Reason, NYT agree: GM repaid your money with your money

There has been some confusion in the comments threads on other posts about whether or not GM has repaid the federal government. With that in mind, I offer the following.

Strictly speaking, GM wasn’t lying when its chief executive, Ed Whitacre, announced last month that the company had “repaid [its] government loan, in full, with interest, five years ahead of the original schedule.” The key word was “loan,” as Reason.tv editor Nick Gillespie explains in this video:

The video played a bit slowly on my computer, so I’ll summarize here:

The federal government devoted some $50 billion in TARP money — originally intended for financial companies — to bail out GM last year. Of that, $6.7 billion was classified a “loan,” while $13.4 billion was put into an escrow account at the Treasury for GM to tap. (The remainder was a U.S. government investment in the company’s stock — an investment that hasn’t been paid back, and which will produce a loss unless GM surpasses its previous high in market capitalization by more than 20 percent.)

To “repay” the “loan” portion of the bailout, GM tapped some of the money in the escrow account — that is, money that also came from taxpayers.

In other words, if you want to see the entire $50 billion repaid, you’re still waiting for GM to pay…$50 billion.

At the New York Times, Gretchen Morgenson reports much the same, with the additional detail that neither GM nor the Treasury considers the $13.4 billion in the escrow account as money that GM must repay:

Herbert M. Allison Jr., assistant [Treasury] secretary for financial stability, confirmed that the money G.M. used to repay its bailout loan had come from a taxpayer-financed escrow account held for the automaker at the Treasury.

Emphasizing that the cash in the account was “the property of G.M.,” Mr. Allison said that the department had approved the company’s use of the money to retire the original debt because it was “consistent with Treasury’s goal of recovering funds for the taxpayer and exiting TARP investments as soon as practicable.”

So, the escrow money was not a loan but a gift; it’s the “property of GM,” not a debt owed to us by GM. The feds for all intents and purposes have written off that $13.4 billion, or at least the portion which GM already has spent.

Just something to keep in mind in the coming weeks as Congress debates new policy that will or won’t lead to future bailouts.

104 comments Add your comment

Peter

May 3rd, 2010
11:17 am

No thoughts on the Spill Kyle…avoiding that subject because of the Lax regulations in the Bush Administration ?

Kyle Wingfield

May 3rd, 2010
11:19 am

Which “lax regulation,” Peter, do you think is responsible?

Peter

May 3rd, 2010
11:20 am

The one that stated the same valve that is required to drill in Norway’s water, that was not in place.

Kyle Wingfield

May 3rd, 2010
11:30 am

Peter, if you want to talk about the topic at hand, you’re free to do so. But I’m not going to allow a total threadjack like you’re attempting here.

Peter

May 3rd, 2010
11:33 am

OK Kyle…I get the point….No problem…..

Big deal they paid back a small loan Kyle…..tell us how much of the company does the government own ?

Kyle Wingfield

May 3rd, 2010
11:35 am

The NYT puts it at 61 percent of common stock in addition to some preferred shares.

Peter

May 3rd, 2010
11:37 am

Why doesn’t GM get the point then…….where are the efficient auto’s of the future coming out of GM, instead of more Muscle cars ?

Peter

May 3rd, 2010
11:38 am

A buddy said they have the ability to have cars run on natural gas……that is abundant in the US.

Is the Oil industry holding that back ?

Peter

May 3rd, 2010
11:39 am

SInce we are the owner’s of GM…should America mandate the types of auto’s they build ?

Peter

May 3rd, 2010
11:48 am

Sorry about the treadjack Kyle……but does anyone care about your topic ?

retiredds

May 3rd, 2010
12:12 pm

Kyle, you are right on this. But I will pose a question to you, if GM, Chrysler, Citibank, Goldman, etc. were all allowed to go belly up at the same time (and it almost happened, as you know), where would the US and global economy be today? What would the unemployment rate have been at its worst and currently? And specifically, where would GA’s economy be right now under the let them all fail scenario that some have discussed?

