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Auto bailout will cost taxpayers $30 billion
If you haven’t heard the news yet, the Obama Administration is set to tell Congress today that it will lose in the neighborhood of $30 billion from the auto bailout.
Now before you start pounding the desk, there is somewhat of a silver lining.
First of all, the projected loss was $44 billion.
Second, the bailout created a ton of jobs. So, although the “American taxpayer” will suffer a bit from this, there are thousands of American auto workers, many with families, that still have a place to live and a source of income.
Here is the report from David Shepardson and the Detroit News Washington Bureau:
Washington — The Obama administration will tell Congress Wednesday that it expects to lose about $30 billion of the $82 billion government bailout of the auto industry.
Gene Sperling, senior counsel to Treasury Secretary Timothy Geithner, confirmed in an interview late today that the administration’s forecast is that it will lose $30 billion on its auto investments — but that’s down from an earlier estimate of $44 billion.
“The real news is the projected loss came down to $30 billion from $44 billion,” Sperling said, noting that auto sales have improved ahead of what many analysts had forecast. The administration still holds out hope that if things improve, the administration could still recover more.
Saving General Motors and Chrysler saved hundreds of thousands of jobs, President Barack Obama said today.
“It was right decision then and the right decision now,” Sperling said, calling it a “courageous decision by the president” to give the two automakers a “rebirth even though he knew it was not going to be politically popular.”
The estimate — the first public accounting of losses connected to the rescue of General Motors and Chrysler — is in line with what the Government Accountability Office, the Troubled Asset Relief Congressional Oversight Panel and former auto czar Steve Rattner have suggested.
The Treasury Department has loaned $50 billion to General Motors, and swapped all but $6.7 billion of it for a 61 percent majority stake in the automaker. In order for taxpayers to be repaid fully, GM’s stock would have to be worth far more than current estimates when the company goes public as early as next year.
The administration forgave much of Chrysler’s $12 billion in government loans. Fiat SpA, which owns 20 percent of Chrysler and controls the company, must repay $6 billion of the loans before it can acquire a majority stake in the automaker. It can get 15 percent by meeting three benchmarks.
The Treasury Department has also injected $13.5 billion into auto finance company GMAC and now owns a 35.4 percent stake. It is not clear if the government predicts it will lose any of that stake.
President Barack Obama defended the rescue of the auto industry at a speech on the economy today.
“We also took steps to prevent the rapid dissolution of the American auto industry, which faced a crisis partly of its own making, to prevent the loss of hundreds of thousands of jobs during an already fragile time,” Obama said. “These were not decisions that were popular or satisfying; these were decisions that were necessary.”
Obama has noted that the bailout was deeply unpopular and not something he wanted to do.
“I didn’t run for president to pass emergency recovery programs or to bail out banks or to shore up auto companies,” he said Saturday during his weekly radio address.
The administration’s report to Congress will disclose that the costs of the $700 billion Troubled Asset Relief Program will shrink by at least $200 billion below the projection released in August. Obama wants to tap some of those funds for job creation and to pay down the deficit.
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[...] administration has owned up to TARP losses of $30 billion at GM and Chrysler. The total at stake according to the article excerpted at the linked post is $82 [...]