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Wed Dec 19, 2012, 09:47 AM

Treasury announces GM exit strategy; automaker buying 200 million shares from U.S.

Source: Detroit News

The Obama administration said Wednesday it will sell 40 percent of its remaining stake in General Motors Co. back to the automaker and said it plans to completely exit the Detroit automaker by March 2014.

The Detroit automaker said it will purchase 200 million shares of GM stock held by Treasury for $5.5 billion or $27.50 per share nearly $2 above the stock's closing price on Tuesday.

The U.S. Treasury after more than a year of refusing to say when it might start selling its remaining stake in GM said it willannounce a written plan in January to shed its remaining 300 million shares over the next 12 to 15 months - likely a series of small stock sales.

.......

"The government should not be in the business of owning stakes in private companies for an indefinite period of time," Assistant Treasury Secretary Tim Massad said. "Moving to exit our investment in GM within the next 12 to 15 months is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests."







Read more: http://www.detroitnews.com/article/20121219/AUTO0103/212190382/Treasury-announces-GM-exit-strategy-automaker-buying-200-million-shares-from-U-S-?odyssey=mod|breaking|text|FRONTPAGE

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Reply Treasury announces GM exit strategy; automaker buying 200 million shares from U.S. (Original post)
Redfairen Dec 2012 OP
bulloney Dec 2012 #1
JayhawkSD Dec 2012 #2
bhikkhu Dec 2012 #3
loudsue Dec 2012 #5
loudsue Dec 2012 #4
JayhawkSD Dec 2012 #7
davidpdx Dec 2012 #6
Morganfleeman Dec 2012 #8

Response to Redfairen (Original post)

Wed Dec 19, 2012, 10:02 AM

1. When will the Wall Street banksters repay the federal government for bailing their asses out?

You never hear any dialogue on that topic. Yet, around my area, the RW media zombies still bitch about the auto bailout, never giving a thought about how it averted an economic disaster that would have rippled to areas outside the auto industry.

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Response to bulloney (Reply #1)

Wed Dec 19, 2012, 10:35 AM

2. Okay, here's some dialog.

Treasury just sold the last of its AIG investment, realizing $22.5 billion profit in the process. So the bailout investment we made in AIG, which is a "Wall street bankster," generated a profit to the taxpayer. That answers your question in part; AIG has repaid the federal government, with a $22.5 billion bonus. AIG gained nothing, because it is no longer in business.

The government is selling shares back to GM now for $27.50 per share, but it needs for those shares to be valued at $53/share to break even on the investment it made to bail out GM, so we will not recoup our money on that deal.

So bailing out AIG turned a profit, while bailing out GM saved jobs and allowed GM to return to making a profit but lost money for taxpayers. You might think that either GM or the workers would want to thank the government for the bailout, but no: GM buys their shares back for a loss to the government, and the workers want tax cuts.

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Response to JayhawkSD (Reply #2)

Wed Dec 19, 2012, 11:31 AM

3. And a little more on the banking side:

a total of $245 billion was loaned out to banks, mostly to bolster their balance sheets to comply with stricter capitalization rules. The goal was to allow them to continue operating as usual, with stronger backing, as they built up funds to repay the loans. The great majority of that worked as hoped for, and most was repaid with interest; so there is currently a profit showing to the government on the banking side of the program. If you remember the predictions and prognostications of absolute doom and collapse, this was a ballsy program that succeeded. There are many small banks that haven't paid their loans back yet, but the totals owing are around $7 billion, less that 3%.

The "trillions and trillions!" figure comes from another briefer and different effort, where the fed made short term (mostly overnight) loans to banks at low interest rates. All of these were repaid, and the beef there is that some millions more in profit should have been made if the interest rates charged were at-market. Hindsight is petty; again, if you look at the actual possibility of collapse, avoiding it successfully with unprecedented efforts was a risk that paid off - we've had steady economic growth since the day the stimulus was enacted, and it has cost much less than predicted.

on edit - link to some information: http://articles.latimes.com/2012/jul/06/business/la-fi-banks-tarp-20120706

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Response to bhikkhu (Reply #3)

Wed Dec 19, 2012, 11:37 AM

5. Thanks for the link. n/t

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Response to JayhawkSD (Reply #2)

Wed Dec 19, 2012, 11:35 AM

4. Do you have any credible links for that information?

I'd like to see where that information is verified.

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Response to loudsue (Reply #4)

Thu Dec 20, 2012, 10:55 AM

7. My link is a Wall Street Journal article that is behind a paywall

It was up on Google news reader and I wrote down the notes I needed and didn't bother to keep the link. It disappeared from Google, as WSJ articles usually do as soon as the WSJ discovers they are there. It should not be hard to find, though if you look for it, as it's all public information.

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Response to JayhawkSD (Reply #2)

Wed Dec 19, 2012, 08:39 PM

6. Hopefully the price of the stock will go back up now that they are making a profit

I had hoped the price would have been higher by now. The other thing you have to factor in is the administrative cost of both the bailouts to the government. I'm sure that was quite a bit as well.

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Response to Redfairen (Original post)

Thu Dec 20, 2012, 12:07 PM

8. This is probably going to be terrible timing for the sale

Once getting past the fiscal cliff circus, the economy has the tailwinds of improving housing, lower energy prices and tail risk events like a Eurozone breakup minimised. The market has the potential to really rally next year. I suspect selling GM shares now will have been a major mistake.

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