Government to bail on bailout, taxpayers the ones getting screwed
Remember that bailout of General Motors? It spurred a lot of emotions in small government types, most of whom knew that taxpayers would never see anything approaching a return on investment. Well, earlier today, we found out just how much taxpayers are getting boned for.
The Treasury Department on Wednesday announced plans to sell the government’s remaining shares of Detroit-based automaker General Motors in the latest in a recent string of moves by the administration to unwind controversial taxpayer bailouts stemming from the financial crisis.
Although the sale will allow the federal government to unload its investments in the auto industry company, it will almost certainly do so at a loss to taxpayers worth billions of dollars.
In an October report, the special inspector general for the Troubled Asset Relief Program estimated Treasury would need to sell the remaining 500 million shares at $53.98 per share to break even on its investment.
“This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM’s progress and our future,” GM Chairman and CEO Dan Akerson said in a statement.
Of course, that depends on how one defines “successful”, doesn’t it? To be sure, the numbers coming out of Detriot sound great, but there is still the question of whether a bailout of GM and Chrysler was the best option for the industry. However, that’s a topic for another day.
The latest move will reduce the government’s ownership in GM from 32 percent to 19 percent, which is still far more than the government should have of any company (the acceptable percentage being “zero”).
To be fair though, the administration never really figured there would be a profit.
An administration official said the White House and Treasury have consistently said the investments in GM would result in a loss.
“That continues to be our view and today’s announcement is consistent with that outcome,” the administration official said.
Sen. Carl Levin (D-Mich.) said that whether the government’s investment in the automaker results in a loss misses the point behind the taxpayer rescue of GM.
“It was about protecting more than 1 million workers whose jobs could have been lost, protecting families and communities that would have been devastated if the domestic auto industry had collapsed, preventing the massive cost the federal government would have had to bear in terms of unemployment insurance and other expenses, and avoiding the very real prospect of a second Great Depression,” Levin said in a statement.
Frankly, Levin may well be wrong about the outcome of not bailing out the automakers. After all, other companies may well have decided to venture into automaking by purchasing some of the car companies’ lines and factories. Instead of three auto companies, we could have easily had a half dozen. Unfortunately, that wasn’t even explored.
Unfortunately, we have continued along the path of bailing out companies that screw up, and that’s what really matters.