VIDEO: Treasury Rejects Sale of GM Stake
NLPC Associate Fellow Mark Modica was interviewed last night on Fox Business Network's Willis Report. Here's a transcript:
Cheryl Casone: Government Motors. Trying to shed its ties to Uncle Sam once and for all, pushing the sale of the U.S. stake in the company altogether. But saying goodbye is hard to do. The government's digging in its heals, saying taxpayers would have faced a massive multibillion dollar loss. Joining me now with more is Mark Modica, associate fellow for the National Legal and Policy Center. This was a bad deal. I mean this was a bad deal for the taxpayers. Of course, Treasury said no to it.
Mark Modica: Hi, Cheryl, well, they have been saying no. Actually, they could have first sold the stake almost a year and a half ago when share price was over thirty, and we heard the same story. They're not going to sell at a loss. The fact is, they should get out of the auto industry. They should have done it as soon as possible. The decision to hold on, is based on politics. Look, Tim Geithner worked on Wall Street. He knows that a decision to sell stocks shouldn't be based on what you paid for the stock. It should be based on whether you should own the stock at this time. And right now, the government shouldn't own General Motors stock. They should sell as soon as possible, should've sold almost a year and a half ago when the value was up about twenty percent higher than it is now. Taxpayers have seen a loss of about three billion dollars more since that time, and we heard the same story then. They didn't want to sell it at loss. Stocks can go up. They can go down. Get us out now.
Cheryl Casone: But Mark, I mean Treasury Secretary Geithner also knows that if you hang in sometimes the markets going to ebb and flow. Right now we've actually got an upswing for the market. So, if the taxpayer can and they can hold on, I mean that is the truth here. We're talking about the government. It's not, you know...
Mark Modica: Well, sure.
Cheryl Casone: ...we are not trading on the back of individuals, the U.S. government, they've got trillions of dollars, why not hang around for another year and let the investment grow a little bit?
Mark Modica: Yeah, it is called market timing. Do you want? Should we have taxpayer money being market-timed in the market? You know, these are the same guys that went -- there were suggestions to put Social Security assets in the market, they said no way, we shouldn't risk taxpayer money. Well, why are they market timing their exit from GM? With this philosophy, you can sell GM and buy Apple and gamble some more with taxpayer money. The fact is, this is a political decision. General Motors knows this. General Motors knows that the government is not going to sell their stake. This is all politics, public relations. They are not going to sell before the elections. They should sell. They should have sold before, and we will be lucky if we don't lose more money on it when the smoke clears.
Cheryl Casone: OK Mark, you know, obviously, Fox Business reached out to the Treasury to get their comments on this report. And here is what they told us, they say that the government shouldn't be, shouldn't be a long term investor, but we have to maximize taxpayer returns. And they say we didn't do this to make a profit, we did it to prevent a collapse of the auto industry. Treasury assistant secretary Tim Massad to Fox Business. So, that is their take on this. That we are not looking to make a profit or any kind of timing we just want the auto industry just to stay stable.
Mark Modica: Well, what they did it for was to save the UAW and protect cronies and politically powerful UAW. That is a fact. But once again, markets go up, they go down. To say that we are going to protect taxpayer investment and make an assumption that the stock has nowhere to go up is just arrogant. The stock can go down as well as up. And taxpayers should be out. The government shouldn't be in this business. Sell it now.
Cheryl Casone: All right, Mark Modica, you have major point, thank you very much, Mark. Good to have you on this show.
Mark Modica: Thank you.