Just recently the US Government sold its remaining equity stake in Chrysler for a $1.6 billion loss, according to CNN today. That’s on top of $4 billion in US government loan forgiveness and a $3.2 billion loan outstanding from the Dept. of Energy.
One suspects the final close-out of Uncle Sam’s stake in GM will be equally unsuccessful; just to break even, GM needs to sell its ownership at $54 per share. It’s running just under $30 today.
I keep hearing progressives crow about “all the loans being paid back,” but money is fungible. Subsequent TARP funding and off-the-radar loans like the Dept of Energy’s are simply misleading bookkeeping conventions which eventually will surface (although business and accounting wonks, like me, can easily figure out what’s going on.)
So despite the progressives’ proclamations of success, it’s looking like GM will end up costing the American taxpayer. Additionally — and I don’t know their basis but am assuming it’s similar the US government’s — I suspect the value of the UAW’s ownership will be slammed as well, likely affecting their pension and retiree benefit trusts.
I’m curious to hear the BMG loyalists defend this costly bailout. By my calculation, we could have simply paid all of the GM workers 1 year severance, given bondholders a slight haircut, and let GM slip beneath the waves for one-third to 1/2 the funds they received. Why wouldn’t this have been a better plan?