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Treasury pegs auto bailout losses at $28 billion

April 24, 2010

Treasury pegs auto bailout losses at $28 billion

Detroit News Washington Bureau

Washington — The Treasury Department Friday on lowered its estimate of losses from the $85 billion auto industry bailout to $28 billion.

The Treasury Department last year predicted it would lose $30.6 billion. In a letter to congressional leaders, government officials reduced the estimate to $28 billion.

The announcement came after General Motors Co. this week repaid its outstanding $5.8 billion in U.S. and Canadian loans, while Chrysler Group LLC reported a first-quarter operating profit.

The "prospects for repayment of government investments in the industry have improved," Treasury Secretary Timothy Geithner said in a nine-page letter to Congress.

At one point, the Treasury estimated that bailing out banks and automakers could cost $500 billion — or 3.5 percent of gross domestic product. It now might cost $87 billion or less than 1 percent of GDP, the department said.

The government owns 61 percent of GM in exchange for swapping about $42 billion in loans. It also owns 56 percent of GMAC Inc. as part of its $17.2 billion bailout and owns 10 percent of Chrysler as a condition of its $12 billion bailout.

But some in Congress have criticized the government’s touting of GM’s repayment.

Sen. Charles Grassley, R-Iowa, called GM’s repayment a "money shuffle" because the automaker used unused government bailout funds to make the repayment.

"The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future," Grassley said.

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