General Motors Corp. emerged from bankruptcy court earlier this month as a leaner and more focused company, and American taxpayers woke up as the owners of 61 percent of this “new GM.”
Granted, the speedy bankruptcy court approval of GM’s plan to sell its best assets to a new company in exchange for federal funding will save Americans jobs and help preserve the U.S. manufacturing base.
But it also adds GM to the list of private companies partially owned by taxpayers — a list that also includes American International Group Inc. and Citigroup.
President Obama was correct when he said Americans are “reluctant owners” of these enterprises. As a member of the Senate Banking Committee, I have joined my colleagues in working in a bipartisan way to examine the causes — and try to minimize the ongoing effects — of the economic meltdown that has roiled our nation’s economy over the past nine months.
The banking committee is working on a package of reforms to modernize regulation of the financial services industry. The obvious goal is to prevent future excesses — and to try to correct the obvious regulatory lapses and gaps that made this mess possible in the first place.
We are striving to tackle this complex challenge in a bipartisan way.
However, I believe more immediate action is necessary to enforce some rules of the road on the Troubled Asset Relief Program, or TARP, that would more fully protect the taxpayer; remove any hint of politics from the federal government’s temporary ownership stake in GM, AIG and Citibank; and provide a clear strategy for turning over taxpayer ownership of these companies to informed stockholders.
That’s why I am an original lead sponsor, along with Sen. Bob Corker, Tennessee Republican, of the TARP Recipient Ownership Trust Act of 2009. Here is what the proposal would do:
If the government owns more than 20 percent of a private company, that ownership stake would be placed in an independent trust supervised by three presidentially appointed trustees with a clear fiduciary obligation to the taxpayers of this country.
These three trustees would not be compensated. It is my hope they would accept this responsibility in the spirit of public service.
I hope the Obama administration would seek trustees of the caliber of investor Warren Buffett or former General Electric Chairman Jack Welch — neutral, respected business executives with records of accomplishment and the skill and knowledge to maximize taxpayer returns on their ownership stake.
Several recent surveys clearly indicate that Americans want the federal government to sell its stakes in General Motors, AIG and Citibank as soon as possible.
The American people have not been given any indications of when, or how, the TARP program is supposed to end, and they recognize that they have invested in troubled companies at a time when no one else would. They also are understandably worried about how much of the initial investment they will get back.
The private markets can do a better job of determining a company’s success or failure. But government should relinquish its ownership in a responsible manner that protects the taxpayer’s investment.
Under this legislation, the trust would have a responsibility to sell these assets within 18 months. Trustees could ask for an extension if they collectively determined that additional time might provide a way to maximize the return on the taxpayers’ initial investment. However, a target deadline of December 2011 should give taxpayers some confidence that they will not still own a significant share of stocks in these companies five, 10 or 20 years from now.
I believe this legislation will go a long way toward providing additional assurances that a political agenda is not being pursued through government ownership in any of these companies and that these companies also are being dealt with fairly.
The bipartisan legislation we have proposed will set clear parameters so we can take these investments out of the federal government’s hands and ensure maximum returns. Taxpayers deserve to have their investments managed in a way that rewards the risk they have undertaken in helping to save these huge institutions.
Removing control of these investments from the day-to-day politics of Washington not only makes common sense. It also might make all of us feel a little less squeamish about this unprecedented public investment in the private sector.
Sen. Mark Warner, Virginia Democrat, is a member of the Senate Banking and Budget committees.