by Andrew Walden
In an interview with KITV this morning, Hanabusa cites General Motors as her one and only example of bailout success:
"Reports are coming back that we may not be losing the kind of money that the people are saying. We may actually come out on the positive of some of the bailouts that was (sic) done. General Motors, for example, paid up their debt five years early."
FALSE. Iowa Senator Chuck Grassley demolished this old line long before Hanabusa got around to using it. In an April 23 column Grassley explains how GM shell game works:
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.”
The April 26 Denver Post agrees:
Exhibiting quite a lot of gall, General Motors is trying to spin the public with an ad campaign launched last week based on breathtakingly misleading information.
So can the taxpayers ever get their money back from GM. In a letter to Obama’s Treasury Department, Grassley explains:
The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment.
And what would the price of GM stock have to be for taxpayers to break even? The Detroit News September 23 reports: “GM stock needs to hit $133.78 to break even.”
Will they be able to do it? Taxpayers currently own 61% of the company. Only through an open market sale of stock will the public learn whether the $133.78 stock price for the formerly bankrupt company is realizable or not.
The first post-bailout IPO of GM stock is conveniently scheduled after Election Day, a clear indicator that the Obama administration believes the results will not be favorable.