Billions To Be Lost in Auto Bailout?


The Congressional Oversight Panel, assigned to oversee the TARP bailout and chaired by Harvard prof Elizabeth Warren, has released another of its monthly reports, this one on the federal bailout of GM and Chrysler. No surprise, the panel finds that once again the taxpayers are not getting the best deal. The money shot, so to speak:

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.

In other words, the taxpayers could lose up to $20 billion on the deal. But that’s not all. It turns out that the Treasury Department has not legally justified—at least, in public—its use of TARP dollars for the auto bailout:

[B]ecause of the unprecedented nature of the assistance provided to the automotive industry, the Panel also recommends that Treasury provide its legal analysis justifying the use of TARP funds for this purpose. This analysis will inform policymakers? and taxpayers? understanding of the potential for Treasury to use its authority to assist other struggling industries. Treasury must be clearer, more transparent, and more accountable in its TARP dealings, providing the American public with the information needed to determine the effectiveness of Treasury?s efforts.

Shouldn’t this have already been done? Yet looking at this and previous COP reports, it does seem as if the Treasury strategy has been bailout first, answer questions later.

The report also notes:

The Panel recommends that, to mitigate the potential conflicts of interest inherent in owning Chrysler and GM shares, Treasury should take exceptional care to explain its decisionmaking and provide a full, transparent picture of its actions. The Panel recommends that Treasury 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. To limit the impact of conflicts of interest and to facilitate an effective exit strategy, Treasury should also consider placing its Chrysler and GM shares in an independent trust that would be insulated from political pressure and government interference.

Again and again, this panel has to remind Treasury to be transparent. The big question is, why does Treasury always need such a reminder?

You can follow David Corn’s postings and media appearances via Twitter.

DOES IT FEEL LIKE POLITICS IS AT A BREAKING POINT?

Headshot of Editor in Chief of Mother Jones, Clara Jeffery

It sure feels that way to me, and here at Mother Jones, we’ve been thinking a lot about what journalism needs to do differently, and how we can have the biggest impact.

We kept coming back to one word: corruption. Democracy and the rule of law being undermined by those with wealth and power for their own gain. So we're launching an ambitious Mother Jones Corruption Project to do deep, time-intensive reporting on systemic corruption, and asking the MoJo community to help crowdfund it.

We aim to hire, build a team, and give them the time and space needed to understand how we got here and how we might get out. We want to dig into the forces and decisions that have allowed massive conflicts of interest, influence peddling, and win-at-all-costs politics to flourish.

It's unlike anything we've done, and we have seed funding to get started, but we're looking to raise $500,000 from readers by July when we'll be making key budgeting decisions—and the more resources we have by then, the deeper we can dig. If our plan sounds good to you, please help kickstart it with a tax-deductible donation today.

Thanks for reading—whether or not you can pitch in today, or ever, I'm glad you're with us.

Signed by Clara Jeffery

Clara Jeffery, Editor-in-Chief

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate

Share your feedback: We’re planning to launch a new version of the comments section. Help us test it.