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?

One Response

  1. just how stupid does our administration,the media,and the regiem think we,the american tax payer,really are.we have always wanted our government to be transparent,well,this is about as transparent as it gets.even the blind can see through this deal.

    AMERICA,STEP UP AND VOTE.

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