GAO Questions Results of Treasury’s Support of the Auto Industry

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis

The Government Accountability Office has released a report examining the Treasury Department’s commitment of $62 billion in Troubled Asset Relief Program funding to General Motors and Chrysler. Under the GAO’s mandate to oversee TARP, the report addresses: (1) how restructuring with federal assistance has affected GM’s and Chrysler’s financial condition; (2) what Treasury has done to ensure that it disinvests in GM and Chrysler so as to protect taxpayers’ interests and what risks remain in recouping its investments; and (3) how restructuring has affected auto communities and what the White House Council on Auto Communities and Workers and its staff in the Department of Labor’s Office of Recovery for Auto Communities and Workers have done to mitigate these effects.

The GAO found that while federally-funded restructuring allowed GM and Chrysler to remain in business, and therefore benefited communities where auto work continued, communities where plants were idled or closed experienced economic challenges beyond those they already faced. Further, communities assisted by the White House Council program had mixed views on the results of the efforts. The Council also has not completed two of the four functions set forth in the executive order establishing it, and neither the Council nor its staff have demonstrated the results of their efforts, according to the GAO report. Although the Council is set to expire in June 2011 unless renewed by the President, fiscal year 2012 funding has been requested for the Auto Recovery Office to continue its efforts.