Revelations that the New General Motors is using increased subprime lending to power its recent sales may doom any chance that taxpayers will ever recover the still-unpaid chunk of the $49.5 billion the federal government spent in 2009 bailing out the former auto industry giant.
The GM bailout came as part of the bankruptcy reorganization imposed by the Treasury Department’s auto recovery task force formed in 2009 by President Obama shortly after his election to the White House. The reorganization was intended to help GM get through the deep sales slump it suffered in the Great Recession of 2008.
‘This would be consistent with what a company might do if they have some confident that the government will bail them out. – Prof. Todd Zywicki’
At the same time, Obama put the Treasury Department behind the acquisition of Chrysler Corp. by the Italian industrial giant, Fiat. Ford Motor Co., the original member of Detroit’s once-almighty Big Three automakers, did not require government assistance because it had accumulated sufficient cash reserves to weather the recession.
As part of the reorganization, the New GM said it would repay the bailout loans, so government and stock market analysts alike are closely following the company’s continuing problems in the market place.
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