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U.S. Remaining Stake in General Motors
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The U.S. government sold its last remaining shares in auto company GM booking a loss of $10.5 billion- a recovery of $39 billion dollars of the $49.5 billon dollars given to GM. The Center for Automotive Research in Ann Arbor, Mich., points out that the cost of bailing out GM and Chrysler was about $13.7 billion. The benefits were 1.2 million jobs protected in 2009 during the depths of the financial crisis. It also preserved $39.4 billion in personal and social insurance tax collections in 2009 and 2010. The Treasury Department estimate of the cost is about $15 billon, including money invested in GM's former finance arm Ally Financial Inc. President Obama says the effort helped create 372,000 new jobs in five years. Treasury Secretary Lew summed it up by saying "it helped stabilize the auto industry and prevent another Great Depression." Other intangible but larger benefits in the long run were building up the companies anew with new pay structures the auto companies could support in a globalized economy, bringing in new management and discarding of old mindsets and culture, new relationships with unions and customers, committment to achieving fuel efficiency targets with new technologies in cooperation with the U.S. government guidelines, and renewed confidence of millions of employees in the U.S. auto sector. It is also the one area in which the Obama administration scores a clear win, and in which president Obama took the greatest interest as senator. That the public did not fully appreciate the significance of the step is more a reflecion of public frustration with how the companies were run by the old management, and a continual reminder of the importance of good management for the U.S. industry and economy.
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Looking back: An assessment of the management of the U.S. economy in Obama's first term 2008-2012
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Why were significant resources not invested to aid homeowners under water just as resources were provided to the auto industry? And why was there a lack of focus on unemployment in this period? The challenges were difficult but did the Obama administration do what could have been done. The auto industry bailout was an easy call considering Obama's commitment to increasing fuel efficiency during his days in Congress. Housing was a tougher call with bankers cautious and influencing policy, yet even Republicans Martin Feldstein and Sheila Bair were calling repeatedly for strong action. Tackling housing first and healthcare later after economic recovery, is likely to have produced better results, credibility for the administration, and a broad consensus in the U.S.
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