* Bailout watchdog said US may not have fully vetted deal
* Government may have "left money on the table"
* Report cites govt rush to exit Chrysler Financial
* Treasury says deal fully analyzed, price fair
(Adds quote from report)
By John Crawley
WASHINGTON, Jan 13 The U.S. Treasury may not
have fully vetted the settlement of its interest in Chrysler
Financial last year and not gotten a strong enough return for
taxpayers, a bailout watchdog said in a report issued on
The Treasury settled its interest in the former financial
arm of the automaker for a loss in May last year.
Private equity firm Cerberus Capital Management [CBS.UL]
then became the sole owner and agreed in December to sell the
the financing business for $6.3 billion to Toronto Dominion
Bank (TD.TO), raising eyebrows over Treasury's handling of the
Treasury may have "left money on the table" in its dealings
with Cerberus, said former Delaware Senator Ted Kaufman, who
headed the bipartisan Congressional Oversight Panel's final
report on the auto sector.
"The rush to exit Chrysler Financial compounded by
incomplete due diligence may have resulted in an unnecessarily
subpar return for taxpayers, preventing Treasury from recouping
more of its prior $1.6 billion loss," said the report.
The deal illustrated a broader finding of the panel: that
the Obama administration may be too enamored of the politically
appealing scenario of quickly cutting its stake in the auto
business rather than patiently managing taxpayer interests.
"Treasury's efforts have in some cases lacked transparency
and accountability," said Kaufman on a conference call with
Treasury disputed the findings, saying it had hired an
independent financial adviser to assist in valuing Chrysler
Financial and to check for other potential buyers. It said its
exit was done responsibly.
The oversight panel was appointed by Congress to review
bailouts under the Troubled Asset Relief Program.
Kaufman stressed that his group understood the
administration faced tough decisions in orchestrating the
bankruptcy overhaul General Motors Co (GM.N) and Chrysler in
2009. The panel said the government's intervention was
ambitious and the companies now "appear to be on a promising
However, Kaufman said taxpayers will likely lose billions
on now-public GM and with Chrysler, now under the management
control of Italy's Fiat FIA.MI.
Treasury has recovered about half of the $50 billion
extended to GM in return for nearly 61 percent of the
restructured company, and about $2.2 billion of the $12 billion
given to Chrysler in exchange for a 10 percent interest.
Bill Visnic, senior editor of Edmunds AutoObserver.com,
said the auto bailout was an attempt to prevent harm to the
economy and should not be viewed as an investment.
"It had to be done," Visnic said. "Anything you get back is
Treasury assumed 40 percent of Chrysler Financial's equity
as part of a $3.5 billion pre-bankruptcy loan extended in
January 2009 to the lending unit's parent, Chrysler Holding,
which was owned at the time by Cerberus.
Treasury settled for $1.9 billion -- a loss of $1.6 billion
on the loan -- in May 2010, transferring the Chrysler Financial
stake to Cerberus, which became the sole owner ahead of the
deal with Toronto Dominion Bank.
The panel found that Treasury officials apparently
conducted "limited valuation due diligence, focusing on the
merits of the offer from Cerberus," the report said.
Treasury, the panel said, expected that Chrysler Financial
would be wound down, which would limit its value. But
Chrysler Financial continued investment in its business before
finding a strategic partner in TD Bank.
Treasury responded saying it does not "engage in market
timing." The recovery, it said, was significantly more than
Ron Bloom, the administration's pointman on auto
restructuring, said in Detroit this week that the bailouts
prevented widespread economic hardship. He also said the agency
is moving responsibly to exit the business and that turnarounds
at GM and Chrysler have "yielded concrete returns remarkably
(Reporting by John Crawley; Editing by Richard Chang and Tim