Posted on 05/01/2010 10:35:44 PM PDT by GVnana
ReasonTV — April 30, 2010 — General Motors CEO Ed Whitacre has bragged in TV commercials and newspaper columns that GM has paid back its bailout "in full and ahead of schedule."
As with the Pontiac Aztek, an ugly exterior masks an ever darker problem: Whitacre is being fanciful to the point of deceit. GM received $50 billion in TARP funds (never mind that TARP was only supposed to cover financial institutions). About $7 billion of that came in the form of a straight-up, low-interest loan. And about $13 billion came in the form of an escrow account.
So how has GM, which lost $38 billion in 2007 even as it sold 9.4 million cars, paid back its debt? It took money from the escrow account to pay back the $6.7 billion loan.
(Excerpt) Read more at youtube.com ...
Paying back the $6.7 billion apparently qualifies them for $10 billion more from government for “retooling” to meet the new CAFE standards.
Converting to bank holding status makes GMAC eligible to apply for funds from the TARP program. How much remains to be seen. CNBC reported that spokesperson Gina Proia said "GMAC has submitted an application to the Treasury Department for money from the government rescue fund, though she declined to say how much the company is seeking."
http://ml-implode.com/ailing/lender_ResidentialCapital,LLC*_2007-01-16.html
From this, it doesn't sound like GM would have directly benefited from any TARP funds given to GMAC.
Through this crooked "bankruptcy" Fedzilla already absorbed the GM pension as part of its assets (most liabilities are supposed to be wiped out and/or converted into equity to former debt holders) and thus dumped these "assets" on the taxpayers, who now "own" them.
So while company is still bankrupt and getting more bankrupt every quarter, our government is getting us into more losses because GM is treated as Too Big To Fail enterprise, similarly to former Government-Sponsored Enterprises and now mostly (80%) Government-Owned Enterprises Fannie and Freddie. Just one of the reasons why government in general should not own or sponsor what should be private enterprise.
This is what has been done with GM in more detail:
GM CEO says government loans have been repaid - FR, 2010 April 21, #33
And no, SarbOx does not apply here because GM did not mislead its "investors". Even if it were a public company, what they said was technically accurate, while in reality not being true. SarbOx law itself, of course, should be put out to pasture - it does not prevent Madoffs and other abuses, while it unnecessarily overregulates and bureaucratizes smaller public companies and caused the immediate outflow of huge amounts of money from U.S. public market and U.S. commerce and continues to do so to this day.
No, GMAC would not be direct beneficiary of GM "loans" or conversion, except that GMAC is still a large part of financing supply-chain of GM auto sales, so indirectly they benefit plenty from GM being kept afloat in current condition by the government, instead of real restructuring by bankruptcy process.
Of course, GMAC had its own hanky-panky with TARP funds...
Watchdog: GMAC bailout could cost taxpayers $6.3B - FR, 2010 March 11, #8
Agree on most, Sarb-Ox is a disaster from what I hear.
I disagree on the Pension. As I understand it GM owes the plan 15 billion next year to not get in hot water with ERISA.
But as I understand it, the Obamatons have not come out and said they will make the pension whole or absorb it like the railroads did eons ago.
Which is what Glenn is predicting. It is not if but when the American public gets the bad news they now have to make good on GM's 900,000 pensioners...
you can’t use the misspoke defence because what he said was in the form of an ad, which are planned
That's just the funding schedule (that's how plans become "underfunded" or "overfunded"), but the "ownership" and obligations now lays with U.S., Canada and UAW.
Now who, except for gamblers, would want to buy an IPO in that, unless that stock can be somehow divorced from GM liabilities, i.e. they still would be taxpayers' responsibility?
The question is, if GM had to divest itself of GMAC in order for GMAC to get TARP funds, how did GM get TARP funds?
I suspected they were lying... either about paying it back, OR about being broke. No way they turned their little liberal Union company around on a dime - unless it’s OUR dime...
" That's just the funding schedule (that's how plans become "underfunded" or "overfunded"), but the "ownership" and obligations now lays with U.S., Canada and UAW."
A great way to understand it, but as if and when they go "public" they would have to pay this nut, instead I don't think that will change and we are the nuts...
"Now who, except for gamblers, would want to buy an IPO in that, unless that stock can be somehow divorced from GM liabilities, i.e. they still would be taxpayers' responsibility?
Which it the point I have been trying to make here on FR for a while. You are not getting just the Plants, Intellectual Property, etc. you are getting all the liabilities, i.e. the Pension and VEBA stuff hidden in the stock ownership. It is not like buying an IPO in a startup of a software company that has no legacy cost. And Obama, Wall St etc and their hand maidens on the various financial porn programs can't lipstick over that pig IMHO, you and I see these liabilities and anyone with a finance or modicum of accounting background can see it.
Unless they expect uncle sugar to own this forever and it is British Leyland on Steroids, or they do an IPO and Obama nationalizes the VEBA and their Pension.
Anyway I slice it, this thing doesn't get cut and let go until the Palin Administration.
bump
Political accomodations and stupidity... Bush started the process, which is why he is now always "credited" with it, along with Obama, by the newsreaders...
Rick Wagoner (who has since been fired by Obama administration) should have convinced the board to file for voluntary bankruptcy after elections, instead he asked Bush for a loan.
Geroge W. Bush should have refused using TARP funds for anything it was not designed to be used, i.e. temporary liquidity for financial institutions to allow "netting" and unfreezing of credit crunch and flow of commercial paper for businesses. At the most, Bush could have provided the "green project" funds which were already allocated by Congress for "greening" of auto industry (electric and alternative fuel systems). Instead he did the stupidest thing possible under the circumstances and gave them $billions of TARP funds, specifically unintended for this purpose. Obama just finished the job, in the only way Democrats are expected to do - nationalizion, on the backs of the taxpayers.
If a Big 5 accounting firm Arthur Andersen tried to sell a deal in which liabilities suddenly became "assets" it would be shut down and driven into bankruptcy... Government did exactly that with GM, and it's not... Oh what am saying?
Auto task force shocked by state of GM, Chrysler - FR / AP, 2010 October 21, by Ken Thomas
U.S. to use bank bailout to aid automakers - FR / IHT, 2008 December 12
I assume, at least I hope, that "British Leyland" scenario would be stopped after new Congress in January.
The other scenario then is more likely, but could become a part of hearings and necessary restructuring of government's "relationship" with other TBTF GSEs / GOEs, like Fannie and Freddie, and/or FHA.
Depends on how strong the leadership in Republican House and Republicans in the Senate will be. Bob Dole after 1994 revolution, made all kinds of deals with Clinton in 1995, before resigning, to undermine Gingrich and the House Republicans and get the accolades of the press for being a "grownup" so he could run for President on the "he can win" platform... Helped him about as much as it helped McCain who didn't understand or cared about the lesson.
These things were going on so quickly, it was hard to follow. Here it is, a year and a half later, and things are beginning to gel.
Most of us knew we were being screwed. Whenever the Govt starts throwing around big sums of money for “emergencies,” it’s a safe bet that they are protecting their financial supporters and feathering their own nests. It’s just taken a while for things to make sense.
There are Republicans and there are Democrats. But there is apparently no party to represent the majority of Americans.
Go to the link and check out the Daniel Howes Article, the "Goverment Motors" stigma is hurting them...
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