Nov 17, 2011 4:00 PM GMT
Stimulus dollars hard at work. What's an extra several billion dollars between ... political supporters?
U.S. boosts estimate of auto bailout losses to $23.6B
David Shepardson/ Detroit News Washington Bureau
The Treasury Department dramatically boosted its estimate of losses from its $85 billion auto industry bailout by more than $9 billion in the face of General Motors Co.'s steep stock decline.
In its monthly report to Congress, the Treasury Department now says it expects to lose $23.6 billion, up from its previous estimate of $14.33 billion.
The Treasury now pegs the cost of the bailout of GM, Chrysler Group LLC and the auto finance companies at $79.6 billion. It no longer includes $5 billion it set aside to guarantee payments to auto suppliers in 2009.
The big increase is a reflection of the sharp decline in the value of GM's share price.
The current estimate of losses is based on GM's Sept. 30 closing price of $20.18, down one-third over the previous quarterly price.
GM's stock closed Monday at $22.99, up 2 percent. The government won't reassess the estimate of the costs until Dec. 30.
The government has recovered $23.2 billion of its $49.5 billion GM bailout, and cut its stake in the company from 61 percent to 26.5 percent. But it has been forced to put on hold the sale of its remaining 500 million shares of stock.
The new estimate also hikes the overall cost of the $700 billion Troubled Asset Relief Program costs to taxpayers. TARP is the emergency program approved by Congress in late 2008 at the height of the financial crisis.
In total, the government used $425 billion to bailout banks, insurance companies and automakers, and provided $45 billion in housing program assistance.
The government now expects to lose $57.33 billion, including the full cost of the housing program, up from $36.7 billion. The new estimate means the government doesn't believe it will make an overall profit on its bailouts.
Republican presidential candidates, including former Massachusetts Gov. Mitt Romney, have seized on the auto bailout losses estimates, as evidence that the Bush and Obama administrations "wasted" money.
Matt Anderson, a spokesman for the Treasury Department, said, "Both TARP and the auto industry rescue are still on track to cost a fraction of what was originally expected during the dark days of the financial crisis."
In 2009, the government initially forecast it would lose $44 billion on its auto industry bailout. It revised it down to $30 billion, and later to as low as $13.9 billion earlier this year.The administration and President Barack Obama have argued that any losses on the auto bailout were worth the hundreds of thousands of jobs saved.
"The investment paid off. The hundreds of thousands of jobs that have been saved made it worth it," he said at an appearance last month at GM's Orion Assembly plant. "I want to especially thank the people of Detroit for proving that, despite all the work that lies ahead, this is a city where a great American industry is coming back to life and the industries of tomorrow are taking root, and a city where people are dreaming up ways to prove all the skeptics wrong and write the next proud chapter in the Motor City's history."
The new bailout forecast also represents an increase in the government's forecast in its losses from its $17.2 billion bailout of Detroit-based auto and mortgage lender Ally Financial Inc. The government holds a 74 percent stake in Ally, which has been forced to put its planned initial public offering on hold because of market conditions.