Government watchdog believes US Treasury needs a plan to GM and Ally

Article by Christian Andrei, on July 12, 2012

Due to the ailing market conditions, the U.S. Treasury’s move to sell stakes in General Motors Co. and its one-time consumer financing arm has been dismal. A government watchdog told a House panel that the Obama administration will need to come up with a solid plan. The House members in the oversight panel had questioned former auto task force chief Ron Bloom, legal adviser Matthew Feldman, and member Harry Wilson to clarify some details about GM's 2009 bailout, such as its choice to "top off" pension plans for Delphi's hourly workers while failing to do this for salaried retirees.

Christy Romero, special inspector general for the financial-crisis-era corporate bailout initiative referred to as the Troubled Asset Relief Program, said it may take several years for taxpayers to be able to break even on the investments in GM and Ally Financial.

Furthermore, she testified that the delays were due to the task force members’ lack of cooperation. She also talked about the ability to investigate the task's force role in GM's decision to offer more funds for hourly workers. After over a year of requests, all its three members have agreed to a meeting with her office (SIGTARP). Through a single testimony.

Romero said that the Treasury may sell shares even lower than break-even prices. He explained that this is the likely scenario for a subcommittee of the Republican-led House Oversight Committee that handles government audits. Romero said that even if taxpayers get out of these investments faster, it would cut taxpayer return.

He said that Treasury has to find a real exit plan for GM and Ally. Since 2010, Treasury has not sold any shares. So far, Treasury has invested higher than $50 billion in GM. To break even on the bailout, it will have to sell its remaining stake of 500 million shares at higher than $52 each. This stock is trading slightly higher than $20, a steep drop from its initial public offering price of $33 in November 2010.

Topics: gm, ally financial

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