Jefferson

May 3rd, 2010
12:19 pm

Had you rather they have kept that small portion also, or are you just throwing little balls of crap in the fan.

Matt Williamson

May 3rd, 2010
12:21 pm

I care, I’ve been waiting for an explanation since seeing that commercial. My BS meter was through the roof. Thanks for the post.

Peter

May 3rd, 2010
12:23 pm

Should America mandate the types of Autos they sell ?

Kyle Wingfield

May 3rd, 2010
12:33 pm

retiredds: GM could have gone through a normal bankruptcy proceeding and continued to operate in some capacity — or been sold to another carmaker — without getting a bailout. Chrysler and Citi are proof that one bailout often isn’t enough.

Jefferson: I would rather than they didn’t misrepresent what they’d done and act as if taxpayers had been made whole.

Peter: That depends on whether you want GM to operate as a policy vehicle or sell real vehicles and actually repay most of its bailout funds.

Peter

May 3rd, 2010
12:38 pm

Hey Kyle…… I am not sure I understand what you mean here…….

Peter: That depends on whether you want GM to operate as a policy vehicle or sell real vehicles and actually repay most of its bailout funds.

Are you stating the future of the Auto is NOT going to be green, and economical ?

No More Progressives!

May 3rd, 2010
12:43 pm

Peter

May 3rd, 2010
11:48 am
Sorry about the treadjack Kyle……but does anyone care about your topic ?

Yeah, I do. When a publicly traded company broadcasts erroneous financial information, it usually falls under the heading of “fraud.”

Remeber how you lefties screamed about Enron?

Jess

May 3rd, 2010
12:44 pm

Obama chose the TARP route over bankruptcy because in bankruptcy a judge could have nullified union contracts, and forced the unions into new contract negotiations. Under TARP, he broke all precedants, by putting the unions, who had no financial investment in GM ahead of bondholders, who had a huge investment. In a nutshell, this was a $50 billion dollar political payback for union support during his campaign.

Jefferson

May 3rd, 2010
12:45 pm

Kyle, the man is trying to get a positive spin and sell cars. Parsing words have become the norm these day. Just ask the leaders in GA. Fee increases…

JKL2

May 3rd, 2010
12:46 pm

Peter-

Since the government owns them, how about free cars for everybody? We could have taken that $13.4b slush fund give-away and put 1.1million new Aveo’s on the road. And that is if we paid sticker price. I’m sure we could easily double that with our employee/owner discount.

JKL2

May 3rd, 2010
12:50 pm

This is the same type of accounting that made Obamacare look affordable. If Obama said it is so, then it must be right. Stop being an unpatriotic racist/terrorist Kyle. How dare you question the amrtest man in the world.

Tricky

May 3rd, 2010
12:56 pm

I knew it wouldn’t be long until someone blamed this on Obama. History teaches us, and those of us without failing memories will recall that Bush “loaned” 17 billion to GM and Chrysler in December of 2008. Yes Bush used the TARP funds to do this and bypassed Congress specifically so these two worthless companies would not fail on his watch. Yes President Obama loaned these two companies subsequent TARP funds. By that time they were an investment anyway. You people always seem to forget who was on duty when the economy tanked and exactly who started this bailout trend.

Peter

May 3rd, 2010
12:57 pm

Hey JKL2…You have to be kidding all….after the nightmare left us by Bush, you want to talk about Obama, and make sill statements about getting Free cars ?

Tell us about the Great Bush accounting, and how the Iraq War has helped America ?

Peter

May 3rd, 2010
1:00 pm

Hey JKL2………Please tell us about the lack of regulations from the Bush Administration, and how they along with the FREE markets are working out as a benefit for ALL American’s ?

JKL2

May 3rd, 2010
1:09 pm

Peter-

Iraq falls under national security. I could go into how we did it as a function of the UN(which we finance if you didn’t notice) so either way we end up paying. At least this money goes thru US companies for the most part.

