As we now know, GM used “new” TARP money to “repay” one of the original TARP loans it received.
One of the motivating factors for this “money shuffle” was to generate positive “Public Relations Press” for both GM and the Obama Adminstartion.
Now it appears thata a secondary motivation was to allow GM and its Union to escape paying the “Financial Crisis Responsibility Fee, also known as “The TARP Tax.”
The following is Senator Grassley’s letter to Treasury Secretary Geitner:
Dear Secretary Geithner:
General Motors (GM) yesterday announced that it repaid its TARP loans. I am concerned, however, that this announcement is not what it seems. In fact, it appears to be nothing more than an elaborate TARP money shuffle.
I am also troubled by the timing of this latest maneuver. According to Mr. [TARP Special Inspector General Neil] Barofsky, Treasury had supervisory authority over GM’s use of these TARP escrow funds. Since GM’s exit from bankruptcy court, Treasury had approved the use of the escrow funds for costs such as GM’s obligations to its parts supplier Delphi. According to the GM 8K, GM had planned to use the TARP funds in escrow to pay back the TARP loans on a quarterly basis beginning in the fourth quarter of 2009. But following the April 20, 2010, hearing of the Senate Finance Committee, where Treasury’s decision to exempt GM from the bank TARP excise tax was questioned and GM’s refusal to testify was noted, it is odd that GM suddenly drew down on the TARP escrow and accelerated the repayment of the remaining balance of GM’s outstanding TARP loans.
The bottom line seems to be that the TARP loans were “repaid” with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the Administration have claimed in their speeches, press releases and television commercials. When these criticisms were put to GM’s Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:
Question: Are you just paying the government back with government money?
Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d be able to pay this back.
Filed under: Auto Industry, Auto Industry Bailout, Bailout, General Motors, GM, Politics, TARP, TARP Tax | Tagged: GM "shuffles" TARP Money To Avoid TARP Tax, GM Uses New Tarp Money To Repay Old TARP Loan And Avoid TARP Tax, GM's Loan Repayment Just A Tax Dodge? | Leave a Comment »