NEW YORK (CNNMoney) -- A Congressional oversight panel says that a "starkly improved" outlook for the auto industry has reduced the likely taxpayer loss on the bailout by more than half to about $19 billion.
The previous estimate from the panel was that taxpayers would lose $40 billion of the $81.3 billion given to the automakers and their finance arms from the Troubled Asset Relief Program.
The bailouts funded the automakers' operations through bankruptcy and Treasury ended up with significant equity in the various companies in return for the bailouts.
The report questions Treasury's decision to sell so much of its stake in General Motors (GM) during the automaker's successful initial public offering in November, saying the decision "essentially locked in a loss of billions of dollars and thus greatly reduced the likelihood that taxpayers will ever be repaid in full."
And it also cast doubt on whether Treasury will be made whole on a smaller bailout of the Chrysler Group, and questioned its handling of its holdings in the former finance arms of the two automakers, GMAC/Ally Financial and Chrysler Financial.
Treasury spokesman Mark Paustenbach said that despite the criticisms in the report, the analysis of the bailout was largely positive. The report acknowledged the government's action was necessary, he said, and because of the bailouts, the industry is now on a promising course.
Administration officials said it is too soon to say the final cost to taxpayers until the last shares of stock in GM, Chrysler and Ally Financial are sold.
But the Congressional report also says that there are significant consequences of the bailout which go beyond the loss of tax dollars.
"Treasury's rescue suggested that any sufficiently large American corporation -- even if it is not a bank -- may be considered 'too big to fail,' creating a risk that moral hazard will infect areas of the economy far beyond the financial system," it said.
"Further, the fact that the government helped absorb the consequences of GM's and Chrysler's failures has put more competently managed automotive companies at a disadvantage. For these reasons, the effects of Treasury's intervention will linger long after taxpayers have sold their last share of stock in the automotive industry."