Wednesday, November 17, 2010

GM IPO: Fiscal Drag?

GM is going to do an IPO tomorrow to raise some capital. Yahoo! has a story here. Excerpt:

"The Obama administration now will sell 412 million of its 912 million shares, raising around $13.6 billion that will help the government get back some of the $50 billion it loaned GM to save the company from ruin last year."
If this 13.6B is just returned to the Treasury, it may provide fiscal drag this month, as the average monthly flow of fiscal (which is probably all that is holding everything together) is around $110B/month. This $13.6B would represent a bit above a 10% hit to this flow this month, and may be significant.

6 comments:

Mike Norman said...

Good point!

Mike Norman said...

Getting taxpayers "off the hook," right??

TomatoBasil said...

AIG paid 36.7 bln to FRBNY and Drew 22bln from Treasury tarp credit line this month also for net negative of 14.7 bln.
Unrelated, a positive T.I.C. flow of 81.7 bln for the month doesn't hurt.

DoggeyStyleMikey said...

What artificial lending standards are you talking about?!?!?!!?!?

Matt Franko said...

TB,

Are you including the 20B AIA ipo AIG did in Hong Kong in USD in your net AIG figures to the Fed/Treasury?

this AIG fiscal xfer and now the GM one today may be why stocks and bonds have ran into trouble so far this month...source of funds?

Good catch on the AIG I missed that one.... Combined the AIG and the GM may total about 25-30B.. that is substantial for one month.

Once this fiscal xfer is over it may be a return to previous trend.

Matt Franko said...

PS

Thinking more about all of this...

when Treasury made the initial investment it was for a purchase of Financial Assets (shares) so that would not have added to AD. (at least directly, but did aid stability) (I think we said so at the time)

Now here when they take it back, although it may not be a hit to AD (it is not a broad tax per se), perhaps it puts pressure on FA prices as something has to be sold to raise funds to give back to the govt?

so we may not see any hit in AD/Sales from this just maybe a small sell off in FAs..