Summit News

Bailout watchdog will review GM IPO

WASHINGTON (Reuters) - A government bailout watchdog will review the General Motors Co GM.UL share offering to see whether decisions made by Obama administration officials resulted in maximized returns for taxpayers.

Neil Barofsky, Special Inspector General, Troubled Asset Relief Program, speaks at the Reuters Washington Summit September 21, 2010. REUTERS/Kevin Lamarque

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, told the Reuters Washington Summit on Tuesday that the GM audit would be a template for other reviews of initial public offerings that involve the wind down of taxpayer stakes.

The U.S. Treasury manages the government’s nearly 61 percent holding in the automaker following more than $50 billion in TARP bankruptcy and bailout financing for GM in 2009.

The size of the GM IPO later this year has not been determined but estimates range from $10 billion to $20 billion, depending on how aggressively Treasury decides to sell its interest.

“I think it’s important for us to do effective and quick audit work so we can learn the lessons from this IPO and make sure that they’re applicable for the subsequent IPOs,” Barofsky said.

The government has a nearly 10 percent stake in Chrysler, which received about $14 billion in bailout and bankruptcy financing. Chrysler is run by Italy's Fiat SpA FIA.MI, which hopes for an IPO for the U.S. company in 2011.

Treasury also holds substantial interests in bailed out insurer AIG Group Inc AIG.N and Ally Financial Inc GKM.N, formerly the GMAC auto financing unit of GM.

The GM review, which will take place after the sale, was prompted by a letter to Barofsky’s office from U.S. Senator Charles Grassley. The Iowa Republican asked Barofsky to see if Treasury officials and GM are taking “adequate steps” to ensure the “highest possible return” for taxpayers.

Barofsky said his office is keeping tabs on Treasury as it works with outside advisers to gauge the value of the company.

Treasury is expected to take a loss on the first share offering, although subsequent offerings of the government’s holding may be profitable, sources have said.

Steven Rattner, the former pointman for the Obama administration’s restructuring of GM and Chrysler, told Reuters in an interview on Monday that he would not rule out the government recouping its entire share of the GM bailout over a period of years.

GM has already returned $6.7 billion in unused aid to the government and has paid roughly $700 million in interest and dividends. The government also holds $2.1 billion in preferred shares, reducing the balance owed to roughly $40 billion.

Editing by Tim Dobbyn