United States to Lose $25 Billion on Auto Bailout
August 15, 2012
The Treasury Department says in a new report that the federal government expects to lose more than $25 billion on the $85 billion auto bailout. That's 15 percent higher than its previous forecast, says Detroit News.
- In a monthly report sent to Congress, the Obama administration boosted its forecast of expected losses by more than $3.3 billion to almost $25.1 billion, up from $21.7 billion in the last quarterly update.
- The report may still underestimate the losses.
- The report covers predicted losses through May 31, when General Motors' (GM) stock price was $22.20 a share.
- Recently, GM stock fell $0.07, or 0.3 percent, to $20.47.
- At that price, the government would lose another $850 million on its GM bailout.
The government still holds 500 million shares of GM stock and needs to sell them for about $53 each to recover its entire $49.5 billion bailout. At the current price, the Treasury would lose more than $16 billion on its GM bailout. The steep decline in GM's stock price has indefinitely delayed the Treasury's sale of its remaining 26 percent stake in GM. No sale will take place before the November election.
The Obama administration initially estimated it would lose $44 billion on the bailout but reduced the forecast to $30 billion in December 2009. But the recent estimates are not as optimistic as last year.
- The Treasury Department said in a May 2011 report that its estimate of auto bailout losses was $13.9 billion.
- The Congressional Budget Office (CBO) also estimates a $14 billion loss.
- The CBO has written off $8 billion of the government's auto bailout as an unrecoverable loss.
Source: David Shepardson, "Treasury: U.S. to Lose $25 Billion on Auto Bailout," Detroit News, August 13, 2012.
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