Sunday, September 5, 2010
U.S. taxpayers could lose money on General Motors stock offering
Reports from New York that insiders say U.S. taxpayers stand to lose money on the bailout of General Motors should come as no surprise to anyone. In agreeing to refinance the largest U.S. automaker back in 2009, albeit accepting a majority of the common stock of the bankrupt company, the federal government was obviously taking a huge risk and entering uncharted economic waters. But preparations for the expected return of General Motors shares to public trading later this year reveals a long list of unanswered questions that really should have been anticipated long before now. U.S. taxpayers still have more than $40 billion invested in the automaker, according to the Reuters international news service. Should shares in the revamped GM be sold at a discount to early investors in ordinary Wall Street practice, even though taxpayer money is at risk? Should shares in GM be pulled from trading if they fall to below the break-even point for taxpayers? If not, and shares fall, how much money should the government be willing to lose on the stock before halting trading? GM was able to eliminate $40 billion in debt and other obligations in bankruptcy, including its most unprofitable car lines, Reuters said, but still owes $26 billion to its employee pension fund. The new company needs to have a capitalization of at least $70 billion after its first public offering for taxpayers to recoup all of their investment, the news service said.