The federal government is unlikely to recover all of the $81 billion in bailout assistance it extended to the automobile industry, according to a congressional panel.
The Congressional Oversight Panel said in a new report that the $23 billion in aid extended late last year to Chrysler LLC and General Motors Corp. would probably not be repaid.
Under the federal auto bailout package, General Motors received $50 billion to retool and ease its transition into bankruptcy. Chrysler received $10.5 billion. In addition, the government gave $12.5 billion to auto financing firm GMAC and $3.5 billion to auto suppliers.
The market value of those companies -- and of the government's stock in them - would have to rise dramatically for the government to make back its initial investment. The report noted that, for taxpayers to break even, the restructured an streamlined General Motors would need to have a market capitalization higher than that the original, much larger company ever achieved.
Overall, taxpayers now hold 10 percent of Chrysler and 60 percent of General Motors.
"Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount," the panel said.
The report also takes to task the Treasury department for never clearly defining its objectives in using TARP funds for the auto bailouts. Additionally, it notes the significant ambiguity in TARP legislation language and congressional intent as reason for there to be "no effective challenge to its decision to use TARP funds for this purpose."
This tends to be the standard M.O. with Congress with respect to Bailout Nation. One cannot hit a target, one cannot see. The complete lack of transparency makes both the effectiveness of the program and any challenges to it, highly dubious.
H/T: Bailout Sleuth
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