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Closing the Door on GM Investment

By Washington Post, Washington Post - November 24, 2013

THE OBAMA administration announced Thursday that it would sell its remaining shares in General Motors by the end of the year, heralding an end to the largest direct government bailout of a U.S. industry in modern history. The U.S. government stands to lose $10 billion on its investment, based on GM’s current stock price. Combined with the Treasury Department’s already realized loss of $1 billion on its smaller investment in Chrysler, that brings the total cost to taxpayers of rescuing two of the Detroit Three to $11 billion.

Was it worth it? Anyone who claims a definitive answer to that question is not being honest. The government could have spent less on the bailout if it had driven a harder bargain with the autoworkers’ union, which made only modest concessions. But taxpayers would likely have ended up on the hook for a substantial amount anyway. That cost would have to be weighed against the costs of not intervening, which might have resulted in liquidation and a cascade effect throughout the auto industry supply chain. Not even financially healthy Japanese, German and Korean factories could have escaped that unscathed, to say nothing of the surrounding cities and towns. On the other hand, resources not devoted to propping up GM and Chrysler could have found alternative productive uses, perhaps yielding more jobs and other benefits to society in the long run.

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