Saturday, September 12, 2009
From a purely financial standpoint, the auto industry bailout was not a wise maneuver on the part of the federal government. It can be argued that the assistance was necessary to avert even more job losses in an already recession-wracked economy, but the investment of federal bailout money into GM and Chrysler is likely to amount to a significant loss for American taxpayers.
An analysis by a Congressional Oversight Panel has predicted that the majority of the multi-billion-dollar loans given to the two automakers and their financing wings will not be repaid. In effect, the government will end up providing GM and Chrysler with a 73% subsidy because so little of the Troubled Asset Relief Program dollars will not be recouped.
The congressional report estimates that about $23 billion in initial loans given to the two domestic car companies will be subject to “much lower recoveries.” That is, unless the stock values of the new-and-improved GM and Chrysler exceed all expectations on Wall Street.
-Noel Brinkerhoff
Oversight Panel Asks All the Right Questions about Auto Industry Bailout (Project on Government Oversight)
September Oversight Report: The Use of TARP Funds in the Support and Reorganization of the Domestic Automotive Industry (Congressional Oversight Panel) (PDF)
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