Plan B Forum

The US will make a profit from bailing out the nation's banks and carmakers at the height of the financial crisis, the Treasury Department has said.



The bank bailouts may result in a return of $2bn (£1.3bn), the Treasury said in its latest projections for the government's response to the crisis.

And the recovering auto industry has added 230,000 jobs as a result.

The recession was the worst since the Great Depression and $19.2tn of wealth was wiped out, it said.

"Although the economy is getting stronger, we have a long way to go to fully repair the damage the crisis has left behind," the Treasury said.

"We are still living with the broader economic cost of the crisis, which can be seen in high unemployment."

The vast majority of the projected returns - more than $179bn - come from the Federal Reserve's huge investments and loans to banks.

The Fed and the Treasury together invested $182bn just to save insurance giant AIG.

In terms of the bank bailouts, the much-maligned Troubled Asset Relief Program (Tarp) that provided money to more than 700 banks has already realised a $19bn profit.

The bailout of carmakers General Motors and and Chrysler - which was also part of Tarp, cost $22bn, the Treasury said.

"But the cost of a disorderly liquidation to families and businesses across the country that rely on the auto industry would have been far higher," it added.

The US Treasury still owns more than 30% of GM's ordinary shares.

In the end, the Treasury expects to make $22bn from Tarp's bank bailouts and $2bn on Tarp's loans to restart the credit markets, offsetting the auto bailouts.

http://www.bbc.co.uk/news/business-17720012

The US Treasury still owns more than 30% of GM's ordinary shares.

One of the great mysteries to many inside the auto industry is why is GM’s stock price so low? Though the company had a weak third quarter, its stock price has been stuck well below its IPO price for much of the last year, despite a return to profitability. Though GM faces challenges, few inside the auto industry understand why its stock price remains so low. One theory: the government’s mere continued presence as a major stockholder creates uncertainty around the company. If this is the case, it creates something of a vicious cycle: the lower the stock price, the less likely the government is to sell its shares, leaving it lingering with no exit strategy, in turn driving the stock lower. Though that’s not likely to be the whole story, one thing is certain: the government has been forced to increase its loss estimate for the GM bailout. The Detroit News reports that the Treasury’s losses on GM are now estimated at $23.6b, up from $14.4b. And with an election looming, it seems likely that the White House will sell within the next six months. But will the government’s desire to protect itself politically trade off with GM’s PR? After all, whatever the Treasury’s final loss is, that number will be pinned to GM as a symbol of what it owes the American people. On the other hand, with most analysts insisting that GM stock is undervalued, another year of government ownership could convince investors to bid up the price, greatly reducing GM’s public debt. Too bad electoral politics will probably prevent that from happening….

dales wrote:

The US Treasury still owns more than 30% of GM's ordinary shares.

Which have steadily declined in value.

The MOPAR giveaway was a gift to FIAT at the expense of US taxpayers.