Have you driven a Ford lately? That might be a good idea, as it seems that GM's claims to have repaid its TARP loans in full and ahead of schedule are, well, bullshit. Sen. Charles Grassley (R-Iowa) has sent a letter to Treasury Secretary Tim Geithner pointing out that GM has apparently paid back its TARP money with…more TARP money. Here's some of Grassley's query:
During his testimony [Inspector General for TARP Neil] Barofsky addressed GM's recent debt repayment activity, and stated that the funds GM is using to repay its TARP debt are not coming from GM earnings. Instead, GM seems to be using TARP funds from an escrow account at Treasury to make the debt repayments. The most recent quarterly report from the Office of the Special Inspector General for TARP says "The source of funds for these quarterly [debt] payments will be other TARP funds currently held in an escrow account."…
Therefore, it is unclear how GM and the Administration could have accurately announced yesterday that GM repaid its TARP loans in any meaningful way. In reality, it looks like GM merely used one source of TARP funds to repay another. The taxpayers are still on the hook…
The bottom line seems to be that the TARP loans were "repaid" with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the Administration have claimed in their speeches, press releases and television commercials. When these criticisms were put to GM's Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:
Question: Are you just paying the government back with government money?
Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we'd be able to pay this back.
Girsky, you magnificent bastard! If you managed to say that line without laughing, you deserve all the unsold Pontiacs in North America.
And, needless to say, Grassley isn't even raising the massively important issue of whether the freaking bailout via TARP funds was legal. Spoiler alert: It wasn't.
But don't worry, GM loses money hand over fist and is poised to lose even more money when the market rebounds and they start selling more units. That's what happened in 2007, a record-setting year for GM when it sold 9.4 million cars worldwide and lost $38 billion. Check it out, why don't you?:
This post, incidentally, was written by a very satisfied owner of a used Buick.
Update: Fox News reports that TARP IG Barofsky told them on Wednesday: "I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn't from earnings…. It's actually from another pool of TARP money that they've already received…I don't think we should exaggerate it too much. Remember that the source of this money is just other TARP money."
Fox News unconvincingly hypothesizes "the TV spot [touting its early payback of loans] may land GM in hot water with the Federal Trade Commission over its truth-in-advertising laws, which prohibit ads that are 'likely to mislead consumers.'"