Tarp was something stupid Bush did. Now Obama is giving away the money for purposed it was never intended. If they are giving away my money I see no reason why I couldn’t get a “free” car out of the deal.

Bush’s biggest problem was spending. Now we have drunken sailors in charge of the checkbook. And they still have checks left…

(Just an expression. Not meant to offend courageous members of the Navy)

jconservative

May 3rd, 2010
1:14 pm

This info came out about week to ten days ago as I remember. “Morning Joe” spent about a half an hour on the subject.

@@

May 3rd, 2010
1:16 pm

Kyle:

I’ve always argued that such was, and is, the case. Even the money being floated around as economic improvement is due to our “indebtedness” of course. This administration’s propensity for slime surpasses what we’re seeing in the gulf right now.

Washington’s man-made disaster.

Time for containment with a boom. NO! mine is not a call to violence, merely containment of the damage being done.

JKL2

May 3rd, 2010
1:18 pm

Peter-

explain to me how the 158 new government agencies Obama created with his health care bill is going to save us money?

Free markets work until the government gets involved. Too big to fail has to be one of the dumbest things ever invented. Why would a company even think about being financially responsible if the government is going to bail them out?

Obama is trying to apply short term fixes(which aren’t working) to long term problems. History has shown it will only prolong the agony. How does that help “ALL American’s”.

Peter

May 3rd, 2010
1:21 pm

Iraq…. NEVER EVER fell under National security…….I guess drilling in the Gulf is the same ?

Spin it any way you want…….It was as you say…….Bush acting as a drunken sailor with the check book.

Yes the money went through Cheney’s buddies as you say !

Peter

May 3rd, 2010
1:24 pm

I don’t buy your argument JKL2…….. Regulations are required, because the Evil want theirs no matter what the cost to folks are.

Free markets work when those in charge have Empathy, and care about others besides themselves………Something that is lacking in industrial leaders of today.

Port O' John

May 3rd, 2010
1:30 pm

Kyle wants to avoid all discussion of the Gulf Oil spill — its time for GOP to change its motto to “Spill Here, Spill Now” or maybe just “Spill, Baby, Spill.”

JKL2

May 3rd, 2010
1:37 pm

Peter-

Tarp was the drunken sailor part. National security actually is a government function. Maybe they should spend more time focusing on their job instead of coming up with new ways for screwing up our country and spending us into oblivion.

We won’t have to worry about immegration if Obama turns us into Mexico.

Peter

May 3rd, 2010
1:38 pm

Yes Kyle will begin to talk about this when the Rich start loosing their beach rental homes, when it is so filthy no one goes there.

Peter

May 3rd, 2010
1:40 pm

Yes JKL2 Bush did us great favors when it came to Illegal immigration…..

SO ….you are saying the IRAQ WAR was not screwing up our country, and didn’t spend us into Oblivion ? Letting Bin Laden go free was OK then ?

JKL2

May 3rd, 2010
1:41 pm

I don’t buy your argument JKL2…….. Regulations are required, because the Evil want theirs no matter what the cost to folks are.

Replace “reglations” with “The Constitution” and “evil” with “government”. Now we are talking about the Obama administration rather than business philosophy.

Peter

May 3rd, 2010
1:42 pm

Not only should the mantra be…….”drill baby drill”…..it should be “Build baby build”……..then wonder why there is all the flooding going on ?

JKL2

May 3rd, 2010
1:42 pm

Port-

Jay and Cynthia both have lovely blogs today about the oil spill. Why don’t you try one of those…

Jess

May 3rd, 2010
1:55 pm

Peter,

If ignorance is bliss, you must be in a very wonderful place.

Port O' John

May 3rd, 2010
1:59 pm

Well JKL2 — I could go to those blogs, but Kyle is a big supported of offshore drilling and how safe it is. But now its all silence — just like the GOP in general. Six months ago y’all wanted oil drilling everywhere –now you won’t bring it up. Why is that?

