Analysis says federal bailout of GM and Chrysler is a success

Article by Anita Panait, on December 11, 2013

The United States government will likely recover nearly $14 billion less from the bailout money it used to rescue General Motors and Chrysler. That may seem to be a big loss, but the way the Center for Automotive Research sees it, the government intervention could be regarded as a success. According to the Center for Automotive Research, every dollar spent on taxpayers’ behalf resulted to nearly eight dollars in savings.

This is primarily due to the fact that the rescue funds provided in 2008 and 2009 prevented GM and Chrysler from collapsing into in bankruptcy – an event that would have wiped out $284 billion in household income in 2009 and 2010 and sap $105 billion from federal coffers by chiseling tax revenues and increasing demand for services like unemployment insurance.

The Center for Automotive Research “is confident that in the years ahead this peacetime intervention in the private sector by the U.S. government will be viewed as one of the most successful interventions in U.S. economic history,” wrote Sean McAlinden and Debra Menk, the senior researchers who wrote the report. The analysis comes as the US Treasury gets ready to sell its remaining GM shares by the end of 2013, allowing GM to entirely drop the moniker “Government Motors.”

The share sale also will pave way for new opportunities for GM, which was forced to restrict its executive pay and shareholder rewards since the US government bailed it out.  “This sale will almost certainly restart the discussion over the question of the ‘worthiness’ of the government’s ‘investment’ in the new GM or its actual return to the general public,” McAlinden and Menk wrote.

Topics: gm, chrysler

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