Payne: Taxpayers take a Government Motors bath

Posted by hpayne on December 19, 2012

Now we know the reason why the Obama administration spurned General Motors’ offers to buy back U.S. Treasury stock until after the election.

In fact, we have 13 billion reasons.

A month after Obama’s re-election – an election won in part due to the Obama campaign’s boast that it saved GM and Chrysler – GM announced today that it would buy back 40 percent of Washington’s stock at just half the price needed for taxpayers to break even on their investment. That’s at least a $13 billion loss according to The Detroit News (AP pegs the loss at $21B when remaining shares are sold).

Ironically, the GM losses will not negatively impact the TARP program’s bottom line, because the banks that also received TARP money have paid back their loans with profit to the taxpayers. That is, the Wall Street banks that Obama demonized for his class warfare strategy are covering his keister on GM losses.

We can’t make this stuff up.

GM’s losses, however, do not include the billions lost by Delphi salaried workers whose pensions were gutted by the White House (even as UAW Delphi pensions were made whole) and billions more lost by pensioners (including Indiana teachers and firefighters) when Obama’s White House Task Force illegally gave preference to Democrat-donating Big Labor over secured bondholders.

Though GM has been desperate to unload federal shares for the past year to escape the “Government Motors” stigma, the losses would have been a nightmare for an Obama campaign that claimed its bailout was an unmitigated success. Indeed, selling the shares during the campaign would have exposed Obama (and Obamedia’s) Big Lie that he did not let GM go bankrupt. GM’s stock price suggests that Obama’s managed Chapter 363 bankruptcy was a less efficient solution for taxpayers than Mitt Romney’s managed Chapter 11.

The share price further reflects a GM that continues to struggle against more efficient rivals unburdened by union contracts (not to mention the drag of Obama model-Euro unions on Opel) – and with government mandates forcing it to sell unprofitable green vehicles. The National Legal and Policy Center (NLPC) reports that GM pension obligations are about $24 billion under-funded meaning the General will likely have to issue more stock to pay UAW obligations – further cheapening the 19 percent of GM shares that taxpayers still own.

“Almost a year and a half ago, Treasury could have sold taxpayers’ GM stake for about $30 a share. They wouldn’t. Shares are now down about 20 percent from then, resulting in an additional loss in value of about $3 billion for taxpayers,” reported NLPC in scolding the White House decision last September not to sell immediately. “Treasury will continue to gamble taxpayer money on GM and continue to stay invested as they market-time their exit.”

“Unfortunately for America,” they continue, “the gains they seek by the gamble are political rather than monetary.”

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