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/

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