More than four years after the U.S. began pouring money into ailing banks and automakers, the Obama administration is moving more quickly to shut down the controversial $700-billion bailout fund and rid Uncle Sam of its holdings in private companies.
The sale of Treasury's GM stock would be its first since the restructured automaker's initial public offering in 2010. Above, a 2013 Cadillac ATS rolls off the assembly line at a General Motors plant in Lansing, Mich. (Bill Pugliano, Getty Images / July 25, 2012)
The latest move came Wednesday when the Treasury Department announced plans to sell its remaining 500 million shares of General Motors Co. over the next 15 months -- even if that means taking a loss.
The task will begin with the sale of about 40% of the government's holdings to GM at $27.50 a share by the end of the month, reducing the U.S. stake in the company to less than 19%. At its peak, the U.S. owned 60.8% of GM after a government-led restructuring.
Obama administration officials have been clear that they don't expect to recover all the money given to GM from the Troubled Asset Relief Program, or TARP. If the remaining shares were sold at the current price, they would generate about $8.2 billion, leaving the U.S. with a loss of about $12.6 billion.
Peter Nesvold, an analyst with Jefferies & Co. said the Treasury Department had been expected to start selling off its remaining shares but "the actions were earlier than we expected and at a lower price."
Nesvold said he had anticipated a price of about $30 a share, given the potential value of GM.
"The auto industry rescue helped save more than a million jobs during a severe economic crisis, but TARP was always meant to be a temporary, emergency program," said Timothy Massad, assistant Treasury secretary for financial stability.
"The government should not be in the business of owning stakes in private companies for an indefinite period of time," he said.
That philosophy has been clear recently.
Last week, the Treasury sold its final shares of insurance giant American International Group Inc., ending the largest single bailout in the financial crisis. The Treasury ended up with a gain of $5 billion on its portion of the complicated, $125-billion AIG bailout, which was funded with TARP money. The Federal Reserve earned a $17.7-billion profit on its part of the rescue.
And Treasury officials said Tuesday that they planned to sell the government's stake in about two-thirds of the 218 mostly small banks that still have not repaid their bailout money. The banks owe a combined $8 billion.
Source: The LA Times | Jim Puzzanghera and Jerry Hirsch