Last month, the US Treasury Department sold its remaining 11.4% stake in Ally Financial, formerly known as GMAC, General Motors’ lender and bank-holding company, and closed the books on the government bailout of its auto industry.
In its report, the Treasury said that is has recovered US$70.43 billion out of the US$79.69 billion it gave to General Motors, GMAC, Chrysler and Chrysler Financial under the federal government’s bail out program.
This program was initiated in December 2008 by then President George W. Bush, with a US$25 billion loan to the ailing automakers, while his successor in the White House, President Barack Obama, added another US$55 billion.
“We’ve now repaid taxpayers every dime and more of what my administration committed, and the American auto industry is on track for its strongest year since 2005”, Obama said in a press conference on December 30.
As the Detroit News reports, technically the actual loss was US$16.56 billion. That’s because, according to federal law, more than US$7 billion recovered in interest and dividends by GM and Chrysler don’t count towards their payments, just like the interest payments on a citizen’s bank loan don’t count in paying off this loan.
Losing $9 billion of taxpayers’ money is, of course, not something to be happy about. Yet, it was way less than the governments’ initial estimate of a US$44 billion loss, plus it gave two out of three US automakers the chance to survive and, in the process, thrive. Plus, it also saved hundreds of thousands of jobs. We don’t know what cost would the other option would have had in the US economy but our best guess is it would be far greater than the eventual loss.
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