Bailout Watch 518: How Much is This Boondoggle Going to Cost Me?
Some Detroiters honest-to-God believe that Chrysler and GM will repay the money “loaned” to them by the federal government. That’s a leap of faith that would have taken Evil Knievel across the Grand Canyon (proper) and on to Maui. But you know what? In all this excitement, I’ve lost track of how many billions we’re actually talking about. I reckon the government’s to-date contribution towards keeping the zombies alive lies just north of $37 billion. That doesn’t include the duo’s share of the $25 billion Department of Energy retooling loans (should they live that long). Or the $5 billion blessed upon GMAC. And the $1.5 billion loaned to the now-defunct Chrysler Financial. Or Canada’s contribution to the kerfuffle. Or the cost of running a 25-member Presidential Task Force on Automobiles. And the phalanx of lawyers employed by same. And the community organizer assigned to help out affected communities with, wait for it, federal funds. And now . . . the rest.
No less a personage than the President has promised to provide “fresh” funding for GMAC to absorb Chrysler Financial. I’m thinking that’ll be $5 to $10 billion, for a start. And we’ve heard nothing of the cost (or logistics) of the federal warranty program backing Chrysler buyers. And here’s something interesting I found on CNNMoney:
The U.S. government’s $700 billion bailout fund can be used to purchase debt and equity from domestic auto makers, U.S. Treasury Secretary Timothy Geithner told congressional leaders this week.
In letters dated Wednesday to the chairmen of several key committees, Geithner said he and U.S. Federal Reserve Chairman Ben Bernanke have determined that the purchase of auto makers’ debt is “necessary to promote financial market stability.”
Moreover, Geithner said he and Bernanke have concluded the debt qualifies as a “troubled asset,” making it eligible for purchase through the bailout fund. The fund was originally created as a way to cleanse bank balance sheets of risky mortgage-related assets that have constrained their lending ability.
Geithner said certain companies involved in the auto manufacturing sector already have asked the Treasury Dept. purchase debt obligations or equity. However, he declined to provide names or further details.
Question: at what point do even Detroit’s myopic cheerleaders say “basta”? I have a feeling we’re going to find out. Later.
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