The announcement that the federal government would sell 200 million shares of General Motors back to GM for $5.5 billion and then dispose of its remaining 300 million shares by early 2014 makes a vast taxpayer loss close to a certainty. If the remaining shares sell for the same $27.50 as the initial block of 200 million shares – and GM’s many headaches make a big stock surge unlikely – the hit would be $12.5 billion.
Was this worth it? If you believe the 1-million-jobs-were-saved claim, you may say yes. But that claim is based on the very dubious idea that GM would have disappeared without federal intervention. The decision by first President George W. Bush in 2008 and then President Barack Obama in 2009 to have the federal government invest in the automaker allowed GM to avoid the sort of normal bankruptcy process that would have helped it leverage a lower wage structure from the United Auto Workers, one that would have put GM on a par with most of its competitors.
Who agrees that the union made out very well from the taxpayer bailout? Stephen Rattner, the executive Obama chose to oversee the GM deal. “We should have asked the UAW to do a bit more. We did not ask any UAW member to take a cut in their pay,” he said.
Here’s one more twist on the outcome of the Troubled Asset Relief Program: Taxpayers made billions after the federal government was paid back with interest by the most reviled recipients of relief – big banks and the American Insurance Group. But not with General Motors, whose fundamentals were bad far before the housing bubble collapsed in 2007.