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GM Bailout: Taxpayers Still $18.1 Billion in the Hole

Posted by on Jul. 24, 2013 at 5:59 PM
  • 8 Replies


DETROIT (AP) -

General Motors stock would have to sell for $95.51 per share for taxpayers to break even on bailing out the company, according to a government watchdog's report released Wednesday.

That price is about three times what GM shares are selling for now, even after a 25 percent increase in the price so far this year.  

"There's no question that Treasury, the taxpayers, are going to lose money on the GM investment," Special Inspector General Christy Romero, author of the July quarterly report to Congress, said in an interview.

GM needed the $49.5 billion bailout to survive its trip through bankruptcy restructuring in 2009. Since emerging from bankruptcy, the restructured company has piled up $17.2 billion in profits. In exchange for the bailout, the government got 61 percent of GM's stock. It cut that to 33 percent in GM's November 2010 initial public offering.

The government has gradually been selling off the rest of the stock, with the goal of exiting the investment by April of next year. As of June 6, it still owned 189 million shares, or about 14 percent of the company, according to the report.

Taxpayers are still $18.1 billion in the hole on the $49.5 billion bailout, including interest and dividends, according to the report.

If the government sells its remaining shares of GM for the current stock price of $36.61, it would get just over $6.9 billion, meaning taxpayers would lose about $11.2 billion on the bailout.

When GM was bailed out in 2008 and 2009, the government said it was necessary to stop the industrial Midwest economy from collapsing. Chrysler was bailed out for $12.5 billion at the same time. Taxpayers wound up losing $2.9 billion on that bailout, Romero's report said.

The report says that taxpayers still are owed $14.6 billion for bailing out Ally Financial Inc., which once was GM's auto lending arm. Treasury still owns 74 percent of the company, plus $5.9 billion worth of preferred stock.

Ally has made one principal payment of $2.5 billion since the bailout 4 1/2 years ago. It also has paid the government $3.4 billion in dividends, according to the report.

Residential Capital LLC, or ResCap, Ally's troubled mortgage arm, filed for bankruptcy protection last year. Romero criticized Treasury for having no clear plan to deal with mortgage liabilities, which he said is preventing the government from selling its stock.

"We really want to see what's the plan here. How are taxpayers going to recoup our money? Are we taking a loss?" Romero asked.

Overall, the government allocated $474.8 billion to the TARP program to bail out banks, insurers, auto companies and others during the financial crisis. Taxpayers are still owed $57.6 billion, the report stated. Of that, the Treasury Department has written off losses of $29.6 billion, leaving a balance of $28.6 billion outstanding.

That figure excludes $8.6 billion spent on the government's bailout program for struggling homeowners. That money is designated as government subsidies and no repayment is expected, the report said. Romero said Treasury has yet to spend $29.9 billion available for the housing program.

Her report also cited continuing problems with the mortgage aid program, which has been criticized for years for failing to help enough homeowners at risk of foreclosure. The program allows modifications of mortgages for eligible homeowners. The report says the longer homeowners have stayed in the program, the greater their chance of missing payments and defaulting on their modified mortgages.

It says the oldest modifications, from the third and fourth quarters of 2009, have an average default rate of 46 percent, compared with modifications granted in 2010, which have an average rate of 38 percent. About 306,000 homeowners have defaulted of a total 865,000 or so in the program. The original goal was to help 3 million to 4 million struggling homeowners, in a program based on banks participating  and reworking mortgages for borrowers -- including some with weak credit histories.

Treasury said there will always be a risk of defaults in such a program. But Treasury disputed the idea that homeowners are more likely to default the longer they're in the program, saying that in fact the longer they remain in it, the more likely they are to keep up payments and avoid default.

Treasury has taken steps to improve its ability to give "as many struggling homeowners as possible the chance to keep their home while recognizing that not all will succeed," Mark McArdle, the acting chief of homeownership preservation, said in a post on the department's website. For example, he said, the program established eligibility rules so that mortgage aid would go to those homeowners most in need, and standards to make the modifications provided sustainable for homeowners.

by on Jul. 24, 2013 at 5:59 PM
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Replies (1-8):
candlegal
by Judy on Jul. 24, 2013 at 6:14 PM

gee, didn't someone say last week that this was all paid back?

D-Town
by Platinum Member on Jul. 24, 2013 at 6:18 PM

 

Quoting candlegal:

gee, didn't someone say last week that this was all paid back?

 I was going to ask the same question. It's been said over and over that GM paid back ALL of the bailout money. Chrysler too. Even Obama's website has said GM and Chrysler both have paid back all of the money that was used to bail them out. According to Obama's website, only the banks hadn't repaid the money.

candlegal
by Judy on Jul. 24, 2013 at 6:20 PM

That must be one of the  talking points of the Obama can do no wrong crowd.

Quoting D-Town:

 

Quoting candlegal:

gee, didn't someone say last week that this was all paid back?

 I was going to ask the same question. It's been said over and over that GM paid back ALL of the bailout money. Chrysler too. Even Obama's website has said GM and Chrysler both have paid back all of the money that was used to bail them out. According to Obama's website, only the banks hadn't repaid the money.


muslimah
by on Jul. 24, 2013 at 11:42 PM

 Like I said in another post the major car industries are not in Detroit. They are out side of Detroit in the suburbs. That's a good thing for them because if they were in Detroit they could not collect any taxes because everyone is on dope and does not pay taxes. They are all on well fare and when that runs out they just get get knocked up again to exstend their welfare.

Healthystart30
by Gold Member on Jul. 24, 2013 at 11:51 PM
Will we really lose all that money? Are people still being employed by these companies, and would those people be on welfare if all of them would have gone completely bankrupt?
What about the dealerships and the money paid in taxes when people buy these cars?

And have those companies stopped paying money back?
jllcali
by on Jul. 25, 2013 at 12:20 AM
I sometimes think Bush signed the bank and auto bailouts as a great big eff you in retaliation for people making fun of him while in office.
candlegal
by Judy on Jul. 25, 2013 at 6:57 AM

So, was he lying here? 


Obama: Auto bailouts worked

and this must be a lie, right?

Auto bailout in ’09 key to Obama’s survival in Ohio

Quoting jllcali:

I sometimes think Bush signed the bank and auto bailouts as a great big eff you in retaliation for people making fun of him while in office.


jllcali
by on Jul. 25, 2013 at 11:11 AM
That really doesn't have anything to do with the fact that bush is the one who signed them his last month in office. I thought it was a horrible idea then, and would only benefit auto and bank executives. If the purpose of them was to pad the wallets of auto and bank executives, which I believe was the purpose, then they worked as intended.

The reason the bank and auto bailouts helped obama is probably because many people think he was the one who signed them, and since the industries survived instead of going completely under, people were relieved and just glad not everyone was laid off.



Quoting candlegal:

So, was he lying here? 


Obama: Auto bailouts worked

and this must be a lie, right?

Auto bailout in ’09 key to Obama’s survival in Ohio

Quoting jllcali:

I sometimes think Bush signed the bank and auto bailouts as a great big eff you in retaliation for people making fun of him while in office.


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