WASHINGTON (By John Crawley) - 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 on Thursday.
The deal most clearly illustrated a broader finding of the bipartisan Congressional Oversight 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 former Delaware Senator Ted Kaufman, who headed the group's last report on the auto sector.
Kaufman stressed his group understood the administration faced tough decisions in orchestrating their overhaul and bankruptcy. Despite the criticism, the panel said in the report that the government's intervention was ambitious and the companies now "appear to be on a promising course."
However, he said taxpayers will likely lose billions on now-public GM, and Treasury may have "left money on the table" in its dealings with private equity firm Cerberus Capital Management over Chrysler Financial, the automaker's one-time consumer financing arm.
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.
Treasury assumed 40 percent of Chrysler Financial's equity as part of a $3.5 billion pre-bankruptcy loan 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 stake to Cerberus, which became the sole owner.
Cerberus then agreed to sell the financing business for $6.3 billion to Toronto Dominion Bank in December, raising eyebrows over Treasury's handling of the settlement.
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, and noted at the time of settlement the price paid by Cerberus was fair.
Chrysler Financial, however, continued to make investments in its business before finding a strategic partner in TD Bank.
Treasury disputed the conclusion it may not have fully vetted the Chrysler Financial settlement, saying it conducted several months of due diligence and hired an independent financial adviser to assist in valuation and check for other potential buyers.
The panel was appointed by Congress to review bailouts under the Troubled Asset Relief Program. General Motors Co and Chrysler, now under management control of Italy's Fiat Spa, received bailout and bankruptcy assistance from the Treasury in 2009.
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 Treasury is moving responsibly to exit the business and that turnarounds at GM and Chrysler have "yielded concrete returns remarkably quickly."
Chrysler's resurgence especially, he said, "has surprised just about everyone."
(Reporting by John Crawley; Editing by Richard Chang)
Copyright 2010 Thomson Reuters. Click for Restrictions.
Our 2024 Coverage Needs You
It's Another Trump-Biden Showdown — And We Need Your Help
The Future Of Democracy Is At Stake
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
The 2024 election is heating up, and women's rights, health care, voting rights, and the very future of democracy are all at stake. Donald Trump will face Joe Biden in the most consequential vote of our time. And HuffPost will be there, covering every twist and turn. America's future hangs in the balance. Would you consider contributing to support our journalism and keep it free for all during this critical season?
HuffPost believes news should be accessible to everyone, regardless of their ability to pay for it. We rely on readers like you to help fund our work. Any contribution you can make — even as little as $2 — goes directly toward supporting the impactful journalism that we will continue to produce this year. Thank you for being part of our story.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
It's official: Donald Trump will face Joe Biden this fall in the presidential election. As we face the most consequential presidential election of our time, HuffPost is committed to bringing you up-to-date, accurate news about the 2024 race. While other outlets have retreated behind paywalls, you can trust our news will stay free.
But we can't do it without your help. Reader funding is one of the key ways we support our newsroom. Would you consider making a donation to help fund our news during this critical time? Your contributions are vital to supporting a free press.
Contribute as little as $2 to keep our journalism free and accessible to all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circumstances have changed since you last contributed, we hope you'll consider contributing to HuffPost once more.
Support HuffPostAlready contributed? Log in to hide these messages.