Taxpayers lost $9.7 billion on bailout of General Motors

In a report issued to the Congress by the Special Inspector General of the Troubled Asset Relief Program (TARP), it was stated that the United States Treasury’s 2009 bailout rescue of General Motors has lost about $9.7 billion of the near $50 billion thus far.

As of Sept. 13, 2013, the U.S. owned approximately 101.3 million shares. If the Treasury were to sell those shares for Tuesday’s trading price of $35.72 then the taxpayers would lose an additional $760 million for a grand total of $10.5 billion – the shares would have to be sold for trading value of $148 just to break even.

It has been reported that the Treasury expects to sell its shares sometime early next year, while GM CEO Dan Akerson believes the government might even exit before the year is finished. Either way, the Obama administration and Democrats are still celebrating the move and say it was the right thing to do because it saved one million jobs and prevented a bigger recession.

But was it the right thing to do? Conservative and libertarian critics continue to argue that the government acted inappropriately. Due to astronomical labor costs, extended mismanagement and flawed business strategies, GM needed to undergo corporate restructuring at the time it garnered a bailout.

Another important element of the bailout initiative was that it was politically motivated in order to protect President Obama’s labor union allies. According to the Heritage Foundation, these favors have increased GM’s costs by $27 billion.

What have the results been? Since its partial initial public offering two years ago, its stock price hasn’t recovered, it is still partly owned by taxpayers and it is even on the verge of a second bankruptcy. In the end, government bailouts establish terrible precedents: bailouts become future business models, government bailouts and ownership hurt economic growth and the taxpayers are left with immense debts.

Governments should not be in the business of bailing out any company, whether it’s an automobile manufacturer, a financial institution or an ice cream shop. That is the point of the free market: the competent ones succeed and the incompetent ones fail and once the latter fails then the competent enterprises take over the incompetent’s assets.

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