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.