GM’s Alleged TARP Repayment – Obama Adminstration Helping GM Avoid TARP Tax

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.

http://www.thetruthaboutcars.com/grassley-was-gms-payback-shuffle-about-avoiding-the-tarp-tax/#more-353869

General Motors Repayment Scam – Paying One Bailout Loan With Another Bailout Loan – Plans 1st Outlined In November 2009

Did GM’s anouncement that it had repaid its TARP loans “in full” and “5 years early” sound familiar? It was. GM made the same claim last November (2009) and then delayed the repayment for 5 months.

Where did the money used to make the “repayment” come from? The same escrow account mentioned in the post below. This post was published last November (2009). 

From CREDITWRITEDOWNS.COM:

GM’s phony taxpayer repayment

Posted by Edward Harrison on 23 November 2009 at 9:06 am   

This comes via Deal Book at the New York Times.

The company’s chief executive, Fritz Henderson, called the repayment plan “a personal commitment.” The Obama administration, wardens of the 60 percent taxpayer stake in the company, declared itself “encouraged” by the news. Many commentators followed suit. But in the premature rush to herald the beginning of the end of the government’s involvement in the auto industry, a number of key considerations were left out, Edward Niedermayer, the editor of The Truth About Cars

For starters, $6.7 billion doesn’t begin to scratch the surface of what G.M. actually owes us. Over the past 12 months, the Treasury has given it some $52 billion in the form of cash, loans and the purchase of that 60 percent of the company’s post-bankruptcy equity. And that number fails to take into account the two bailouts of G.M.’s former lending arm, GMAC, or the $3 billion spent on the “cash for clunkers program,” which doubtless kept the company from posting even deeper losses.

Moreover, G.M. is not, in the strictest sense, paying back taxpayers at all. Rather, it is refunding $6.7 billion of an $18 billion escrow account that was given to it by the government when it emerged from bankruptcy. The rest of that account will be used to cover fourth-quarter losses (including $2.8 billion pledged for the rescue of G.M.’s major parts supplier, Delphi), repay loans from the Canadian government, and possibly prop up the automaker’s shaky European operations. That escrow account is due to expire in June, at which time G.M. will repay what remains of the $6.7 billion from this week’s pledge — and then pocket the estimated $5.6 billion remainder.

Read more: http://www.creditwritedowns.com/2009/11/gms-phony-taxpayer-repayment.html#ixzz0lw40O0bb

Meanwhile, in what should be seen as a PR move, General Motors has also announced it will begin repaying government money. The first $1 billion to be repaid in December. The company will make $1 billion payments to the U.S. government and $200 million payments to the Canadian government every quarter. It has said it could repay all the aid money by 2011, four years ahead of schedule. Presumably, this does not include the equity government stakes which can be sold on in the open market in an I.P.O.

Given the fact that General Motors is still losing money, it would make sense for them to delay repayment. However, I reckon they are going to repay early in order to tamp down criticism about their government-funded bailout.

Obviously, a lot of people were fooled into thnking that GM was repaying anything. It’s pure smoke and mirrors designed for public relations. The fact is GM is completely dependent on both government largesse and a global recovery in order to make its story work.

We know where the money is coming from; it is coming from the $18 billion escrow GM has courtesy of the U.S. government and taxpayers. 

The phony taxpayer repayment has to be seen against this backdrop. The U.S. and Canadian governments have invested over $60 billion in GM.

GM had a market capitalization at a 2000 bubble peak of $57 billion. Yet, according to the New York Times article, equity from a planned I.P.O. (Initial Public Offering) would have to be worth $66 billion, an even higher market capitalization. (McAuley’s World: The new and much smaller GM would need to be able to sell stock worth at least $11 billion more than GM has ever been worth in its 100  plus year history – worth more than the highest price ever placed on GM stock in GM’s heyday, back in the day when GM ruled the globe in market share. Do you think that is likely given the much smaller market share and the billions of dollars in unfunded union pension liabilities at the company?)

