You know those very misleading ads GM has been running about how they have supposedly “paid back with interest, five years in advance” their government bailout money? Unsurprisingly, the Obama administration has also been bragging about the announcement as well, but Republican Senators rightly are not buying it, and have questioned both GM and the Treasury Dept. Here’s how Treasury responded (via blogprof):
Washington — The Treasury Department defended General Motors Co.’s repayment of its outstanding bailout loans Wednesday amid mounting Republican criticism.
Sen. Charles Grassley, R-Iowa, and other Republicans have suggested that GM is misleading consumers by touting its repayment of $6.7 billion in U.S. government loans.
“The hype does not match the reality,” Grassley said on the Senate floor. “Taxpayers have not been repaid in full — far from it.”
On April 20, GM repaid the remaining $4.7 billion in loans with unused bailout funds that were in escrow.
“The fact that GM made that determination and repaid the remaining $4.7 billion to the U.S. government now is good news for the company, our investment, and the American people,” Herbert Allison, assistant secretary for financial stability, said in a letter to Grassley.
Taxpayers swapped about $43 billion in loans for a 61 percent majority stake in GM. Until the government sells all of its shares in GM, it won’t be clear whether taxpayers will be fully repaid. At current prices, taxpayers would lose about $8 billion on their $50 billion GM bailout.
GM will now get immediate access to $6.6 billion in unused bailout funds in a restricted escrow account, Allison said.
Grassley said in a Detroit News interview he wants to “discredit the intellectual dishonesty of the GM ads because you get the impression that it is being paid back because they are selling more cars.” He said GM was paying back the loans “with taxpayer money that is laying around there.”
Grassley acknowledged in his speech Wednesday that Treasury may be “technically correct” when it says all of the details have been made public, “but it wasn’t clearly communicated” to the average citizen.
“The truth is that the taxpayers are still on the hook for billions that may never be repaid,” he said.
Grassley wrote an opinion piece about this issue last week:
General Motors announced this week that it repaid its multibillion-dollar taxpayer-backed TARP loans. GM even bragged that it was able to “repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying [GM] vehicles.” There was great fanfare, including expensive, around-the-clock GM TV commercials nationwide. But, the hype is not the reality. In fact, GM did not repay the loans with money it earned from selling cars. Instead, GM repaid the TARP loans with money it withdrew from another TARP fund at the Treasury Department.
The day before the GM story broke, Neil Barofsky, the government TARP watchdog, testified before the Senate Finance Committee. He explained that GM did not use earnings to repay its TARP debt. The April quarterly report to Congress from his office stated: “The source of funds for these quarterly [debt] payments will be other TARP funds currently held in an escrow account.”
GM filings with the SEC reveal that GM was paying 7 percent interest on a $6.7 billion TARP debt. The filings also confirm that the source of funds for GM’s debt repayments was a multibillion-dollar TARP-funded escrow account at Treasury; that means it was taxpayer money — not earnings.
Meanwhile, in all the fanfare and patting themselves on the back, Treasury and GM made no mention of what happened to the $2.5 billion loan GM owes its union health care plan. The union loan carries a 9 percent interest rate and runs until 2017. Don’t most Americans try to pay off their higher-interest debts first? Well, the union loan was not paid off. Why not? Does the union get to keep collecting 9 percent from GM until 2017, courtesy of the American taxpayer, while taxpayers give up a 7 percent return over the next five years in exchange for the hope that GM stock will be worth more than what we paid for it, someday down the road?
I’d like to remind everyone of what WH Spoxdude Robert Fibbs laughably said last week in response to the news about GM’s “repayment”:
White House Press Secretary Robert Gibbs said that while the administration doesn’t believe that GM and Chrysler have escaped danger of another collapse, the news today represents a validation of the president’s decision to get involved with the automakers.
“I’m making the case that, looking back, almost a year later from the president making a very difficult and unpopular decision to loan money to G.M. and Chrysler, in order to go through a structured bankruptcy, and save 1 million to 3 million jobs,” Gibbs said, “I think we could all agree that the depth of our economic downturn would hardly have been helped with those million or so people additionally out of work.“
Ah, yes. Our brave (‘courageous‘?) President made the ” very difficult and unpopular decision” to loan money to GM and Chrysler that has been paid back with … other government money (better known as taxpayer dollars). I wish I could say this was “priceless” but obviously it’s not.
Another day, another administration lie exposed. I’m sure the national media will be all over this any day now …