Obama Advisor: Taxpayers Can Expect "Most, If Not All" Of GM's Bailout Back

Edward Niedermeyer
by Edward Niedermeyer

Speaking at a Brookings Institution summit on cities affected by the auto downturn, National Economic Council director Larry Summers said that taxpayers will likely see “most, if not all” of its $42b outstanding “investment” in GM returned when the automaker goes public. According to the Detroit Free Press:

Summers’ comments were backed up by an analyst estimate today that suggested the new GM’s equity could be worth between $75 billion and $78.5 billion – giving the government more than $42 billion for its 60.6% stake.

Obama Administration officials had previously said that taxpayers stand to lose as much as $34b on its bailout of the auto sector, including GM, Chrysler and their finance unit formerly known as GMAC (now called Ally Financial).

With all three firms seeing improvements in their first-quarter financial performances, Summers is certainly correct in saying that

The prospects of repayment are brighter than they were a year ago

However, the three firms do appear to be on a collision course over the issue of captive and subprime financing. This emerging conflict has all the looks of a zero-sum game in the making, meaning it’s unlikely that all three will be able to reach their optimal performance level without harming one another. Moreover, Treasury has already written off $1.6b in loans to Chrysler. Still, if the line can be drawn there, and taxpayers can be protected from further losses, we should all be grateful. Reasonable minds can agree or disagree with Summers’ optimism, but every US taxpayer should hope he’s right.

Seperately, the Freep reports that the cast-off remnants of GM known as Motor Liquidation will set up an $800m trust fund to clean up polluted former GM sites. No new government money was allocated to the fund, which will be created from $1.2b given to Motors Liquidation by the US Treasury to wind down GM’s old business. Concerns have been voiced recently that Motors Liquidation might not have enough money to clean up all these sites, but according to Rep John Dingell (D-MI) those fears are unwarranted.

Edward Niedermeyer
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  • Tommy Boy Tommy Boy on May 19, 2010

    >>I disagree Tommy Boy.. Big three management,by caving to union demands,were every bit as guilty,as the union bosses were, for asking. At anytime during the last 30 years management,could of drawn a line in the sand. To put it into blue collar terms,they didn’t have the balls. They were too worried about market share and how would impact thier bonuses Mikey, Legitimate points, but ... Federal law forces that management to deal with the UAW, they can't just tell them to go pound sand, and even if they'd stood firm they'd still be saddled with the "legacy costs" of union sabotage of vehicles and equipment as "payback," a union determined to "get back" the "concessions." The problem with the UAW (and other unions, nature of the beast) is that they never know when to stop. Partially because the union bosses are like politicians, and like the perks of their offices, so feel compelled to bring home the bacon. In the long run, unions kill the goose that lays the golden eggs (or force it into a Chapter 11 reorganization, so that the union bosses can blame the bankruptcy judge for the "concessions" as they live off the rank and file's dues and restart the compensation binge-purge cycle of excessive union compensation (binge) followed by the next bankruptcy (purge). We've seen this dynamic with airlines, steel and automakers. And to think that Obama using our money to bailout the UAW won't make it even more emboldened to demand more is fantasy, for it can be confident that they are now "too big to fail." The patriotic (and financially responsible) course for taxpayers is to boycott any product made with UAW labor, and to drive it into extinction, for as long as it continues to exist it will continue to feed off of us taxpayers -- a welfare queen masquerading as a labor organization.

    • Shiney2 Shiney2 on May 19, 2010

      When it comes to the downfall of the big 3, the UAW was entirely secondary to incredibly incompetent management practices. The union did not decide to squander valuable brand names on worthless clone products, did not demand that the big three waste their massive mid 90s profits by going on an overseas buying spree, did not decide to launch whole new brand names when they already had more dealers and brands than they could manage, did not decide financing not car manufacturing was their real core competency... etc. How long did it take to get rid of the boardroom blowing failure that was Rick Wagoner? What was his severance package?

  • Mego Rider Mego Rider on May 19, 2010

    :: Obama Advisor: Taxpayers Can Expect “Most, If Not All” Of GM’s Bailout Back :: Um, how is this great news? Didn't they promise from the beginning to pay it all back?

  • MaintenanceCosts It's not really much of a thought in the buying process. I would think twice about a vehicle assembled in China but other than that I really don't care. Looking at my own history, I've bought six new cars in my lifetime (I don't think choice of used cars says anything at all). I think the most patriotic of them were mostly Japanese brands. (1) Acura, assembled in Japan (2) Honda, assembled in U.S. (3) Pontiac, assembled in Australia (4) Subaru, assembled in U.S. (5) Ford, assembled in U.S. (6) Chevrolet, assembled in Korea
  • ToolGuy News Flash: Canada isn't part of the U.S.
  • Dave M. My Maverick hybrid is my first domestic label ever. It was assembled in Mexico with US components. My Nissan and Subaru were made here, my Toyota, Isuzu and other Nissan had J VINs.
  • ToolGuy "and leaves auto dealers feeling troubled" ...well this is terrible. Won't someone think of the privileged swindlers??
  • ToolGuy "Selling as I got a new car and don't need an extra." ...Well that depends on what new car you chose, doesn't it? 😉