New TARP Report Questions Taxpayer Bailouts of Chrysler, GM
A congressional report on TARP funding raises a host of questions.
Sept. 9, 2009— -- The Obama administration's bailouts of General Motors and Chrysler raise a wide variety of unanswered questions according to the congressionally-appointed TARP oversight group report to be released Wednesday.
"The decision to provide financing for the automotive industry raises a number of questions about TARP and its use, including the decision to fund the automotive industry, the government as tough negotiator, the conflicts of interest that arise when the government owns a substantial stake in a private company and the exit strategy," finds the report from the Congressional Oversight Panel chaired by Harvard law professor Elizabeth Warren.
The report raises a series of issues including shareholder losses, conflicts of interest, repayment of taxpayer dollars and even the Treasury Department's communications strategy.
"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," the panel adds.
The watchdog also notes a double standard for the automakers' bailouts compared to ones received by the financial sector.
"Assistance given to the banks has carried less stringent conditions, and money was made readily available without a review of business plans or without any demands that shareholders forfeit their stake in the company or top management forfeit their jobs.
By contrast, Treasury was a tough negotiator as it invested taxpayer funds in the automotive industry. The bulk of the funds were available only after the companies had filed for bankruptcy, wiping out their old shareholders, cutting their labor costs, reducing their debt obligations and replacing some top management."
American taxpayers now own 61 percent of post-bankruptcy GM and 10 percent of post-bankruptcy Chrysler. However, the panel says, they run the risk of losing money on these investments.
"Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount."
