Christy Romero, a special inspector general examining the corporate bailouts that came in the wake of 2008's financial crisis, has some advice for the U.S. government: "Treasury should develop a concrete exit plan for GM and Ally." She is referring, of course, to the 30-percent stake that the government still holds in General Motors and the 74-percent stake it holds in Ally Financial, formerly known as GMAC when the Treasury pumped $17 billion into it.
For its part, the government says it already has an exit plan and Romero doesn't offer any further advice to guide that plan in some other direction. With the calls for Treasury to divest coming even more frequently during the U.S. Presidential race, Treasury has repeatedly stated the same thing: it is waiting for the right time to maximize its return, thereby minimizing the loss to the U.S. taxpayer.
With 500 million GM shares in its portfolio, the government needs those shares at $52-per in order to recoup the remainder of its initial $50 billion investment. Shares are right around $20, which would mean a highly unpalatable Greek haircut if the government gave up its position. Recent GM moves have also led the Treasury to believe that there is unlocked value in the company that the market simply hasn't reacted to yet; however, that sentiment was voiced two months ago and the stock price still hasn't budged.
Ally Financial is a different conundrum, one that the Treasury seems to be much more eager to divest itself of. The financial firm has paid back $5.4 billion of its TARP loan and filed IPO paperwork a year ago, but there's still not even a potential date for an offering, and no one seems to have any idea when it will pay off the rest of the funds. While plans are debated for an offering or a breakup of the company, Treasury has suggested that GM buy back Ally, but GM hasn't indicated any desire to do so.
So in effect, nothing has really changed, but at least now we have more figures in the government suggesting that the government get out of GM.
For its part, the government says it already has an exit plan and Romero doesn't offer any further advice to guide that plan in some other direction. With the calls for Treasury to divest coming even more frequently during the U.S. Presidential race, Treasury has repeatedly stated the same thing: it is waiting for the right time to maximize its return, thereby minimizing the loss to the U.S. taxpayer.
With 500 million GM shares in its portfolio, the government needs those shares at $52-per in order to recoup the remainder of its initial $50 billion investment. Shares are right around $20, which would mean a highly unpalatable Greek haircut if the government gave up its position. Recent GM moves have also led the Treasury to believe that there is unlocked value in the company that the market simply hasn't reacted to yet; however, that sentiment was voiced two months ago and the stock price still hasn't budged.
Ally Financial is a different conundrum, one that the Treasury seems to be much more eager to divest itself of. The financial firm has paid back $5.4 billion of its TARP loan and filed IPO paperwork a year ago, but there's still not even a potential date for an offering, and no one seems to have any idea when it will pay off the rest of the funds. While plans are debated for an offering or a breakup of the company, Treasury has suggested that GM buy back Ally, but GM hasn't indicated any desire to do so.
So in effect, nothing has really changed, but at least now we have more figures in the government suggesting that the government get out of GM.
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