I seriously question whether this money will ever be repaid in full.  This is what happens when you bailout bankrupt companies.

http://www.creditwritedowns.com/2009/11/gms-phony-taxpayer-repayment.html

So how is it that the Main Stream Media, the Obama Aministration, President Obama himself and Vice President Biden were not truthful about these announcements. Why are we, the public, being lied to about the circumstances of this “payback”.  

Question: As this GM “escrow account” expires in June 2010 and under the current language of the “escrow” General Motors gets to “pocket” an additional $5.6 billion dollars, will GM and the Obama Administration claim the $5.6 billion in taxpayer money as a “GM profit”?

What bothers you more …. the Obama Administration’s incredibly wasteful spending or the Media and the Administration’s lies about the source of the repayment money?

General Motors & Obama Administration – Misleads Press & Public – Loans Repaid With New Bailout Money

As it turns out the Obama Adminstration’s hand pick CEO for GM, Ed Whitacre, was talking out of both sides of his mouth when he proclaimed, “GM has turned the corner” while the Obama Adminstration trumpted the alleged repayment of one of GM’s  ”bailout” loans.

What are the facts?

GM SIMPLY USED OTHER BAILOUT FUNDS TO REPAY A BAILOUT LOAN.

Yep, taking cash out of one pocket and putting it in another – all of the cash is taxpayer cash – not GM earnings.

GM has at least three outstanding “loans’ made at taxpayer expense. A $60 Billion plus loan that the Government has accepted ”securites for”, an $8 billion dollar “cash loan” that GM allegedly repaid and an open ended “escrow account” that provides GM “operating cash” provided by the Obama Adminstration at taxpayer expense.

What did GM do? GM took cash ourt of the “escrow account” funded by the taxpayers to “payback” the $8 billion dollar cash loan.

Did this “slight of hand” reduce the amount of money GM owes the US taxpayer or reduce GM’s total debt? Heck NO! The “transaction” just changed which account the money was owed to. Just like when people use one credit card to pay another credit card …. a sure sign of financial recovery.  

How dishonest of GM, President Obama, VP Biden and the News Media. Shame on all of them!

Grassley Slams GM, Administration Over Loans Repaid With Bailout Money 

…… the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money…… accused the Obama administration of misleading taxpayers about General Motors’ loan repayment, saying the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money…… the charge was backed up by the inspector general for the bailout — also known as the Trouble Asset Relief Program, or TARP….. Watchdog Neil Barofsky told the Senate Finance Committee, that General Motors used bailout money to pay back the federal government …… ”It appears to be nothing more than an elaborate TARP money shuffle,” Senator Grassley said in a letter Thursday to Treasury Secretary Timothy Geithner …. Grassley called on Geithner to provide more information about why the company was allowed to use bailout money to repay bailout money, and how much of the remaining escrow money GM would be allowed to keep…… “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,” he wrote….. Barofsky said, “I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn’t from earnings. … It’s actually from another pool of TARP money that they’ve already received,” he said Wednesday. “I don’t think we should exaggerate it too much. Remember that the source of this money is just other TARP money.” 

Barofsky told the Senate Finance Committee the same thing Tuesday, and said the main way for the federal government to earn money out of GM would be through “a liquidation of its ownership interest.” 

Grassley criticized this scenario in his letter. 

“The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment,” he wrote, refering to the $60+ billion dollar loan which the Obama Administartion allowed GM to convert to an “unsecured”, ”security”.

http://www.foxnews.com/politics/2010/04/22/grassley-slams-gm-administration-loans-repaid-bailout-money/

General Motors Busted For Loan Repayment Scam. Repayment made with “other” Bailout Funds.

As it turns out the Obama Adminstration’s hand pick CEO for GM, Ed Whitacre, was talking out of both sides of his mouth when he proclaimed, “GM has turned the corner” while the Obama Adminstration trumpted the alleged repayment of one of GM’s  “bailout” loans.

