The federal government pumped nearly $50 billion into General Motors in exchange for a 60% stake in the company in 2009 to help the failing automaker survive bankruptcy. The government now owns less than 7% of GM and expects a $9.7B loss on the deal when it finally cashes out completely.
Detroit News: Earlier this month, Treasury reported it sold $570.1 million in General Motors Co. stock in September, as it looks to complete its exit from the Detroit automaker in the coming six months. The Treasury says it has recouped $36 billion of its $49.5 billion bailout in the Detroit automaker. The government began selling off its remaining 101.3 million shares in GM on Sept. 26, as part of its third written trading plan. The government didn’t disclose precisely how many shares it sold in the final days of September, but at recent trading levels could exit as early as January.
All of which raises some worthwhile questions.
Ultimately, was it worth $9.7 billion to save GM?
Was the federal government's rush to unload it's controlling share of GM stock prudent given its investment and the share price? After all, one seller unloading more than half the stock in any company over a three-year period can only lower the stock price. Supply/demand and all of that.
Why was the bailout structured as a stock deal instead of a straight loan that might have ensured the government could have better recouped the money spent to prop-up GM through bankruptcy?
How does GM's bailout loss compare to other bailouts, which may have turned paper profits if you read the numbers in a favorable light and ignore the moral hazard?
If GM starts making Pontiac Azteks or Cadillac Cimarron again, it will be allowed to die of natural causes, right?
