Article brought to you by: Catholic Online (www.catholic.org)
U.S. taxpayers could foot the bill for costly automaker bailout
By Catholic Online (NEWS CONSORTIUM)
August 15th, 2012
Catholic Online (www.catholic.org)
August 15th, 2012
Catholic Online (www.catholic.org)
General Motors' stock prices have experienced a significant downturn. As
a result, U.S. taxpayers may be forced to foot the bill of the 2008 -
2009 bailout, to the tune of $25 billion. That figure has increased by
15 percent since an earlier forecast.
In a new Congressional report, the White House raised the amount to $25.1 billion. The Obama administration says that it can now recover the amount by selling off the remaining 26 percent stake it still holds in GM. The previous quarterly estimate was set at $21.7 billion. The latest figure is approximately 45 percent less than the $44 billion the Obama Administration had estimated.
The forecast has actually been increasing over the past several months. Government analysts issued a projection closer to $15 billion last year. After the November 2010 GM IPO, there were encouraging signs that the Treasury might break even.
Sadly, over the past several weeks, automotive shares in general have nosedived. The $25 billion government loss forecast was based on a stock price of $22.20 at the end of May. That number has dipped to less than $19 a share last month, though the stock has since rebounded to $20.61 at midday today.
In response, GM sold off more than half the shares held by American taxpayers during the 2010 IPO. The Treasury remains the maker's biggest stockholder at 26 percent, or 500 million shares. GM's stock price would need to climb to $53 for the government to break even.
Started by the Bush administration, the bailout has since become a campaign issue. GOP presidential candidate Mitt Romney loudly opposed the rescue effort in 2008 and 2009, but has since claimed that he helped set the framework that helped GM and Chrysler successfully emerge from bankruptcy.
President Obama has long defended the bailout, insisting that the long-term cost of allowing GM and Chrysler to go bankrupt would have been more than what the Treasury might ultimately lose on the effort.
"The auto industry rescue helped save more than 1 million jobs throughout our nation's industrial heartland and is expected to cost far less than many had feared during the height of the crisis," Treasury spokesman Matt Anderson said in defense of the bailout.
Even at $25.1 billion, the current forecast is less than the original $44 billion the Obama Administration had projected, the same amount authorized by the Bush Administration when it approved the first tranche of bailout money.
Chrysler has paid off all the money it received from the Obama Administration but didn't cover another $1.3 billion granted by Bush.
© 2012, Catholic Online. Distributed by NEWS CONSORTIUM.