I was a bit mystified the other day when I saw this GM ad crowing about how the company had paid off its government loans. Could it be true? The ad was pretty unequivocal:
“I’m Ed Whitacre from General Motors. A lot of Americans didn’t agree with giving GM a second chance. Quite frankly, I can respect that. We want to make this a company all Americans can be proud of again. That’s why I’m here to announce we have repaid our government loans in full, with interest, five years ahead of the orginal schedule.”
If that seems too good to be true, it is. In fact, at best it seems like an attempt to pull the wool over the eyes of American taxpayers. The loans have been paid off but with other government funds, not GM’s own earnings. From a letter Senator Charles Grassley, R-Iowa, sent to Treasury Secretary Tim Geithner yesterday (PDF link):
On Tuesday of this week, Mr. Neil Barofsky, the Special Inspector General for TARP, testified before the Senate Finance Committee. During his testimony Mr. Barofsky addressed GM’s recent debt repayment activity, and stated that the funds GM is using to repay its TARP debt are not coming from GM earnings. Instead, GM seems to be using TARP funds from an escrow account at Treasury to make the debt repayments. The most recent quarterly report from the Office of the Special Inspector General for TARP says “The source of funds for these quarterly [debt] payments will be other TARP funds currently held in an escrow account.” See, Office of the Special Inspector General for TARP, Quarterly Report to Congress dated April 20, 2010, page 115.
Furthermore, Exhibit 99.1 of the Form 8K filed by GM with the SEC on November 16, 2009, seems to confirm that the source of funds for GM’s debt repayments was a multi-billion dollar escrow account at Treasury—not from earnings. In the 8K filing GM acknowledged:
- Of the $42.6 billion in cash and marketable securities available to GM as of September, 30, 2009, $17.4 billion came from an escrow account with Treasury,
- $6.7 billion of the escrow account available to GM was allocable to the repayment of loans to Treasury,
- $5.6 billion in cash would remain in the Treasury escrow account following the repayment by GM of their loans, and
- Upon repaying Treasury, any balance of escrow funds would be released to GM.
If Americans think this confirms their suspicions that the incompetant automaker is still refusing to take responsibility for their copious failures and are more convinced than ever that bailing them out was a terrible idea — quite frankly, I can respect that.
(h/t Hot Air)
