By Meena Thiruvengadam
The Wall Street Journal
WASHINGTON -- The U.S. Treasury Department drove a hard bargain but likely won't recoup taxpayers' entire investments in General Motors (GM) and Chrysler (C.XX), according to a new report from a congressional panel overseeing government bailouts of the banking and auto sectors.
The panel, though, commended the Treasury's efforts to function as a tough "negotiator" when it came to structuring deals to save the ailing automakers. "They may have driven the best bargain they could, but it may not be enough," said Elizabeth Warren, a Harvard University law professor and the panel's chair.
"Treasury has indicated they don't think its going to be enough," she said, referring to recent remarks by Obama administration manufacturing advisor Ron Bloom, who previously headed the Treasury's auto rescue efforts. The report cited Bloom as indicating last month "that it was possible but unlikely that taxpayers would recover all of the money they had invested in Chrysler and General Motors."
Overall, the Treasury has disbursed nearly $80 billion in aid to the U.S. auto sector, including money for suppliers and funds to cover consumer warranty costs. While some money, like $1.5 billion loaned to Chrysler Financial, has been repaid, officials are doubtful all loans made to Chrysler and General Motors will be fully repaid. Warren believes it is unlikely, however, she didn't venture a guess as to just how much taxpayers could lose.
Despite her compliments of the Treasury's negotiating skill, Warren continued to chide the department for a lack of transparency in its operations and for failing to provide a legal argument for its decision to step in and rescue the auto sector. The panel recommended Treasury to "use its role as a significant shareholder in Chrysler and GM to ensure that these companies fully disclose their financial status and that the compensation of their executives is aligned to clear measures of long-term success."
It also suggested Treasury consider putting government holdings of the auto companies' shares in a trust to insulate them from "political pressure and government interference."
Rep. Jeb Hensarling, R-Texas, rejected the panel's report, saying instead: "With the economic suffering the American taxpayers have endured during the past two years one wonders why Chrysler and GM merited such generosity to the exclusion of other taxpayers. The government clearly picked winners and losers."
