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Business

Watchdog says taxpayers may lose $27B in bailout

WASHINGTON — A government watchdog says US taxpayers stand to lose $27 billion from the 2008 financial bailout, up from an estimate of $22 billion made in the fall.

A report issued Wednesday by the special inspector general for the Troubled Asset Relief Program says the estimate is higher because of increased losses for the Treasury Department on sales of shares in bailed-out companies.

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Ally Financial, the former financial arm for General Motors, still owes $14.6 billion of the $17.2 billion in aid it received. The report says taxpayers can expect to lose $5.5 billion on that investment because of the company’s losses on risky mortgages issued ahead of the financial crisis.

The report also criticized the Treasury for lacking a plan to unwind its investment in Ally. Taxpayers own 74 percent of the company.

Ally and GM together owe more than half of the $67.3 billion still owed US taxpayers by companies that were bailed out during the financial crisis, according to the quarterly report to Congress by Special Inspector General Christy Romero.

The total owed is down from $84.2 billion as of Sept. 30, as banks and other financial companies have repaid their investments and the Treasury has received proceeds from stock sales.

GM owes $21.6 billion of the $49.5 billion bailout it received.

Romero’s report said the Treasury “has no concrete exit plan” for Ally, which was formerly called GMAC.

The Treasury disputed the report’s finding.

The department does have an exit strategy for the Ally investment, Timothy Massad, an assistant secretary for financial stability, said in a letter to Romero.

Ally had originally planned to make an initial public offering of its stock to assist the Treasury’s exit, but the plan was postponed in 2011, Massad noted. He said two actions occurred last year that were part of the strategy. Ally’s mortgage-lending subsidiary Residential Capital LLC filed for bankruptcy protection, and the company sold its international operations to raise cash.

After ResCap is restructured in the bankruptcy proceeding and the sales of overseas operations are completed, the Treasury will be able to recover its investment through a sale of its Ally stock or additional asset sales, Massad said.

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