What are the facts?

GM SIMPLY USED OTHER BAILOUT FUNDS TO REPAY A BAILOUT LOAN.

Yep, taking cash out of one pocket and putting it in another – all of the cash is taxpayer cash – not GM earnings.

GM has at least three outstanding “loans’ made at taxpayer expense. A $60 Billion plus loan that the Government has accepted “securites for”, an $8 billion dollar “cash loan” that GM allegedly repaid and an open ended “escrow account” that provides GM “operating cash” provided by the Obama Adminstration at taxpayer expense.

What did GM do? GM took cash out of the “escrow account” funded by the taxpayers to “payback” the $8 billion dollar cash loan.

Did this “slight of hand” reduce the amount of money GM owes the US taxpayer or reduce GM’s total debt? Heck NO! The “transaction” just changed which account the money was owed to. Just like when people use one credit card to pay another credit card …. a sure sign of financial recovery!  

How dishonest of GM, President Obama, VP Biden and the News Media. Shame on all of them!

Grassley Slams GM, Administration Over Loans Repaid With Bailout Money 

…… the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money…… accused the Obama administration of misleading taxpayers about General Motors’ loan repayment, saying the struggling auto giant was only able to repay its bailout money by dipping into a separate pot of bailout money…… the charge was backed up by the inspector general for the bailout — also known as the Trouble Asset Relief Program, or TARP….. Watchdog Neil Barofsky told the Senate Finance Committee, that General Motors used bailout money to pay back the federal government …… “It appears to be nothing more than an elaborate TARP money shuffle,” Senator Grassley said in a letter Thursday to Treasury Secretary Timothy Geithner …. Grassley called on Geithner to provide more information about why the company was allowed to use bailout money to repay bailout money, and how much of the remaining escrow money GM would be allowed to keep…… “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,” he wrote….. Barofsky said, “I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn’t from earnings. … It’s actually from another pool of TARP money that they’ve already received,” he said Wednesday. “I don’t think we should exaggerate it too much. Remember that the source of this money is just other TARP money.” 

Barofsky told the Senate Finance Committee the same thing Tuesday, and said the main way for the federal government to earn money out of GM would be through “a liquidation of its ownership interest.” 

Grassley criticized this scenario in his letter. 

“The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment,” he wrote, refering to the $60+ billion dollar loan which the Obama Administartion allowed GM to convert to an “unsecured”, “security”.

http://www.foxnews.com/politics/2010/04/22/grassley-slams-gm-administration-loans-repaid-bailout-money/

Obama and the VAT: Obama Moves Closer to Breaking “No New Tax Pledge” To The Poor, The Elderly And Those Who Can Least Afford It

We all remember candidate Obama’s pledge, “If you a make under $250,000, your taxes won’t go up. Your taxes won’t go up as much as one thin dime”.

Looks like Obama the politician is about to break that pledge. Just another political huckster about to betray those who elected him.

Obama is now calling for a VAT Tax, or Value Added Tax, to be placed on nearly all items purchased in the United States. The VAT is a National Sales Tax. The amount of the tax being discussed by the Administration is 20% or 20¢ (cents) on every dollar.

A $100 purchase would become $120, a $1000.00 (1 thousand dollar) purchase will become a $1200.00 (one thousand two hundred dollar) purchase.

For those of you hoping that car sales will pick up, a $20,000 (twenty thousand dollar) auto, will cost $24,000 (twenty four thousand dollars) after a 20% VAT.

The young, students, the poor, the working poor, the elderly and those on fixed incomes will suffer the most. VAT taxes, like any sales tax, effect these people the most because they spend more of their income just to survive, more than the rich ever spend on necessities.

Another broken promise by another Politician that should not have been trusted!

Obama suggests value-added tax may be an option

WASHINGTON – President Barack Obama suggested Wednesday that a new value-added tax on Americans is still on the table.  

Obama adviser Paul Volcker recently raised the prospect of a value-added tax, or VAT.

