The taxpayer bailouts of General Motors and Chrysler kept the companies afloat while they went through bankruptcy, averting liquidations that would have caused catastrophic job losses across the U.S. auto industry at the height of the recession. One consequence of the intervention, however, is that the government is still holding on to more than a fourth of GM's stock. The Treasury Department argues that the time isn't right to sell and that GM's shares are undervalued by the market. Maybe so, and maybe the ultimate cost to the taxpayers would be lower if Washington held on to the shares longer. But there's a more important principle at stake, namely that the government shouldn't have an ownership interest in private companies.
The Bush and Obama administrations tapped the $700-billion Troubled Asset Relief Program for about $80 billion in loans to GM, Chrysler and their consumer-lending businesses. Much of the debt was converted into equity as part of the bankruptcy process, leaving the feds with sizable holdings in the two companies.
The new, post-bankruptcy Chrysler — owned by Italian automaker Fiat — bought out the government's stake, with a net loss to the taxpayers of $2.9 billion. The feds' stake in GM was much larger, though, and the Treasury Department didn't want to sell it all at once for fear of flooding the market and lowering its returns. So far the Treasury has recovered almost half of the $49.5 billion loaned to GM, and it still holds 500 million of the company's shares.