Romney would sell GM stock quickly if elected

Those who criticize the government bailout loans made to General Motors are still unhappy about the fact the US Federal Government is holding onto the 500 million shares of common stock so Romney’s angle of a quick sell is likely to appeal to those voters who oppose the government’s involvement with the suggestion of selling quickly. The problem is that when the 500 million shares of stock were issued as repayment of the bailout loans, those shares were valued at $33 per share but GM stock closed at $21.25 today. This means that if the government sold these 500 million shares at current prices, the government would effectively lose $5.875 billion US dollars strictly from the quick sale of the stock at the current price. This does not take into account the original amount of the bailout loans but all said and done – the quick sale of the 500 million shares of GM stock held by the US Treasury Department would end up costing the US taxpayers around $16 billion dollars.

Republican Presidential candidate Mitt Romney insists that the only reason that the Obama administration is holding onto the GM stock is because the massive loss through the sale of stock would have a negative impact on his attempt at re-election. The Treasury Department is quick to point out that they have to focus on maximizing the value of the GM stock before selling rather than just hurrying to sell simply to be rid of the large portion of General Motors.

On one hand, it seems to make sense to the American people to not have their tax dollars tied up in a corporate entity like General Motors but at the same time, it the feds unload the 500 million shares of GM stock simply for the sake of being rid of it only to have the price go up – the American taxpayers could lose out on billions of dollars being repaid to the treasury.

The US Treasury Department’s ownership of 500 million shares accounts for a 26% ownership in General Motors and as part of the bailout loan agreement, the government still has say in how things are done at GM. Romney seems to think that GM would be better off if the management members were completely free to make decisions on their own (without government intervention) but thus far, the main complaint by GM about the control by the government is that they cannot pay their management staff the same astronomical figures as auto bosses like Ford’s Alan Mulally. It sure doesn’t seem like the ability to send a few million more dollars into the bank accounts of Dan Akerson and his coworkers at GM would make much difference in improving General Motors. Also, GM managers making all of their own decisions was what got the company into the financial mess in the first place.

It will be interesting to see if President Obama’s administration does indeed unload the GM stock quickly should the Democratic candidate be re-elected but should the next President of the United States of America be the Republican Romney – we should expect to see the Treasury sell the GM stock quick, facing the loss and moving on while allowing GM to do the same.

Source: The Detroit News

Image captured from the bio video on MittRomney.com