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Posts Tagged ‘Troubled Asset Relief Program’

Taxpayers Will Take Big Losses on Auto Bailouts

Oversight Panel says $81 billion committed is largely at risk.

by on Sep.09, 2009

Click on chart to enlarge.

Click on chart to enlarge.

Taxpayers are not going to recover anywhere near the money they have invested in automakers and their subsidiaries, according to a report just released by the Congressional Oversight Panel.

The Panel, which is investigating  the U.S. Treasury Department’s Troubled Asset Relief Program (TARP), criticizes Treasury’s ongoing lack of transparency about the wildly unpopular auto bailouts.

The latest report follows the money and looks at how tens of billions of taxpayer dollars have been used to support Chrysler, General Motors, GMAC and parts makers.

In protecting the interests of taxpayers, the Panel found that Treasury “negotiated aggressively with all the players,” and now holds a combination of debt and equity in the reorganized Chrysler Group, General Motors Company and GMAC.

  • U.S. taxpayers have lent $49.9 billion of TARP funds in conjunction with GM’s bankruptcy and the subsequent creation of General  Motors Company.
  • The Chrysler transactions have spent $14.3 billion of TARP funding, of which $10.5 billion remains outstanding.
  • Assistance to automotive suppliers and investments in GMAC, the financial institution dedicated to automotive lending, account for another $16.9 billion of TARP resources.
  • Total TARP net support for the U.S. domestic automotive industry is slightly over $81 billion as of September 9, 2009.

A problem comes when  trying to figure out how much of this will be paid back. Earlier Congressional Budget Office estimates said that between 65% and 75% of the money was lost. The estimates, alas, still appear reasonable.

In the latest investigation, Treasury officials told the Panel staff that recovery of TARP investments in the automotive industry would be dependent upon the value of the stock that Treasury holds (or subsequently receives) in the two companies when they are able to go public. Therefore, the prospects for recovery of the TARP investments depend on the forecast for Chrysler and GM stock appreciation, which is something that cannot  be predicted.

However, in discussions with the Panel Treasury agreed with the Panel’s assessment that the new companies’ stock prices will have to appreciate sharply for taxpayers to be fully repaid.

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Budget Review Shows Deficits Growing $2 Trillion!

Government to sell auto companies “as soon as practicable.”

by on Aug.25, 2009

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The fiscal situation continues to worsen. Now economic growth isn't predicted until 2010.

Today the White House Office of Management and Budget (OMB) released the mid-session review to the House of Representatives. The latest update to  the Administration’s economic forecast, last done in February, and its budget projections going out until 2019 shows a somewhat smaller federal 2009 deficit, but much larger subsequent deficits than previously projected.

It also shows two more years of 10% unemployment rates, and a -2.8% drop in the nation’s economy this year instead of  the previously forecast growth.

Executive summary devoid of spin: the economy is in bad shape with no immediate relief in sight. This is bad news for the nation’s shrinking middle class, for the automobile business and our whole consumer-spending based economy.

“Overall, it underscores the dire fiscal situation that we inherited and the need for serious steps to put our nation back on a sustainable fiscal path,” said Peter R. Orszag, Director of the OMB.

The report is certain to be attacked by the Republican party whose popularity along with the Democrats continues to decrease as economic woes continue and jobs are being lost.

The Obama Administration now predicts that taxpayer expenses for financial system bailouts will be less than anticipated. In addition, an open item for a possible further financial stabilization program has been removed. The cost of the FDIC bank rescues have also been lowered.

The bottom — red-ink — line is a slight $262 billion improvement in the 2009 deficit, now projected to be whopping $1.58 trillion – or 11.2% of Gross Domestic Product – down from a previously projected $1.84 trillion or 12.9% of GDP.

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Chrysler Financial Repays Government Loans

Lending arm pays back $1.5 billion received in January.

by on Jul.14, 2009

Could Capitol Hill Critics Sink the Fiat Alliance?

Last winter, lots of people predicted this day would never come. But mark this day down — one of the recipients of the government bailout money, Chrysler Financial, has repaid the U.S. Treasury, sending the $1.5 billion it received in January back to Washington.

Meanwhile while GMAC Financial Services Inc. said it will send the government a $271 million dividend check next month.

The repayment by Chrysler Financial and the special dividend from GMAC mark the first step toward repayment of the billions Detroit borrowed last winter when the U.S. auto industry and their finance companies were on the verge of collapse.

Interest Free!

Interest Free!

Chrysler Financial said Tuesday it has repaid in full the $1.5 billion of Troubled Asset Relief Program or TARP loans, which Congress approved last year to bailout troubled banks and the Obama administration used to help Detroit’s struggling automakers when Chrysler and GM were sinking fast. So far, the Treasury Department hasn’t asked for an early payment penalty.

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Pelosi to Big 3: Bailout Must Pay Off for Taxpayers

Automakers warned they must meet CA CO2 standards.

by on Feb.16, 2009

Pelosi: bailout carries a stiff price

Pelosi: bailout carries a stiff price

Two key Democratic administration players sent a clear if contradictory message over the weekend to Chrysler and General Motors that they must radically reshape themselves by making profits while cutting costs and preserving jobs and benefits. This of course is what Chrysler, General Motors and Ford have been trying to do for years with little success.

In a letter, just released, Speaker of the House Nancy Pelosi and Financial Services Chairman Barney Frank wrote to Robert L. Nardelli, Chairman and CEO of Chrysler, and Rick Wagoner Jr., Chairman and CEO of General Motors. In it they insisted that their company restructuring plans due tomorrow must “demonstrate to the world that you are willing to make the tough decisions that modernize your operations, restructure your debt, enhance your competitive status in the global marketplace, and protect American jobs for the future.”

Pelosi from California and Frank from Massachusetts also demanded that the struggling companies demonstrate they can meet the fuel efficiency requirements set forth in the Energy Independence and Security Act of 2007 that requires a combined fleet average of at least 35 miles per gallon by model year 2020.

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