Could it be that maybe, just maybe, offshore drilling leads to oil spills.

Oh yeah, if you don’t like my posts, don’t read them. It won’t hurt my feelings.

mike

May 3rd, 2010
2:01 pm

Peter’s ignorance is embarrasing to us all. He is almost as ignorant as Bill “I am and intellectual” Maher:

http://www.theatlanticwire.com/features/view/feature/George-Will-Educates-Bill-Maher-1166

mike

May 3rd, 2010
2:04 pm

Port O’ John –

“Could it be that maybe, just maybe, offshore drilling leads to oil spills.”

Apparently once every forty years or so. So let’s shut down off-shore drilling in the same way the short-sighted left shut down nuclear power plant development after 3 Mile Island. That worked out great for us, didn’t it?

Like all liberals, you have lots of mindless criticism, but no alternative solutions.

retiredds

May 3rd, 2010
2:09 pm

Kyle, I know that the option of allowing GM, et. al. to declare bankruptcy was an avenue that could have been taken. But my question was what would have happened to employment, the US economy, and the global economy if ALL these bailed out institutions went belly up at the same time in the same month? I would like to see what your answer would be. You see folks we can all sit out here in the blogsphere and and pontificate. It is another thing to be sitting in the seats of responsibility and just say, oh, what the heck let’s just let them all fail and see where the chips fall.

And one other thing, just what is a free market? It is wonderful to say “oh, let the free market reign”, but in reality is there such an animal any more as a pure free market?

JKL2

May 3rd, 2010
2:12 pm

Port-

Drill, baby, drill. Until you come up with a solution, you are part of the problem. Being a slave to foreign countries doesn’t seem to work very well. (unless it is China, because if we offend them we won’t be able to borrow more money for government handouts) Why don’t we try producing our own energy for a change. What a novel concept.

Offshore drilling is generally safe. It’s the tankers that have all the problems.

mit

May 3rd, 2010
2:13 pm

so mike’s solution is nuclear power? clean nuclear power. where have I heard that before?
there is no such thing as clean coal or clean nuclear power. both have hazardous material as by products that must be dealt with. Nuclear power might not put out the emissions a coal plant does but what are you going to do with the radioactive waste afterwards.

mit

May 3rd, 2010
2:17 pm

jkl2, so you want to nationalize the oil companies? If they drill here they will still sale to the market which includeds others besides us. If they drill here, it doesn’t make that oil ours, it is still Exxon or BP that sells it.

JKL2

May 3rd, 2010
2:18 pm

retiredds-

There is no free market anymore because the government has a regulation for everything. If a company goes bankrupt another will step up to take its place if people want the product or service they were providing. It is called opportunity. We used to be called the “land of opportunity”. Now we are becoming the land of entitlement and government handouts.

Illegal aliens have a better appreciation for our country than most citizens anymore.

scurvy

May 3rd, 2010
2:20 pm

Does it really matter? In the end the taxpayer paid it back or the customers who bought from GM paid it back. Corporations don’t really pay anything to the government…eventually you and I pay it…the corporation just passes it along.

JKL2

May 3rd, 2010
2:22 pm

mit-

I think that could easily be another Obama plan. Never let a good crisis go to waste. He can use this as an excuse to take over the oil industry after gas prices skyrocket because he will say it is the nation’s interest to do so.

Kyle Wingfield

May 3rd, 2010
2:24 pm

Port, I challenge you to find a single sentence ever written on this blog that could be construed or even misconstrued as my “support” for offshore drilling.

JKL2

May 3rd, 2010
2:27 pm

mit- (again. I didn’t scroll back up far enough)

If nuclear reactors were able to recycle (a green job. something that appeals to the left. Why are you trying to destroy the planet?) nuclear fuel rods, the total waste from nuclear plants would fit in a 5 gallon bucket. Instead we are stuck with 10,000 tons of waste a year.