General Motors‘ (GM) surprise this morning announcement that it’s buying back 200 million shares of its stock from the U.S. government is already causing some consternation. As this Reuters report points out, if the government sold its remain shares at the $27.50 price announced today, it would end up making a $12 billion loss on its roughly $50 billion bailout of the automaker.
In the video below, Jeff Bennett at The Wall Street Journal explains the details behind the deal, which has sent GM’s stock up 8% today.�As Bennett points out, the Treasury Department would need to sell its remaining GM shares for more than $60 (actually close to $70) each to even to avoid making a loss on its GM bailout:
As Bennett sees it, there are two camps on this: one side wants the government out of the automaker no matter what, the other side argues it should stay in and cover its losses.
As he suggests, today’s announcement could be the federal government just trying to get out of the ownership stakes it took in bailed-out companies as it saved the economy in the wake of the 2008 crisis. And maybe losing $12 billion or so on GM is easier to take given that the government�made a profit of $22.7 billion on the sale of its shares in another crisis-era bailout case, American International Group (AIG).
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