According to Neil M. Barofsky, the inspector general in charge of TARP, GM is using taxpayer money to repay its obligation…to taxpayers. He provided unadulterated comments on this during a Senate Finance Committee meeting on April 20th.
In response to Barofsky’s speech, Senator Grassley, Republican of Iowa, wrote a letter to Tim Geithner about the ‘TARP money shuffle’:
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.”
Grassley continues…
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.
5 days later, the US Treasury responded with its own letter:
If I’m following correctly, the Treasury gave GM a flexible line of financing to pay for expenses (if required). GM no longer the line to pay expenses, so it instead used the money to pay off another loan (TARP) extended by the Treasury.
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That would be like using my personal line of credit to pay down my mortgage. It doesn’t make sense to me, and it probably wouldn’t make sense to my bank.
Worst of all, this shouldn’t make any sense to the American public. Unfortunately, as Grassley says, “The public would know nothing about the TARP escrow money being the source of the supposed repayment from simply watching G.M.’s TV commercials or reading Treasury’s press release.” Watch the commercial below:
…and here’s the US Treasury press release:
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GM Repays Treasury Loan in Full, TARP Repayments Reach $186 Billion
GM Repayment of Remaining $4.7 Billion in Debt Comes Five Years Ahead of Maturity Date
WASHINGTON – The U.S. Department of the Treasury today announced that General Motors (GM) has fully repaid its debt under the Troubled Asset Relief Program (TARP). GM paid the remaining $4.7 billion of the total $6.7 billion in debt owed to Treasury. The repayment comes five years ahead of the loan maturity date and ahead of the accelerated repayment schedule the company announced last year.
Total TARP repayments now stand at $186 billion – well ahead of last fall’s repayment projections for 2010. With this repayment, less than $200 billion in TARP disbursements remain outstanding.
“We are encouraged that GM has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,” said Treasury Secretary Tim Geithner. “This continued progress is a positive sign for our auto investment – not only more funds recovered for the taxpayer but also countless jobs saved and the successful stabilization of a vital industry for our country.”
After this repayment, the remaining Treasury stake in GM consists of $2.1 billion in preferred stock and 60.8 percent of the common equity.
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Just when you thought there was a reason to believe in the power of American inginuity again…it turns out the public relations (PR) machines of the Treasury and GM are working overtime to keep us all smiling as we wade through the BS of an over-extended economy.