The Senate passed a non-binding resolution last week, 85-13, that calls such a tax “a massive tax increase that will cripple families on fixed income and only further push back America’s economic recovery.”

Obama was asked in a CNBC inetrview if he could see a potential VAT in this nation, the president said: “I know that there’s been a lot of talk around town lately about the value-added tax. That is something that has worked for some countries. It’s something that would be novel for the United States.”

http://news.yahoo.com/s/ap/20100421/ap_on_bi_ge/us_obama_tax

Eventually, every politician who believes in “spreading the money around”, “gets around” to your wallet too!

Economic Recovery on Tax Day 2010? In The 4th Year of Democratic Control Of Congress – Unemployment And Home Foreclosures Continue To Soar

“The worst economy on our lifetime” screamed the Democratic political ads back in 2005 as we moved towards the 2006 election when the Democrats took control of both Houses of Congress. http://uspolitics.about.com/od/usgovernment/l/bl_party_division_2.htm

After winning control of Congress the Democrats acellerated Government spending and the reckless mortgage practices of Fannie & Freddie.

The month before the Democrats took control of Congress in November 2006 the National unemployment rate stood at  4.4%. http://www.laworks.net/Downloads/LMI/Data_for_November_2006.pdf

The aveage unemployment rate during Bush’s 8 years as President was 4.8%.

Unemployment stands at 9.7% today (04-15-2010) and 1st time unemployment claims continues to set records and remains above 425,000 first time claims, week after week. (Jobless Claims Rise to 484,000 First-Time Claims, Associated Press: Jobs are still hard to come by as first-time requests for jobless benefits rose to 484,000 last week. http://www.foxnews.com/politics/2010/04/15/jobless-claims-rise-time-claims/?loomia_ow=t0:s0:a4:g4:r2:c0.000000:b0:z5 ) 

Mortgage foreclosures continue at a record pace. (Foreclosure Rates Surge, Biggest Jump in 5 Years.  Associated Press: A record number of U.S. homes were lost to foreclosure in the first three months of this year, a sign banks are starting to wade through the backlog of troubled home loans at a faster pace. http://www.foxnews.com/us/2010/04/15/foreclosure-rates-surge-biggest-jump-years/?loomia_ow=t0:s0:a4:g4:r3:c0.000000:b0:z5 )

Nearly two years ago Obama launched his $75 Billion Dollar mortgage program during a speech in Nevada. The President promised his program would help 9 million American Homeowners. To date less than 100,000 familes have been helped at a cost to taxpayers of more than $1 million per mortgage. 1 out of every 33 houses in Nevada has received a foreclosure notice in 2010. In a normal suburban neighborhood that means 8 to 10 houses on every street are in foreclosure. In November 2006 one out of every 389 households in Nevada were in foreclosure. 1 in 33 versus 1 in 389? http://efinancedirectory.com/articles/Home_Foreclosures_Increase_Across_the_Nation.html   http://www.foxnews.com/us/2010/04/15/foreclosure-rates-surge-biggest-jump-years/?loomia_ow=t0:s0:a4:g4:r3:c0.000000:b0:z5

Nationwide, one home in every 759 was in foreclosure in November 2006, and that number represented a doubling of the number in foreclosure in 2005 (1 home in every 1500 in 2005 – but would Congress listen when the Regulators warned about Fannie & Freddie – heck no – the Congresspeople claimed the “Regulators” findings were racially motivated and biased …. Congress played the race card rather than face facts). How does the 2006 foreclosure rate of 1 home out of every 759 compare with today? “In all, more than 900,000 households, or one in every 138 homes, received a foreclosure-related notice, in the first 3 months of 2010, RealtyTrac said. The firm based in Irvine, Calif., tracks notices for defaults, scheduled home auctions and home repossessions”. http://www.cbsnews.com/stories/2010/04/15/business/main6398303.shtml

For every 1 home foreclosure in 2006 there are 6 home foreclosures in 2010. 

