GM’ing the System
I was going to comment on this one yesterday, but I didn’t actually believe what I was hearing. When news broke yesterday that GM found $6.7 Billion to replay the US and $1.4B to the Canadian governments, I was reasonably impressed. One of the reasons, however, that I didn’t post was the one lurking question I couldn’t answer. Where were they getting the money? Enter QandO, who found this from WSB Radio:
The issue came up yesterday at a hearing with the special watchdog on the Wall Street Bailout, Neil Barofsky, who was asked several times about the GM repayment by Sen. Tom Carper (D-DE), who was looking for answers on how much money the feds might make from the controversial Wall Street Bailout.
“It’s good news in that they’re reducing their debt,” Barofsky said of the accelerated GM payments, “but they’re doing it by taking other available TARP money.”
In other words, GM is taking money from the Wall Street Bailout – the TARP money – and using that to pay off their loans ahead of schedule.
“It sounds like it’s kind of like taking money out of one pocket and putting in the other,” said Carper, who got a nod of agreement from Barofsky.
“The way that payment is going to be made is by drawing down on an equity facility of other TARP money.”
Well, isn’t that just peachy? Here I was thinking that GM had done some serious magic to actually make profits, but that was just wishing on fireflies. Instead, GM is shuffling money from one broken account to the other to make things seem peachy. Bruce McQuain says:
With this administration, question everything. Heck, with any administration, question everything – but it seems it is an especially important thing to do with this one. And when it comes to politics take nothing the press says at face value – ever.
Weeelll, I’m not quite there. While it’s probably clear that someone knew how this was going down, it doesn’t necessarily mean that the administration was in collusion with how GM would pull this. And GM is just trying to get out from one set of chains, even if it has to heft another few links over the shoulders to do it. But even for business, this is a pretty clear manipulation of data that will fool investors into thinking better of the company than it deserves. Do you think there will be any outrage like we’re seeing with Goldman-Sachs? Nope, neither do I.
Updated: I just noticed that GM is advertising in commercials that they’ve repaid the loan in full, “five years ahead of schedule.” Okay. I guess it’s true, and this is just a way to get back on public footing.
Updated 4/23: Hot Air just picked this up. Good info there on Grassley’s letter to Geithner. Also, Fox Business reported this morning that the “old” GM still owes the government $1B. Another thing I didn’t think of. We used TARP money to pay back the Canadians. There’s US jobs for you!
Updated again: Liz MacDonald has a great post up at Fox Business. Go read it all, but here’s a clearly relevant part:
Within five years, they will have to pay $15.7 billion into the carmakers’ union pensions to comply with federal funding requirements, ($12.3 billion to GM’s pensions, $3.4 billion to Chrysler’s plans), according to the GAO report. Fox News analyst James Farrell red-flagged this report, and provides analysis here.
If the carmakers don’t pony up, the GAO says the government, meaning taxpayers, will have to step in and cover about $14.5 billion of this shortfall, based on estimates from the Pension Benefit Guaranty Corp. (PBGC).
So this one is not over by a longshot. We’re on the hook for a lot more money for GM, and meanwhile the administration is saying all is cool…