Newsbusters has a nice story on this that links to a Forbes story on this house of lies. GM received $50B in bailout funds while only $6.7B of that amount was deemed a loan (at 7% interest). As most folks know, most of the bailout money was given to GM, by the US and Canadian governments, in return for a large stake in the company. As to how the loan is being paid back, as Shikha Dalmia of Forbes explains:
As it turns out, the Obama administration put $13.4 billion of the aid money as “working capital” in an escrow account when the company was in bankruptcy. The company is using this escrow money–government money–to pay back the government loan.
Additionally, as Dalmia goes on to say,
Sean McAlinden, chief economist at the Ann Arbor-based Center for Automotive Research, points out that the company has applied to the Department of Energy for $10 billion in low (5%) interest loan to retool its plants to meet the government’s tougher new CAFÉ (Corporate Average Fuel Economy) standards. However, giving GM more taxpayer money on top of the existing bailout would have been a political disaster for the Obama administration and a PR debacle for the company. Paying back the small bailout loan makes the new–and bigger–DOE loan much more feasible.
The gist of this is – if you didn’t catch it – that General Motors will get a DOE loan at 5% to pay off its 7% loans, so essentially it is a refinance of debt, at a lower rate, with the Government playing banker with your money. Even the awful, pro-bailout Charles Grassley referred to this as the TARP Shuffle. In a letter from Grassley to Timmy Geithner, he stated:
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.
Yet so many people, including those in the media, are swept off their feet by the lies. A really, really, really bad article on cars.com has the nerve to make this Mickey Mouse statement:
Essentially, GM no longer needs emergency government aid to stay afloat. While the taxpayer still has a sizable investment wrapped up in the automaker, GM has returned to decent health for the time being.
(Read more from lewrockwell.com)
From the Forbes article: But when Mr. Whitacre says GM has paid back the bailout money in full, he means not the entire $49.5 billion–the loan and the equity. In fact, he avoids all mention of that figure in his column. He means only the $6.7 billion loan amount.
But wait! Even that’s not the full story given that GM, which has not yet broken even, much less turned a profit, can’t pay even this puny amount from its own earnings.
So how is it paying it?
As it turns out, the Obama administration put $13.4 billion of the aid money as “working capital” in an escrow account when the company was in bankruptcy. The company is using this escrow money–government money–to pay back the government loan.