When the Obama administration extended tens of billions of dollars in loans to General Motors and Chrysler to get them through a managed bankruptcy in exchange for stock in the newly reorganized company, conservatives screamed “COMMUNISM! Obama is taking over the auto industry!” It was nonsense from the start; the arrangement was for the government to slowly sell off those stock holdings to pay back the loans as the company recovered. And guess what? That’s exactly what they’re doing:
The U.S. Treasury Department has slashed its stake in General Motors to 7.3%, putting the government within months of ending its direct ownership of the automaker.
The government revealed in an investment transaction report Tuesday that it had reduced its stake in GM more than previously expected. The report comes more than four years after U.S. taxpayers rescued GM and Chrysler, providing emergency financing to guide the automakers through Chapter 11 bankruptcy.
The latest move is part of the government’s broader plan — revealed last December — to gradually sell off all of its GM shares by early 2014.
The U.S. owned 13.8% of GM stock as recently as June 12, according to the transaction report.
In the end, taxpayers will recover all but about $10 billion. That’s a bargain. A huge bargain. If GM had been forced into a liquidation bankruptcy, which was inevitable without government financing for a managed bankruptcy, the entire American auto industry would likely have collapsed. We would have lost around 3 million more jobs in 2009, turning the worst recession since the Great Depression into another depression. We would have had round two of the foreclosure crisis, with more banks collapsing and state and local budgets destroyed by the resulting surge in spending on unemployment insurance, medicaid, food stamps and other benefits. The federal government would have had to take over the pension plans under the Pension Benefit Guaranty Corporation, to the tune of nearly $30 billion for GM alone. Federal revenue would have taken another huge hit from the lost taxes.
The auto bailout was a bargain at twice the price for taxpayers. The American economy would be far worse today if they had let GM and Chrysler collapse and it would have cost taxpayers far more than the bailout. Today, GM and Chrysler are both thriving and gaining market share. This is truly one of President Obama’s biggest triumphs.