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White House: U.S. will get back 'most, if not all' of GM bailout

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White House: U.S. will get back 'most, if not all' of GM bailout

David Shepardson / Detroit News Washington Bureau

Washington -- The White House top economic adviser today defended the $85 billion bailout of the auto industry, reiterating that the government could get most of its investment back in General Motors.

Larry Summers, head of the National Economic Council, said the administration expects to recover "most, if not all" of the $50 billion bailout of GM. At current pricing of GM bonds, taxpayers would lose about $10 billion on the GM investment.

Defending the bailout, Summers said the auto industry had shed 400,000 jobs in 2008, and the Bush administration had estimated the losses at another 1.1 million if the government didn't save GM and Chrysler.

Those job losses would have had a number of other negative impacts.

"They meant state and local budgets pushed to insolvency. They meant rising crime. They meant people dying young(er) than they other(wise) would have," Summers said today at a conference on the future of auto communities sponsored by the White House and the Brookings Institution.

The administration acknowledged Monday that the government would assume at least $1.6 billion in losses on its $4 billion loan to Chrysler in January 2009.

The administration's most recent public estimate predicts about a $30 billion loss on its bailout of GM, Chrysler and GMAC -- now known as Ally Financial Inc.

At the conference, UAW President Ron Gettelfinger said the bailout didn't just save GM and Chrysler but it "saved the nation."

From The Detroit News: http://www.detnews.com/article/20100518/AUTO01/5180398/1148/auto01/White-House--U.S.-will-get-back--most--if-not-all--of-GM-bailout#ixzz0oJIjGqUQ

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White House official: Government could get all of GM money back



WASHINGTON – The chief White House economic advisor said today that the federal government could get “most, if not all” of the money it invested in General Motors back once the automaker offers shares to the public later this year.

The comment by National Economic Council director Larry Summers goes beyond previous estimates by the Obama auto task force that the government would likely lose some of the roughly $50 billion spent rescuing GM, of which about $42 billion remains outstanding.

Summers’ comments were backed up by an analyst estimate today that suggested the new GM’s equity could be worth between $75 billion and $78.5 billion – giving the government more than $42 billion for its 60.6% stake.

The analysts with CRT Capital Group said their numbers could be conservative if worldwide demand for vehicles recovers faster than expected.

Speaking at a Brookings Institute summit on cities affected by the decline of the auto industry, Summers noted that GM and Chrysler were operating profitably.

“The prospects of repayment are brighter than they were a year ago,” Summers said.

Earlier this year, the Congressional Budget Office estimated that the government could lose as much as $34 billion on the $85 billion spent rescuing GM, Chrysler and GMAC, but the estimate depended largely on the value of GM and Chrysler’s shares.

The government also owns 9.9% of Chrysler. Obama administration officials have said it could take a number of years to sell off stakes in both automakers after they issue initial public offerings of their shares.



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