THE taxpayer bailouts of General Motors and Chrysler kept the companies afloat while they went through bankruptcy … 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 … 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 $700bn Troubled Asset Relief Programme for about $80bn in loans to GM, Chrysler and their consumer-lending businesses. …The new, post-bankruptcy Chrysler … bought out the government’s stake, with a net loss to the taxpayers of $2.9bn.

The feds’ stake in GM was much larger, though, and the Treasury Department didn’t want to sell it all at once…. So far the Treasury has recovered almost half of the $49.5bn loaned to GM, and it still holds 500 million of the company’s shares.

Selling those shares at their current price would leave the Treasury with a loss of about $15bn on the GM loans. Of course, dumping that many shares on the market all at once would probably drive the share price down…. Assistant Treasury Secretary for Financial Stability Timothy G. Massad told CNBC … “We’ve made it clear we’ll be patient. So we’ll sell when we think the time is right.”

A more cynical explanation is that delaying the sale helps President Obama on the campaign trail … On the other hand, continuing the government’s stake in GM invites accusations that Washington is tilting the playing field to favour its investment and that it’s forcing the automaker to support the administration’s agenda. GM says Washington plays no role in its decisions, yet the company is still stigmatised among some consumers as ‘Government Motors’.

The administration has accomplished what it hoped to with its loans to GM. The company has restructured and cut its production and distribution costs significantly, and appears self-sustaining. The Treasury should sell its holdings in an orderly fashion and leave the auto industry to private investors. — (Sept 21)