According to a WSJ report, “people familiar with the situation” said on Tuesday that the Obama Administration has put on hold its decision to sell the taxpayers’ stake in General Motors. The article also states that “Treasury officials had anticipated GM’s share price would increase following its public stock offering last November at $33 a share.” It would seem that Treasury anticipated wrong.
Once again, the Obama Administration is arrogantly assuming that GM share price will recover to above $33 a share in the near future. Or perhaps the administration is not as averse to continuing its intrusion in private industry as it would have us believe. Considering that President Obama is staking a great deal on the recovery of GM regarding his reelection chances, the decision to continue a market timing gamble on the company carries significant risk that the government will try and help GM recover at an ongoing cost to taxpayers.
The Obama Administration has been very generous with tax credits granted to GM. In addition to the approximate $45 billion tax loss carry over credit gifted to GM when it came out of bankruptcy, the Chevy Volt has been funded on the backs of taxpayers. The Volt receives a $7,500 subsidy on every vehicle sold. I’m sure our government has also siphoned taxpayer funds in the form of green initiative grants or loans to GM as well. All for a vehicle that has no mass appeal. Add the expense of government fleet purchases of GM vehicles to the pile of taxpayer cash thrown away on the continuing GM folly.
Also consider the fact that just a few years ago a debate played out on the suggestion that social security assets be invested in equity markets. President Obama was in the camp of those that thought taxpayer assets should not be gambled in the stock market. Why is the president now willing to gamble on the GM taxpayer stake? Will attempts be made to manipulate the stock higher? Why is Treasury so certain GM shares will increase when Treasury Secretary Tim Geithner has been so wrong to this point?
Geithner made statements on a Fox Business News interview in April that guaranteed there was no risk of a credit downgrade of US debt. Prior to that, Geithner and cohort Steve Rattner, former Auto Task Force head, boasted that taxpayers should see all of their “investment” in GM returned. After being so wrong on both counts, it is time for Treasury to drop the arrogance that it has displayed from the beginning of its auto industry intrusion. Face it guys, you are not quite as smart as you perceive yourselves to be. It is time to realize that stock markets can go down as well as up and the same holds true for GM share price. A recovery is not a certainty and Treasury should end what has been an ugly chapter in American history. The US taxpayer has no reason to be invested in GM stock. Geithner should accept the fact that he was wrong on the GM gambit and sell now.
Mark Modica is an NLPC Associate Fellow