after funding the business through bankruptcy last year.