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A Republican senator is questioning General Motors’ claim that it has repaid its taxpayer-funded loans in full.
Senator Chuck Grassley is asking Treasury Secretary Tim Geithner to justify those claims. According to the Iowa Republican, GM has repaid its TARP (taxpayer-funded bailout) loans using other TARP funds.
The automaker – which is 61 percent owned by the U.S. and 12 percent owned by Canada -- announced on Wednesday that it has fully repaid the $6.7-billion in loans it received from the U.S. and Canadian governments.
“GM is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse we build here in Fairfax,” said GM Chairman Ed Whitacre during a visit to an auto plant in Fairfax, Kansas on Wednesday.
But as the Associated Press reported, GM received a total of $52 billion from the U.S. government and $9.5 billion from the Canadian and Ontario governments as part of its bankruptcy reorganization. The U.S. considered $6.7 billion of the $52 billion as a loan.
In fact, GM still owes $45.3 billion to the U.S. and $8.1 billion to Canada, money it received in exchange for shares in the company. GM said it hopes to repay those amounts with an eventual public stock offering, the AP reported.
“It looks like [GM’s] announcement is really just an elaborate TARP money shuffle,” Grassley said in an April 22 letter to Treasury Secretary Geithner. “The repayment dollars haven’t come from GM selling cars but, instead, from a TARP account at the Treasury Department.”
Grassley pointed to the most recent quarterly report from Neil Barofsky, the special inspector general for TARP.
Barofsky testified before the Senate Finance Committee this week that the funds GM used 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,” Grassley said. The senator noted that according to Barafsky's testimony, "Treasury had supervisory authority over GM’s use of these TARP escrow funds."
Grassley questioned whether the Treasury Department is being straightforward with taxpayers about its management of the $700-billion taxpayer-funded bailout program
The Fed funds rate is near zero, meaning that banks can borrow at almost no cost and lend out at the prevailing rate—or invest in vehicles such as Treasurys.
Originally posted by damwel
If they just took the money and handed it back... Who cares? To me that's what using tarp money to pay off tarp loans. What the hell is the difference. Bush shouldn't have given it out to begin with but if they just used it to pay it back, who is hurt. I guess I am missing something.
edit: Am I wrong thinking they got say 8 billion and gave back 6 billion and so they owe 2 billion??
[edit on Fri April 23rd, 2010 by damwel]
Originally posted by dolphinfan
reply to post by jibeho
No kidding - this is a sham. There is absolutely no way that they could have turned around that firm that quickly, absolutely no way. I've spent 25 years in corporate America and I can tell you, that there is no way legally to do it.