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Geithner defends auto bailout, says losses could fall

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Geithner defends auto bailout, says losses could fall

David Shepardson / Detroit News Washington Buraeu

Washington -- Treasury Secretary Timothy Geithner defended the government's $85 billion auto industry bailout, saying the auto industry will perform "much better than anyone expected."

In a roundtable interview with reporters sponsored by the Christian Science Monitor, Geithner defended the Obama auto task force's actions and said the government's losses from the bailout could be less than predicted.

"We put (GM and Chrysler) through a necessary -- absolutely necessary -- very difficult restructuring process so that we could reduce the risk of a huge further loss of employment in the auto industry, reduce the risk of a deeper, more long lasting recession and create a set of institutions that could survive in the future without government support," Geithner said.

He said the companies were doing well. "We're going to deliver on that with a level of improvement in profitability and earnings again much better than anyone expected at the time," he said.

He said the Obama administration had inherited an "auto industry at risk of broad collapse."

On Sunday, an audit from a special inspector general criticized the administration for not taking into account the economic impact of the possible loss of 100,000 or more jobs from closing more than 2,000 General Motors Co. and Chrysler Group LLC dealers.

The government owns a 61 percent stake in GM and a 10 percent stake in Chrysler. The Treasury has estimated it could lose $28 billion on its auto bailout.

Geithner said the government's estimate of overall losses on its $700 billion Troubled Asset Relief Program has fallen from $500 billion to $100 billion.

"We're likely to be able to get out of those investments much more quickly than any of us thought at a much lower risk of loss than we anticipated," Geithner said, but he said he couldn't put a firmer estimate on potential auto losses.

Geithner said the Obama administration's oversight of GM and Chrysler was "much better designed and tougher in many ways" than the conditions imposed by the Bush administration that rescued the automakers in December 2008 with a $17.4 billion bailout.

Geithner also said the decision of GM to acquire a subprime lender AmeriCredit didn't put at risk its $17.2 billion investment in Ally Financial Inc, which was formerly known as GMAC.

The government holds a 56 percent stake in Ally, which is the largest lender for GM dealers and customers

From The Detroit News: http://detnews.com/article/20100722/AUTO01/7220451/1148/auto01/Geithner-defends-auto-bailout--says-losses-could-fall#ixzz0uSHxCOLx

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