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Published: Thursday, 9/10/2009

Auto bailout left public in the dark, panel says

BLOOMBERG

U.S. taxpayers are unlikely to recover their $81 billion investment in General Motors Co. and Chrysler Group LLC and were "left in the dark" on specifics of a decision to aid automakers, a congressional panel said.

The U.S. Treasury Department should consider placing its GM and Chrysler ownership stakes into an independent trust to prevent "political pressure and government interference," the Congressional Oversight Panel said in a report yesterday.

"Even if no direct conflict exists, a trust could prevent the use or appearance of political influence in the government's ownership," the panel concluded.

The report didn't estimate how much of taxpayers' aid to the auto industry will be recovered. The panel said GM stock would need "highly optimistic" returns in order for the full investment to be repaid.

The panel, which oversees the U.S. government's $700 billion Troubled Asset Relief Program, raised questions about the Obama Administration's transparency in aiding automakers and challenged the Treasury Department to make more disclosures about company decisions and the government's future role.

"Congress and ultimately the American taxpayer have been left in the dark concerning details of Treasury's review process and its methodology and metrics at a time when Treasury committed additional TARP funds to these companies," the panel said.

Elizabeth Warren, a Harvard law school professor who heads the oversight panel, said yesterday there remains "a good chance" that the portion of taxpayer dollars invested in the automakers' restructuring plan will be recovered.

"If things go well, then the taxpayer could see [some] money back," she said. "But if it doesn't, then our losses could be substantial."

Greg Martin, a GM spokesman, said in an e-mail that the company expects to repay the government. A Chrysler spokesman said the company wouldn't immediately comment.

The Treasury Department spent $49.9 billion in TARP funds for GM and $14.3 billion for Chrysler. Including $16.9 billion in aid to GM's financial arm and suppliers, taxpayers' total net investment as of Sept. 9 is about $81 billion, the panel said.

The government's equity interest in Chrysler would need to reach a value of about $5.7 billion in order for taxpayers to recoup their investment, assuming other loans are repaid.

For GM, repayment of TARP would require government shares of the new GM to be worth $40.7 billion, assuming other debt is repaid. That means the market cap of the entire company would need to be $67.7 billion, the report said.



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