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Gov't Looking to Sell its GM Stock -- A Potential Loss of Over $11 Billion


Why now? It's about the 2012 election.

The U.S. government is currently biggest owner of General Motors stock. It was a condition of that company's bailout in 2009. So when you hear that the government is looking at selling off all its stock, that may seem like a good thing. Until you read what the Wall Street Journal put out today. Mainly, that GM stock is currently at about $30 and in order for the government to break even it needs to sell its shares at about $53. And then you read that despite the over $11 billion loss that would ensue, the Obama administration might do it anyway this summer. Why? Because 2012 is an election year.

The WSJ explains:

The U.S. government plans to sell a significant share of its remaining stake in General Motors Co. this summer despite the disappointing performance of the auto maker's stock, people familiar with the matter said.

A sale within the next several months would almost certainly mean U.S. taxpayers will take a loss on their $50 billion rescue of the Detroit auto maker in 2009.

To break even, the U.S. Treasury would need to sell its remaining stake—about 500 million shares—at $53 apiece. GM closed off 27 cents a share at $29.97 in 4 p.m. trading Monday on the New York Stock Exchange, hitting a new low since its $33-a-share November initial public offering.

"Planning for the sale of our remaining GM stock is still at an early stage, and the IPO lock-up does not expire until late May," a Treasury spokesperson said. "At that point, we will consider all of our options, based on our twin goals of protecting taxpayers' interests and exiting as soon as practicable."

Shares have been hurt by rising fuel prices, industry production disruptions and management turnover. At Monday's price, and taking into account shares sold during the IPO, taxpayers would lose more than $11 billion on the rescue if the government dumped the rest of its stake now.

Government officials are willing to take the loss because the Obama administration would like to sever its last ties to the auto maker, the people familiar with the matter said. A summer sale makes it more likely Treasury could sell all of its stake in GM by year's end, avoiding a potentially controversial sale in the 2012 presidential election year.

Government-owned industries fly in the face of conservative economics, for sure. And many conservatives would like nothing more than to see the "g" in GM once again mean "General." But in this case, be careful what you wish for.

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