Obama administration predicts $30B loss on auto bailout

Discussion in 'Wall St. News' started by WallStWhizKid, Dec 8, 2009.

  1. Obama administration predicts $30B loss on auto bailout

    Detroit News Washington Bureau

    Washington -- The Obama administration will tell Congress Wednesday that it expects to lose about $30 billion of the $82 billion government bailout of the auto industry, two administration officials familiar with the report said today.

    The estimate -- the first public accounting of losses connected to the rescue of General Motors and Chrysler -- is in line with what the Government Accountability Office, the Troubled Asset Relief Congressional Oversight Panel and former auto czar Steve Rattner have suggested.

    But it is lower than previous internal administration estimates.

    The Treasury Department has loaned $50 billion to General Motors, and swapped all but $6.7 billion of it for a 61 percent majority stake in the automaker. In order for taxpayers to be repaid fully, GM's stock would have to be worth far more than current estimates when the company goes public as early as next year.

    GM chairman and CEO Edward Whitacre Jr. said that GM will make a $1 billion payment of its outstanding loans on Dec. 31 and plans similar quarterly payments. In a Web chat with reporters today, he said the company could opt to make a lump-sum payment.

    The administration forgave much of Chrysler's $12 billion in government loans. Fiat SpA, which owns 20 percent of Chrysler and controls the company, must repay $6 billion of the loans before it can acquire a majority stake in the automaker. It can get 15 percent by meeting three benchmarks.

    The Treasury Department has also injected $13.5 billion into auto finance company GMAC and now owns a 35.4 percent stake. It is not clear if the government predicts it will lose any of that stake.

    President Barack Obama defended the rescue of the auto industry at a speech on the economy today.

    "We also took steps to prevent the rapid dissolution of the American auto industry, which faced a crisis partly of its own making, to prevent the loss of hundreds of thousands of jobs during an already fragile time," Obama said. "These were not decisions that were popular or satisfying; these were decisions that were necessary."

    Obama has noted that the bailout was deeply unpopular and not something he wanted to do.

    "I didn't run for President to pass emergency recovery programs, or to bail out banks or to shore up auto companies," he said Saturday during his weekly radio address.

    The administration's report to Congress will disclose that the costs of the $700 billion Troubled Asset Relief Program will shrink by at least $200 billion below the projected released in August.

  2. pspr


    Don't worry, it's just a paper loss and Bernake has the presses running full speed. There's a lot more paper where that came from. And, we have the prettiest currency in the world. Who wouldn't want some USDollars in their pocket?