At the current rate 9 million homes will face foreclosure by 2012. http://minnesotaindependent.com/39184/nine-million-foreclosed-homes-by-2012

Didn’t the Obama Adminstration tell us that an economic recovery was dependent on a recovery in the housing market? http://www.silvar.org/index.cfm/article_392.htm   Wait a minute, wasn’t an economic recovery dependent on the auto industry? http://change.gov/agenda/economy_agenda/ , or pension relief , http://www.necanet.org/index.cfm?fa=newsAboutNecaItem&articleID=4210 and of course, we can’t have a recovery without a Government take over of health care …….     

As the Democrats “feed” the Government with your tax dollars it continues to grow and as Government grows so does the unemployment rate and the number of homes in foreclosure ……\

The Democrats have been leading us down this path since 2006 …… now they are running down that  path at full speed ……. running with their eyes closed and at full speed …..

By the way …. has anyone else noticed the strange coincidence that seems to occur month after month …..  that the Administration saves or creates just enough jobs that when the number of jobs “saved” is combined with the “number of unemployed Americans who give up looking for work” – that the unemployment rate remains constant. Week after week, we have 400,000 plus new unemployment claims and yet the unemployment rate remains stuck at 9.7%.

Yeah, I believe it is just a coincidence.

Wait, let me guess …. it is all George’s fault ……….. George was in office for 8 years and the Democrats have been “in charge” the last 4. Yeah, blame it on George ….. don’t take any responsibility but please admit the obvious – you’ve been in charge the last 4 years and things have gotten a heck of a lot worse …..

Congress, The Tea Party and Government Regulation: Congress Plays The Race Card Again

The familiar charge of racism levied by our esteemed Congress against American citizens freely associating with the Tea Party Movement. Watch the video below as the Democratic Congress plays the race card against the Government Regulators charged with overseeing Fannie Mae and Freddie Mac.

The financial collapse had little to do with greedy bankers and great deal more to do with greedy politicians who failed to do their jobs. Watch the video as the Congresspeople disparage the Government Regulators who discovered and reported on Fannie & Freddie’s reckless deals …. clearly claiming that the Regulators findings were racially motivated and inaccurate …. well, we all know otherwise today.

As for the need for additional regulation … what good will it do when Congress ignores the Regulators findings?

As to new regulation …. it isn’t necessary …. lets start by enforcing the regulation that is already on the books and lets expand Sarbanes Oxley ……. watch the video ….. Fannie & Freddie are not subject to Sarbanes Oxley! Why did Congress allow this exemption? Isn’t it obvious? Watch the video and then contact your Congressperson and let them know how you feel about Congresspeople playing the race card!    

WATCH THE ACTUAL COMMITTEE TESTIMONY – WHY REGULATION REFORM FOR FANNIE AND FREDDIE WAS BLOCKED

WATCH THE VIDEO HERE: </p>

Can you hear the hatred in the Congresspeople’s voices when it was suggested that the GSE’s (Fannie &amp; Freddie are the GSEs) were making horrible loans and it needed to stop! 

How did the reform get blocked ?  You need 60 Votes to pass a law in the Senate – Democrat Senator Christopher Dodd and his Democratic colleagues blocked the reform of Fannie &  Freddie that could have prevented the Crisis.

The following Articles describe the role of “political ideology” in the Financial Crisis – How Politics & Big Government fueled the crisis:

Professor Stan Liebowitz: “The Real Scandal” style=”color:#105cb6;”>http://www.mises.org/story/2963</span></a></p>
<p><strong>John R Lott, Jr</strong> : <strong>Analysis – Reckless Mortgages Brought Financial Market To Its Knees</strong> <a href=”

Professor Thomas J DiLorenzo: The CRA Scam and its Defenders: http://www.mises.org/story/2963

John R Lott, Jr : Analysis – Reckless Mortgages Brought Financial Market To Its Knees http://www.foxnews.com/story/0,2933,424945,00.html

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