Government Sells Off GM Shares . . . Public Takes $10.5 Billion Bath

150px-General_Motors.svgThe federal government just cashed out on our General Motors shares and the final tally is a $10.5 billion loss. Many could still argue that this cost was worth it, but it is different from what has been represented to the public that we would lose no money on the deal. Indeed, the article below says that the White House delayed the final sale until after the election due to the implications of an over $10 billion bath. My concern is the lack of clarity and honesty surrounding the bailout. The public might still have supported the plan but it was not sold as an over $10 billion walkaway bailout.

U.S. Treasury Secretary Jack Lew confirmed that a $10.5 billion loss on the $49.5 billion bailout.

Notably, Treasury sold its stake in Chrysler Group LLC in July 2011 with a $1.3 billion loss on a $12.5 billion bailout. That is a total of $11.8 billion loss on these two companies.

Notably, the Administration decided not to require GM to repay its entire bailout and swapped the loans for the 60.8 percent ownership. It then bailed on its shares before recouping its losses after pushing the sale past the election. In hindsight, the decision to take shares instead of repayment looks like a politically useful way to forgiving debt while leaving the appearance of a public “investment” in the company.

Source: Detroit News

53 thoughts on “Government Sells Off GM Shares . . . Public Takes $10.5 Billion Bath”

  1. Volcker Rule Finalized With Wall Street Responsible For Judging Compliance
    By Shahien Nasiripour
    Posted: 12/10/2013

    Big Wall Street banks face an uneasy future after U.S. regulators on Tuesday finalized the Volcker Rule, a measure that attempts to curtail big bets on certain financial instruments. But in a potential concession, the banks themselves largely will be responsible for determining whether they’re in compliance.

    As Wall Street, Washington and the lawyers that advise them digested the rule, investors appeared to brush off concerns that the final version would dent banks’ profitability. Share prices of banks seen as most vulnerable to the rule rose.

    Named after former Federal Reserve Chairman Paul Volcker, the idea began in 2010 as a simple effort to ban short-term speculative trading and investments in hedge and private equity funds by financial institutions that enjoy federal deposit insurance. Over the last few years, regulators had struggled to define what constituted speculation and what was merely the accumulation of financial instruments meant to be sold to clients, such as asset managers or other large investors.

    More than 18,000 comment letters to the five federal agencies charged with developing the rule further clouded regulators’ efforts, and the rule became a symbol of whether the Obama administration and financial supervisors in Washington would rein in big banks or succumb to relentless industry pressure at a time when calls to break up the biggest banks appear to be growing.

    Officials said the final rule attempts to straddle the line between banning so-called proprietary trading — trading by banks for their own account — but preserving big banks’ abilities to hedge their risks and buy and sell securities in order to serve their customers, otherwise known as market-making.

    The rule promises unprecedented surveillance of big banks’ trading operations, mostly through documentation requirements that force banks to justify trades and strategies and to keep running tallies of whether their activities conform to the rule.

    But the establishment of parameters that ultimately will determine whether banks are complying with the rule was left to the banks themselves. The rule also relies on banks to tell regulators whether their trading practices, as they define them, comply with its provisions. Regulators largely will be responsible for double-checking the banks’ work.

  2. If this was a bath, what was Afghanistan for the past five years? Ocean Eleven?

  3. Bruce,

    The question asked is rather straightforward “Do you approve or disapprove of the way Congress is handling its job?”

    Gallup opines that it is ‘Congress’ continuing inability to agree in a timely fashion on fundamental budget and operating legislation, resulting in “fiscal cliffs” and the actual shutdown of government in October of this year.’

    There is really little difference in the yearly averages by party … 13% – Rep, 14% – Ind, 16% – Dem

    There was no mention of Harry Reid.

  4. Blouise: Could it be because Harry Reid won’t let House bills come to a vote in the senate

  5. BTW… end of the year analysis for Congress from Gallup:

    “Americans’ job approval rating for Congress in 2013 averaged 14%, the lowest annual average in Gallup’s history, including a 12% reading in December. Congressional approval has averaged below 20% for each of the last four years.”

  6. Volker Rule – “any trade has to be tied to a certain asset” (interpretation) – at last some actual accountability to offset the flim-flam artists. Had it been in place a couple of years ago many of the JPMorgan con artists would be in court as portfolio hedging is banned.

  7. Elaine, both too complicated and too little explanation and definition of terms for me. I’m sure any number of accountants can spin this info any number of ways. How am I supposed to wrap my head around $29 trillion and what’s does it mean that they only count outstanding loans? Also, it’s too old. I imagine the numbers have since changed – perhaps a lot. Win – loss – draw? We’ll probably never know. I only hope we learn some lessons (don’t laugh – the Volker Rule did pass today) AND somebody at Kos learns how to spell “paid”. They spelled it TWICE (so no typo) as “payed”. Sorry, but it’s hard to trust someone writing a financial report who can’t spell paid.

    I don’t mean to discourage you; this is the one case that your efforts didn’t help me much.

