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Government prepares to sell General Motors stock

Published on NewsOK Modified: December 19, 2012 at 6:25 pm •  Published: December 19, 2012
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Breaking even would require selling the remaining 300 million shares for an average of about $70 each — more than double the current trading price.

The government bailed out GM during the financial crisis in 2008 and 2009, when the economy teetered on the brink of a depression. Without government help, the wheezing automaker would likely have been auctioned off in pieces. At the time, GM was a sick company, racking up more than $86 billion in losses since 2005. It had $53 billion in debt, burdensome labor contracts and a weak lineup of cars at a time when global markets were shifting to smaller vehicles.

Even during GM's 2009 bankruptcy, government officials said they never expected to get all the bailout money back. Former auto czar Steve Rattner conceded in 2009 that the government would lose billions bailing out Chrysler and GM. But he said saving thousands of jobs and keeping the industrial Midwest alive was worth the money.

The government sold 412 million shares in the 2010 initial public offering. The shares rose shortly after the IPO, but then slid as the U.S. economic recovery faltered and Europe's economy took a turn for the worse. As the shares fell, the government balked at further sales.

Even with the government ownership, GM has made money for 11 straight quarters. But there are signs of trouble. It has lost money in Europe for a dozen years, and its U.S. sales aren't growing as fast as competitors or the overall market.

The company has never been prohibited from paying a dividend to shareholders, but so far has decided against it.

Government-ordered pay restrictions will remain in effect until the Treasury completes the sale of its remaining 19 percent stake. CEO Dan Akerson has complained the pay limits have hurt the company in its efforts to recruit top talent.

Although GM is paying a premium for the government shares, GM's other shareholders could benefit because the number of shares on the market will be reduced about 11 percent. That should increase the value of the remaining shares.

The bailouts of GM and rival Chrysler were part of the Troubled Asset Relief Program created by Congress to save banks during the 2008 financial crisis. So far, the government has recovered 92 percent of the $418 billion in funds disbursed through the TARP.

Last week, Treasury sold its final shares of insurance giant American International Group, which had received the largest amount of government support. The government actually made money on its bailout of big banks, and it expects to recoup all but $1.8 billion of the $14.6 billion supplied to smaller banks.

But in the end, TARP programs are expected to lose $42.1 billion, including a $45.6 billion loss on programs supporting homeowners who are battling foreclosure.

Mark Zandi, chief economist at Moody's Analytics, said Treasury's estimate of final losses from TARP is overstated because much of the money for homeowners will never be used.

Private economists rated the TARP effort as an unqualified success in stabilizing the banking system during the crisis.

"It was a slam-dunk success," Zandi said. "It was vitally necessary and proved to be a key to ending the financial panic and jump-starting an economic recovery." He expects the final government loss on TARP to be $24 billion.

"No one liked bailing out the banks," Zandi added. "But without a banking system on solid ground, the economy would have never found its footing."

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Crutsinger reported from Washington, D.C.