Monday, February 25, 2013

US Government To Take $12 Billion Plus Loss On GM Stock Sale

As Obama frets about sequestration cuts that are poised to cut all of $85 billion dollars from government spending, his administration is poised to lose over $12 billion in its quixotic GM stock sale/loan forgiveness program.

The Detroit News: U.S. selling GM shares on open market

The Treasury has said it "intends to sell its shares into the market in an orderly fashion and fully exit its remaining GM investment within the next 12-15 months, subject to market conditions."

The government needs to get $72 per share for its remaining shares to break even on its $49.5 billion GM bailout. It initially held a 61 percent stake before selling about half of its shares in GM's November 2010 IPO at $33 a share.

At current prices, the Treasury would lose more than $12 billion on its GM bailout.

Last week, the Treasury Department said its estimate of losses on the $85 billion auto bailout fell by 16 percent, or $4 billion, in large part because of a rebound in General Motors Co.'s stock price.

The Obama administration said in a report to Congress that its projected auto losses fell to $20.3 billion, from its prior quarterly estimate of $24.3 billion.

The government isn't selling the shares itself, apparently an organization as large and sophisticated as the Treasury can't handle such things, instead it is paying a commission to have them sold:

Last month, the Treasury named Citigroup Inc. and JPMorgan Chase & Co. to manage the sale.

The banks will get a 1 cent per share commission — or $3 million — for the sale of the entire stake.

It's just a funny coincidence how Treasury is using Citigroup and JPMorgan Chase for the sale......

Government investing at a loss, while rewarding its friends - with your tax money.


Murphy's Law said...

Just so long as the fat, alcoholic union goons are happy...that's all that really matters.

Aaron said...

Yep, union goons and the top of the wealth pyramid - natural allies in buggering the middle class while all the time loudly proclaiming to be populists looking out for the middle class.