US government $10bn out of pocket after General Motors bailout
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Wednesday 30 October 2013
Last year, when the key industrial swing state of Ohio landed in President Obama’s column, helping him to re-election, the result was attributed in part to the auto-bailouts that saved the big American car-makers from doom during the Great Recession. But for taxpayers at large, the government’s rescue of General Motors, while safeguarding jobs and helping the company recover, has resulted in a loss of almost $10bn, according to an official report.
The Special Inspector General charged with overseeing the Troubled Asset Relief Program, the scheme under which the loans were extended, told Congress this week that the US Treasury has been left $9.7bn in the red after selling most of the shares that it received after throwing GM a lifeline worth $49.5bn in 2009.
In return for the bailout, the Treasury received just over $2bn in preferred stock and an equity stake in GM of around 61 per cent. Today, it owns just over 7 per cent of the car company after divesting its preferred stock and offloading most of its equity stake. But according to the Special Inspector General’s quarterly report to lawmakers, “because the common stock sales have all taken place below Treasury’s break-even price,” it has been left with the loss of nearly $10bn on its books.
The government expects to sell off what remains of its stake by April next year, although it could hasten its exit from the car-maker.
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