Obama 2010: Taxpayers positioned to recover more than was invested in GM — 2012: Gov’t can’t sell back GM because taxpayers would lose billions (in an election year… gasp)
**Written by Doug Powers
Running just beneath all the self-congratulatory campaign trail talk about President Obama saving GM and taxpayers being paid back is an ugly thing called reality, and it’s not nearly as rosy as they’re making it out to be:
Earlier this summer, GM floated a plan with Treasury officials to repurchase 200 million of the roughly 500 million shares the U.S. holds in the auto maker, according to people familiar with the discussions. Under the plan, Treasury would sell the remaining shares through a public stock offering.
But Treasury officials aren’t interested in GM’s offer at the current price and aren’t in a rush to offload shares, according to people familiar with the matter. The biggest reason: A sale now would leave the government with a hefty loss on its investment.
Normally a few billion dollars down the dumper wouldn’t be a major concern… unless it’s an election year:
At GM’s Friday share price of $24.14, the U.S. would lose about $15 billion on the GM bailout if it sold its entire stake. While GM stock would need to reach $53 a share for the U.S. to break even, Treasury officials would consider selling at a price in the $30s, people familiar with the government’s thinking have said.
There is also a political calculus. A deal at this time could be fraught for the Obama administration, which has maintained that the bailout saved hundreds of thousands of jobs at a critical time for the U.S. economy and was a win-win for business and taxpayers alike. Huge losses on taxpayer investment in the auto maker’s stock could tarnish the administration’s overall record in recovering crisis-era bailout money.
GM stock is down, but this might be enough to tick it up a penny. Baby steps.
It’s quite the Catch-22 (not for taxpayers though because we’ll probably lose no matter what), and I’m not sure which side to feel less sorry for. GM now wants to shed the “Government Motors” label they were thrilled to accept when it came attached to an enormous check, but the company will probably not recover as long as they’re lugging around a big inept tumor called the federal government that now comprises about a quarter of their total body weight. At the same time the Obama administration is in no way going to sell back the company any time soon and endure all the “taxpayers lose $15 billion on GM” headlines before the election — especially after everybody’s already been told all the bailout money has been recovered and the entire endeavor is a “success story.”
Flashback to November of 2010:
President Barack Obama on Thursday celebrated the return of a reborn General Motors to the U.S. stock market, saying it shows some of the “tough decisions that we made” during the financial crisis were beginning to pay off.
“American taxpayers are now positioned to recover more than my administration invested in GM, and that’s a good thing,” Obama said, speaking of the government’s $50 billion taxpayer-backed rescue of the venerable automaker.
Trading the new stock is a milestone for both the corporation and for the Obama administration.
That “milestone” seems to have turned into a kidney stone.
And as the US government continues to control a sizable chunk of GM after the $50 billion bailout, the Obama administration on Monday filed a complaint with the WTO alleging China’s government of unfairly… subsidizing its auto industry. What’s next? Accusing Hu Jintao of unfairly using a teleprompter?
**Written by Doug Powers
Twitter @ThePowersThatBeblog comments powered by Disqus
Heh: Obama to flex his job creation muscle at auto plant — just one problem (make that two problems)
January 5, 2015 08:10 PM by Doug Powers
July 25, 2014 06:55 AM by Michelle Malkin
May 20, 2014 12:52 PM by Doug Powers
Following up on Joe Biden’s promise that Fisker Auto would be a multibillion dollar return on investment for taxpayers
November 26, 2013 01:16 PM by Doug Powers
Inspector General: Yeah, Obama Treasury Dept. screwed Delphi non-union workers, but there’s nothing we can do about it
August 16, 2013 10:58 AM by Michelle Malkin