  8. G M was a union bailout, G.M. bond holders lost everything, remember they closed dealerships. Another great deal by the Obummer administration along with the three solar panel plants that went upside down with government loans. Wonder why a person with a Havard law degree becomes a community organizer. is it because he doesn’t know his a$$ from a hole in the ground.

  9. Putting the GM bailout into perspective:

    The total cost of the Bank Bailout

    #2: How big was the bailout?

    Many are still under the impression that TARP = The Bailout.
    In fact, TARP was only a small part of the Wall Street bailout. Most of the bailout was accomplished through the Federal Reserve.

    The net total? As of November 10, 2011, it was $29,616.4 billion dollars — (or 29 and a half trillion, if you prefer that nomenclature). Three facilities—CBLS, PDCF, and TAF— are responsible for the lion’s share — 71.1% of all Federal Reserve assistance ($22,826.8 billion).

    $29 Trillion is around twice the size of America’s GDP.

    The Federal Reserve claims they only lent $1.7 Trillion to the big banks. Why the huge difference in totals? Because the Fed only counts the most outstanding at any one time.

    Here’s a quick list of the Fed borrowers:

    Citigroup – $2.513 trillion
    Morgan Stanley – $2.041 trillion
    Merrill Lynch – $1.949 trillion
    Bank of America – $1.344 trillion
    Barclays PLC – $868 billion
    Bear Sterns – $853 billion
    Goldman Sachs – $814 billion
    Royal Bank of Scotland – $541 billion
    JP Morgan Chase – $391 billion
    Deutsche Bank – $354 billion
    UBS – $287 billion
    Credit Suisse – $262 billion
    Lehman Brothers – $183 billion
    Bank of Scotland – $181 billion
    BNP Paribas – $175 billion
    Wells Fargo – $159 billion
    Dexia – $159 billion
    Wachovia – $142 billion
    Dresdner Bank – $135 billion
    Societe Generale – $124 billion
    “All Other Borrowers” – $2.639 trillion

    Behind the enormous sum, we find certain items of interest. Such as:

    The Fed paid $659.4 million in “fees” to these very same institutions during the period in question. This is not part of the bailout.

    You might have noticed that about $3 Trillion went overseas.

    The banks made $13 Billion from Fed below-market rates. This is not part of the bailout.

    The bailout of Fannie and Freddie (which directly assists the banking industry) is still negative $187 billion. They have returned none of the money yet. However, Fannie and Freddie have paid $50.4B in dividends to the Treasury.

    OK. So now we have the full picture, right? TARP bailout was a small loser on something around $600 Billion, while the Fed bailout was around $29 Trillion and pretty much a wash, right?

  10. Yea!!!!!

    Volker Rule passed.

    Senate consents to Millet appointment to 3rd Circuit!!!!

    Yea bye-bye filibuster!

  11. Blouise, thanks for your important arguments as well.

    Turley’s POV seems so biased; I can’t help thinking he hopes to be appointed to the bench (by a Republican administration).

  12. SwarthmoreMom, Thanks for posting the other (and weightier) side of the story.

    Turley seems to have lost sight of the human side of the auto bailout or the need

    to have some kind of manufacturing in this country.

  13. I’m glad they are out. The government shouldn’t be a major investor in a private company if for no other reason than that the government is in a position to write legislation that favors said company over its competitors. And with that point in mind, the government had committed to getting out by the end of the year. (CBSNews) GM is now free to pay dividends … of course they are also free to offer more money to executives which means the incompetents who talk a good game but produce poop can now apply for employment.

    Also, the structured loans that were on top of the stock deal were paid back a long time ago.

    And … to get back to the original mess it needs to be remembered that Bush 2 handed Obama a failed economy on the verge of collapse along with 2 wars. Paulson and TARP belong to Bush2 and his republicans. That’s not partisanship, that’s fact. Would H. Clinton, the only other serious democratic party contender at the time, have done a better job than Obama or McCain/Palin? Those were our choices.

    It might help those who are concerned about the loss from the stock sale to remember it is also true that the Obama administration is collecting billions from tax cheats holding offshore accounts.

    (NCFO has been in existence since 1899 … National Conference of Firemen & Oilers ) I chose this report to site because it was concise … one can find collaboration in the Wall Street Journal, the NYTimes, and the IRS reports.

  14. This is sickly funny! “In recent months we’ve learned that the National Security Agency (NSA) has been spying on tens of millions of law-abiding citizens’ emails and telephone calls placed through companies like Google, Yahoo, Verizon, AT&T and Sprint Nextel. What the NSA does not appear to have been spying on are the Bloomberg chat rooms where real financial frauds involving potentially trillions of dollars in trades have been occurring for years.

    Now, the ultimate embarrassment has occurred for those sleuths at the NSA. The Wall Street Journal is reporting that investigators probing a new line of market manipulation, rigged foreign currency trading, have found that potential lawbreakers were so cavalier about their conduct that they used chat names such as “The Bandits’ Club” and “The Cartel.”

  15. That’s ok…. They(we) may have taken a bath of the stock sale….. But the we the people are taking a bigger bath with the PBGF……. The stock sale is chump change….

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