Collaboration in Civic Spheres

Chrysler needn’t pay last $1.3 billion owed to U.S.

by September 18th, 2012

The Congressional Research Service reports that the reformulated Chrysler Corporation cannot be required to pay the last $1.3 billion of $10.9 billion in loans received from the United States government’s Troubled Asset Relief Program (TARP) starting in Fall, 2008 to help stabilize its financial fortunes. Titled “TARP Assistance For Chrysler: Restructuring and Repayment Issues,” the report released this month by the research arm of the U.S. Congress and Senate says that due to the vehicle manufacturer’s financial restructuring, “an approximate $1.3 billion shortfall remains” in payback – and that because “the U.S. Government has no remaining financial interest in New Chrysler,” the company “has no legal responsibility to make up this shortfall.”

Much of the old company’s assets were bought by New Chrysler, or Chrysler Group LLC. More than two-thirds of it is owned by the retiree medical trust fund of the United Auto Workers, and 20 percent by Fiat.

The $1.3 billion apparently lost to U.S. taxpayers through the TARP Chrysler loan process does not include additional but difficult to pinpoint costs which also might have been reasonably expected to be calculated and repaid, CRS notes. These include costs to the U.S. of borrowing the TARP funds loaned to Chrysler, plus a risk premium for the loan, and the management costs of the financial assistance provided.

The total cost of financial assistance for all four major auto industry TARP loan recipients was estimated at $25 billion earlier this year by the Department of the Treasury and the office of Management and Budget (OMB), but that estimate did not pro-rate shares of that cost for each of the loan recipients, CRS reports.

According to U.S. Treasury reports on TARP auto industry relief, cited in the CRS report, while Chrysler and Chrysler Financial owe nothing to the feds, General Motors still owes $22.6 billion on $50.2 billion in TARP loans, and GMAC/Aly Financial owes $14.6 billion on $17.2 billion in TARP loans.

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