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September 10th, 2009

COP Tells Taxpayers to Kiss Auto Bailout $ Goodbye



Remember when Chrysler took out that full-page ad thanking the American people for their generous bailout money? Oh, you forget about it…sorry to bring that up again.

Since we’re already on the subject, we’d like to add that the Congressional Oversight Panel (COP) — the group in charge of overseeing government bailouts — reiterated that taxpayers will likely see little to none of that ‘generous’ bailout money.

In their 221-page report titled “The Use of TARP Funds in Support and Reorganization of the Domestic Automotive Industry,” the COP backed up previous estimates by the Treasury that taxpayer returns on the loan would be low. However, the panel did call into question the Treasury’s strategy and objectives in dealing with the auto bailout in comparison to the bank bailout:

Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount. The estimates of loss vary. Treasury estimates that approximately $23 billion of the initial loans made will be subject to “much lower recoveries.” Approximately $5.4 billion of the loans extended to the old Chrysler company are highly unlikely to be recovered. … Because Treasury has not clearly articulated its objectives, it is impossible to know if this prospect, indeed, represents a failure of Treasury’s strategy.

While the COP has no real pull in terms of being able to force the government into taking specific action, their report does offer a number of suggestions for the White House. According to the COP’s report, the government’s 10 and 61 percent ownership in Chrysler and GM respectively, could be used to pressure the automakers to “…fully disclose their financial status and that the compensation of their executives…”

We haven’t heard a lot from GM and/or Chrysler recently. Since we know the two benefited little from Cash for Clunkers, should American taxpayers be privileged to their financial information — especially since we’ve already been told that we won’t be paid back (in full)?

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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