Traverse City Record-Eagle


December 1, 2013

Jack Lessenberry: Auto bailout massive success

By the time the ball comes down in Times Square on New Year’s Eve, a big change will have taken place at General Motors. The taxpayers will no longer own a single share of what was, for many years, the largest private corporation in the world.

That will mark the end of the most successful government “bailout” program in the history of the nation, if not the world.

There are many myths about the auto bailout, one of which — repeated almost daily in various newspapers — is that taxpayers will have “lost” a net $10 billion when the stock sale is complete.

That’s technically true — but in the same way as it is true that you “lose” money when you replace your tires or change your oil, so your car won’t suffer a blowout or engine failure that would destroy the vehicle and might kill you in the process.

The U.S. Treasury did, indeed, give General Motors $49.5 billion to keep the automaker afloat before it could prepare for what was later referred to as a “cushioned” or “soft” bankruptcy.

Stock prices fluctuate, but it looks as if the taxpayers may get no more than $39 billion of that back, when all is said and done.

But that remaining $10 billion may be one of the best and most sound investments in the history of the U.S. Treasury.

Make no mistake about it: If Washington had not pumped billions of dollars into both General Motors and Chrysler in the crisis year of 2009, those companies would no longer exist.

But that would be the least of our problems. We might very well, for one thing, be in the equivalent of a Great Depression. Economists at CAR, the Center for Automotive Research, a nonprofit think tank in Ann Arbor, have intensely studied the bailout.

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