Right Thinking From The Left Coast
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GM Lies

Government Motors has been running ads claiming they’ve repaid their government loans.  Bullshit says Shikha Dalmia:

Because a loan of such a huge amount [$49.5 billion] would have been politically controversial, the Obama administration handed GM only $6.7 billion as a pure loan. (It asked for only a 7% interest rate--a very sweet deal considering that GM bonds at that time were trading below junk level.) The vast bulk of the bailout money was transferred to GM through the purchase of 60.8% equity stake in the company--arguably an even worse deal for taxpayers than the loan, given that the equity position requires them to bear the risk of the investment without any guaranteed return. (The Canadian government likewise gave GM $1.4 billion as a pure loan, and another $8.1 billion for an 11.7% equity stake. The U.S. and Canadian government together own 72.5% of the company.)

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.

It actually gets worse.  They are applying for a $10 billion low-interest loan from DOE to work on fuel efficient cars.  In addition, they’re delaying the date at which they will make a public offering to sell their stock.  In short, the company is in a worse position now than they were a year ago.

I remind you that the automakers are the biggest drain on the TARP.  The evil bankers, who are today the subject of a Congressional grandstanding hearing did not plunder the taxpayers’ wallets nearly as badly as the auto companies did, are doing and will do into the foreseeable future.

Posted by Hal_10000 on 04/27/10 at 11:00 AM in Politics Law, & Economics • Permalink

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