A new report given to Congress on Tuesday reveals that the federal government bailout of General Motors is going to end up costing the U.S. taxpayers billions of dollars once the feds sell their share completely.
In October, the U.S. government sold another $1.2 billion worth of stock in the fallen giant, leaving the government’s share down from 7% on September 26 to as low as 4% by October 31.
The report indicated that the feds’ $49.5 billion investment in GM in 2008 has yielded roughly $37.2 billion as the sale of stock continues, leaving taxpayers on the hook for $12.3 billion. On Sept. 26, the feds owned 101 million shares. Assuming the price of stock to be the average between the $33.92 to $37.99 range of GM stock in October, the feds would have had to sell roughly 33.4 million shares for $35.96 each in order to sell $1.2 billion in stock.
Subtracting the 33.4 million shares from the 101 million the feds owned on September 26 leaves the federal government owning approximately 70 million shares. In order for the government to avoid going in the red on their GM investment, the remaining shares would have to sell for more than $175 per share–which is extremely unlikely.
A Treasury Department watchdog admitted that the feds think they will lose at least $9.7 billion of the taxpayers’ money on the bailout.