Report: Auto Industry Bailout To Cost Up To $3.4 Billion More Than Estimated
Cost still isn't as high as many feared, argues Treasury
The U.S. Treasury department sent a report to Congress on Friday that said the 2009 $85 billion bailout is estimated to ultimately cost taxpayers $25.1 billion -- up from a previously estimated cost of $21.7 billion, reported Reuters on Monday.
So far, the Treasury has recouped about half of the $85 billion in grants and loans extended to GM, Chrysler Group LLC and Ally Financial in 2009. Chrysler has since repaid its loans and Ally has also begun repaying its loans.
Since much of the remaining money owed the government is held in equity shares, GM's falling stock price has caused the Treasury to lower its estimate for how much of that money the government is actually going to collect.
Although $3.4 billion sounds like a significant cost, Treasury spokesman Matt Anderson told The Detroit News that even this revised figure doesn't come close to feared price tag some had in mind when the bailout was being debated.
"The auto industry rescue helped save more than one million jobs throughout our nation's industrial heartland and is expected to cost far less than many had feared during the height of the crisis," he said.
With GM and Chrysler teetering on the edge of ruin in 2008, the U.S. government extended $85 billion in loans and grants as the car makers underwent a structured bankruptcy. In the case of GM, the federal government was given shares of the new company. The government still holds more than 500 million shares of GM.
Republicans have long argued that restructuring protected unions in Michigan and Ohio at the expense of white collar workers, as well as stock and bond holders.
GOP presidential candidate Mitt Romney has said that a more cost-efficient plan would have been to use private money to invest in the companies as they underwent bankruptcy and restructuring. However, at the time, few institutions were providing access to capital. Ford, which had stock piled cash prior to the recession did not receive bailout money. Romeny also supported the idea of selling off the stock earlier this year, when the losses would have been about $16 billion.
President Obama and the Democrats, however, have maintained that the bailout staved off an entire collapse of the U.S. auto industry, which could have cost more than one million jobs and led to economic disaster for the entire U.S. auto industry.
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