The Obama administration received a tremendous boost from the plan of the U.S. Treasury to sell the stake it has left in General Motors Co. This brings the government closer to its aim to put an end to a $418 billion bailout program that has become a major issue during the presidential campaign.
With this decision to leave GM in the next 15 months and the sale of the Treasury’s remaining shares of insurer American International Group Inc. last week, two corporate symbols of the 2008 economic crisis from the government's Troubled Asset Relief Program will be wiped out.
For AIG, taxpayers gave up $182.3 billion while $49.5 billion was spent for the rescue of GM. Stephen Myrow, who worked on the program in 2008 as a Treasury official in the administration of George W. Bush and is currently the managing director at ACG Analytics Inc., an investment research and consulting firm in Washington, said that this proves that as the Obama administration embarks on its second term, it aims to cut its link to TARP “as quickly as practicable."
Last Friday, GM paid $5.5 billion to complete its purchase of 200 million, or 13%, of its shares. This means that after this transaction, the Treasury is left with around 300 million shares, or 19% on a fully diluted basis. GM also benefited since it can get rid of its image of having allowed the government to control its business decisions. In a statement, CEO Dan Akerson said that this announcement is “important” in bringing to a close its “successful auto industry rescue."
He also said that it stops GM customers from thinking that the government owns GM. It also denotes confidence in the progress that GM has had as well as its future. A senior Treasury official told Reuters that it was last November after the U.S. presidential election that GM first approached Treasury officials but since the offer was just to pay the market value for the government's stock, the offer was rejected.