The losses are going to be massive:
The $23.6 billion represents a 25 percent loss on the feds $60 billion direct “investment” in GM. But that’s not all that taxpayers are on the hook for. As I explained previously, Uncle Sam’s special GM bankruptcy package allowed the company to write off $45 billion in previous losses going forward. This could work out to as much as $15 billion in tax savings that GM wouldn’t have had had it gone through a normal bankruptcy. Why? Because after bankruptcy, the tax liabilities of companies increase since they have no more losses to write off.
This means that the total hit to taxpayers, who still own about a quarter of the company, could add up to $38.6 billion. That’s even more that the $34 billion on the outside I had predicted in May.
But it’s OK, ‘cuz the president’s campaign supporters got paid off.
So why does the press keep talking about how this was a good deal…Oh, wait.
Unless I’m misunderstanding something fundamental, there’s one problem with those numbers: the extra money that GM will have to pay in taxes ($15B) that will be added onto the bailout write-off will end up in the coffers of the IRS. So that part is a wash. It’s -$15B on one side, but +$15B on the other.
Nukem, if I understand it correctly, you’ve got that backwards–GM is off the hook for $15B in taxes they would have paid had they gone bankrupt in the normal fashion.
Aaahhhhh. That actually makes sense now. I wasn’t reading that way before.
Jeebus. What a clusterfuck.
Thanks for clearing that up for me.