The Obama administration reports the auto bailout will only end up costing taxpayers about $14 billion out of the $80 billion originally spent. Not too shabby, the administration contends-- considering the downside if GM and Chrysler had been obliged to liquidate.  

Bear in mind, though, that the key variable in this equation is GM’s stock price. The Treasury Department still owns 33 percent of GM’s common stock – 500 million shares in all. They’d be worth about $14.4 billion if the government sold at the current price of roughly $28.75. But that’s already 13 percent less than they would have fetched at the $33 per share the government got for 28 percent of the company back in a November 2010 initial public offering.  

In other words, the taxpayer has suffered big paper losses since the IPO — losses that will crystallize on the government’s books if and when it sells. Given what’s happening to the stock, the Treasury Department has decided to hold for the time being. As if to underscore the wisdom of that position, CEO Dan Akerson announced today that investors should consider GM a “long-term” stock. 

Alas, this situation is full of dilemmas, both for GM and the taxpayers who still own a third of it. The government can’t sell to the suddenly cash-rich GM itself, as has apparently been discussed, because at today’s lower-than-the-IPO price, that would look too much like another bailout/sweetheart deal. Nor can it sell to the public too soon, for fear of bigger taxpayer losses, and the attendant political backlash.  

Meanwhile, the mere fact that the government owns so much of the stock probably depresses its price, for at least three reasons: a) the “government motors” stigma with the car-buying public b) investors steer clear of a firm they believe is still subject to political manipulation and c) perhaps most important, investors are loath to pay a premium for GM shares now, anticipating that Washington might dump up to 500 million of them on the market at some point in the not-too-distant future. 

I see no easy solution. But one thing is clear: there’s probably no way the government is ever going to be able to sell out of GM at the break-even price of $53. And if the stock market really tanks, dragging GM down with it, then the losses from the bailout will be huge indeed. Maybe Treasury should just get out while the getting’s good.