Whether if taxpayers get their money back or not it is not the role of the FedGov to be bailing out corporations in the first place. http://www.dailyfinance.com/story/i...-not-get-full-rerturn-on-gm-bailout/19799556/ By selling a block of its shares in General Motors Co. for $33 each - a price far below the "break-even" point - the government sharply reduced the chances of taxpayers fully recovering their $50 billion investment in the auto giant, a new report from a congressional watchdog says. The Treasury Department did gain a "major recovery" of taxpayer aid, $13.5 billion, by selling a chunk of its GM stock in November, the Congressional Oversight Panel said in a report issued Thursday. And the $85 billion bailout of GM, Chrysler and auto lender GMAC - now known as Ally Financial - seems to have put them "on the path to financial stability," the report said. But the companies still face uncertain futures, taxpayers remain at risk and there are concerns about the government's openness in the unprecedented rescue program, the report said. Without the rescue from the Bush and Obama administrations starting in December 2008, GM, Chrysler and GMAC would have faced the financial abyss, the report said. Their failure would have been crushing blow on the economy. The Obama administration has said the rescue was needed to prevent the loss of at least a million jobs and economic devastation in the industrial Midwest. Administration officials have said they never expected to recoup the full investment. An earlier estimate by the Congressional Budget Office that taxpayers would lose $40 billion on the auto industry rescue has been slashed to $19 billion, the oversight panel noted. GM was pushed into bankruptcy protection by the Obama administration. It emerged in 2009 with a balance sheet cleansed of its staggering debt. The company has made an impressive turnaround from losing billions before its restructuring to posting $4.2 billion in profits in the first nine months of last year. Sponsored Links Still, the report said, by selling 45 percent of its GM shares for $33 each in the automaker's $15.8 billion initial public offering in November, Treasury "locked in" a loss of billions of dollars and diminished the likelihood of full repayment to taxpayers. The "break-even" price needed for that is $44.59 a share, according to the report. Government officials say that GM's stock price averaged only 3 percent above $33 in the month following the IPO, confirming that it was fairly priced. "These are always tough decisions," Sen. Ted Kaufman, D-Del., the panel's chairman, said in a conference call with reporters on Wednesday. Treasury's decisions "may well have been reasonable" but the rescue program's objectives should have been more clearly defined, he said. GM's stock price has been rising as the company has performed better than many expected. It closed Wednesday at $38.62. If the trend continues, it's possible that taxpayers could be made whole. The new report also: -said the prospects for taxpayer recovery from Chrysler are reduced because the government owns only 10 percent of the company's stock and so has limited influence on the timing of an initial public offering. -criticized what it called Treasury's "hands off" approach toward Ally Financial, not always asserting its influence of the timing of an eventual IPO. The department also declined to block GM's purchase of AmeriCredit, even though that finance firm may end up competing against Ally Financial, it said. -said that the government's aid to prevent GM and Chrysler from failing "has put more competently managed automotive companies at a disadvantage," referring to Ford Motor Co. See full article from DailyFinance: http://srph.it/gbhXrm
The federal government has a long history of bailing out corporations going back 100+ years. Like it or not, the US wouldn't remotely be as strong as it is today without some of those decisions.
Not really seeing a problem. 1. We weren't expecting to recoup the investment and we did it to save jobs, which seems to have worked. If you want to honestly calculate the returns on this investment, given that our aims were not simply on direct returns, you'd have to model how much economic benefit was gained by saving these companies to add to the gain/loss on the investment itself. 2. The govt didn't want to own the company for the long-term, so waiting for the price to go up would not be preferable. 3. It saw its ownership as a drag on the fair price of the company. They sold one block on the expectation that the stock price would then rise enough to sell the remaining shares at a more favorable price -- and with less pressure to sell in the interim. 4. There's always risk when you play the stock market. I would say given the jobs/industries saved, and the rather minimal loss on the investment itself, this risk paid off big-time. Congratulations to Bush and Obama for knocking it out of the park.
It's not just GM jobs there are a plethora of companies that rely on GM. The reverberations would have been felt nationwide similar to the domino effect of Lehman and Bear Stearns. Actually probably worse.
Oh, well if The Obama Administration said it it must be true. They've never been known to trumpet phony "jobs created or saved" statistics.
Sorta like when the Bush administration reclassified the Fast Food industry as manufacturing jobs? Job reports are just that ...reports. All politicians think good reports are how to win votes.
While I am not a fan of the government meddling in private business, this was something that had to be done even if nothing was paid back. By saving GM and Chrysler, we saved many parts suppliers. Ford knew that those parts suppliers had to be saved or else Ford would have also failed. The loss of all of those jobs would have been horrible, but the permanent loss of all the tax revenues from those lost jobs and lost manufacturing in the USA surely would have exceeded the money provided by the government (and us taxpayers). However, I was not a fan of the heavy-handed actions of the government in the bankruptcy case. While I am not a bankruptcy expert, it certainly seemed that administration forced the unions in to a better position and the bondholders in to a worse position than what generally happens in bankruptcy.
But GM and Chrylser was failing for a reason.. Throwing money at them so a few executiives can continue to fly in their private jets and collect their bonuses and also paying the union workers so they can sit on their butts with taxpayers dollars doesnt seem like a very good idea. GM could have gone through the bankruptcy process like any other corporation. Why do they get special treatment and have to have the govt bail them out with taxpayer dollars. Like you I am not a bankruptcy expert and the process is a whole lot more complicated but in principle it just doesnt seem right.
I'm not an expert either, and I'm not sure how I feel about the whole thing, but do you REALLY think that's the reason it was done? Really??? Like others have said, there was a LOT more at stake than just a few executive salaries. Think about the ripple effect of a company like GM going under. You don't think that would affect any other American companies at all? Or the US economy as a whole? If you want to disagree with it, that's fine. But you're going to have to bring more to the table than just parroting the empty "IT'S JUST THE RICH GETTING RICHER!!!!11" rhetoric. Or the "Obama is a SOCIALIST and wants to take over the auto industry and rename GM Goverment Motors!!!!!!!!11" nonsense you hear on the Shawn Hannity show. Why not learn more about it before you form such a strong opinion?
I don't think GM would have made it out of bankruptcy without the funding from the government. I could be wrong, but I think if it that domino had fallen, we would be in a very different situation in this country currently. The one small bad result of some executives, who should not have benefited, getting a benefit, should not undermine all the good from what did happen.
