Did Obama administration tell GM to lie about its TARP repayment?
Mark Tapscott
General Motors chairman Ed Whitacre made news last week with a series of national television advertising spots in which he claimed the company has repaid its government bailout loans in full, ahead of schedule and with interest.
Unfortunately, according to Neil Barofsky, the Inspector-General for the Troubled Asset Relief Program (TARP) under which the federal loans were made to GM, the repayments cited by Whitacre were simply made with other tax dollars made available to the automaker in its bailout deal with the government.
So in effect GM was repaying one government loan with another government loan.
Now Whitacre is not a dumb guy, nor are there any ethics scandals in his previous record as a very successful CEO at AT&T. He was even the national head of the Boy Scouts of America, so why all of a sudden is he making a transparently false statement in a GM TV spot?
Three Republican members of Congress are asking the same question and they are also demanding some answers from Secretary of the Treasury Timothy Geithner, who oversees the TARP program and who issued a statement endorsing the GM claim and citing the repayment as evidence that the government's bailout effort is working.
On the House side, Rep. Darrell Issa, R-CA, who is ranking minority member of the Oversight and Government Reform Committee, and Rep. Jim Jordan, R-OH, all but accused Whitacre in a letter of committing fraudulent advertising:
“We are concerned that GM, under your leadership, has come dangerously close to committing fraud, and that you might have colluded with the United States Treasury to deceive the American public.
“Your false statements may expose GM to millions of dollars in damages, further reducing the value of the taxpayer-owned company.
"The American people, as the majority shareholders of GM, have a right to know the truth behind the cost of the GM bailout and GM’s genuine financial condition,” Issa and Jordan wrote.
You can read their full letter here.
The government's bailout of GM consisted of $49.5 billion committed to GM through Treasury’s Automotive Industry Financing Program in return for which Treasury received a 60.8 percent common equity stake in GM, $2.1 billion in preferred stock, and $7.1 billion in GM debt.
Treasury put $17.4 billion of the $49.5 billion bailout in an escrow account, which required GM to obtain Treasury’s permission to draw down. It is from this account that the repayments boasted of by Whitacre were made.
A spokesman for Issa and Jordan noted that on Nov. 16, 2009, GM said it intended to use the taxpayer money in the escrow account to finish paying back the original $7.1 billion loan. The repayments would be made no later than June 30, 2010, drawing on the taxpayer money in the escrow account to pay back the taxpayer loan.
Issa and Jordan are not the first to raise concerns about government influence over GM advertising as a result of the bailout. I reported on such worries in this space last year.
On the Senate side, Sen. Charles Grassley, R-IA, is demanding some answers from Geithner, wondering in a letter made public this week if Treasury approved what effectively amounted to GM misusing TARP escrow funds that were supposed to be used to settle claims in GM's bankruptcy settlement with parts supplier Delphi:
"In reality, it looks like GM merely used one source of TARP funds to repay another. The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment.
"I am also troubled by the timing of this latest maneuver. According to Mr. Barofsky, Treasury had supervisory authority over GM’s use of these TARP escrow funds. Since GM’s exit from bankruptcy court, Treasury had approved the use of the escrow funds for costs such as GM’s obligations to its parts supplier Delphi."
You can read Grassley's entire letter to Geithner here.
Accusations and worries of improper government interference with business are inevitable results of government picking winners and losers in the private economy, as was done with the trillions of tax dollars used by the Bush and Obama administrations to bail out Wall Street investment firms, GM and Chrysler, insurance giant AIG, and multiple banks.
There is a name for the kind of regime that allows private ownership of businesses but effectively tells them what to produce and sell. It's called Facism. America is far from there, but becoming a bailout nation is a significant step in the wrong direction.
Mark Tapscott
General Motors chairman Ed Whitacre made news last week with a series of national television advertising spots in which he claimed the company has repaid its government bailout loans in full, ahead of schedule and with interest.
Unfortunately, according to Neil Barofsky, the Inspector-General for the Troubled Asset Relief Program (TARP) under which the federal loans were made to GM, the repayments cited by Whitacre were simply made with other tax dollars made available to the automaker in its bailout deal with the government.
So in effect GM was repaying one government loan with another government loan.
Now Whitacre is not a dumb guy, nor are there any ethics scandals in his previous record as a very successful CEO at AT&T. He was even the national head of the Boy Scouts of America, so why all of a sudden is he making a transparently false statement in a GM TV spot?
Three Republican members of Congress are asking the same question and they are also demanding some answers from Secretary of the Treasury Timothy Geithner, who oversees the TARP program and who issued a statement endorsing the GM claim and citing the repayment as evidence that the government's bailout effort is working.
On the House side, Rep. Darrell Issa, R-CA, who is ranking minority member of the Oversight and Government Reform Committee, and Rep. Jim Jordan, R-OH, all but accused Whitacre in a letter of committing fraudulent advertising:
“We are concerned that GM, under your leadership, has come dangerously close to committing fraud, and that you might have colluded with the United States Treasury to deceive the American public.
“Your false statements may expose GM to millions of dollars in damages, further reducing the value of the taxpayer-owned company.
"The American people, as the majority shareholders of GM, have a right to know the truth behind the cost of the GM bailout and GM’s genuine financial condition,” Issa and Jordan wrote.
You can read their full letter here.
The government's bailout of GM consisted of $49.5 billion committed to GM through Treasury’s Automotive Industry Financing Program in return for which Treasury received a 60.8 percent common equity stake in GM, $2.1 billion in preferred stock, and $7.1 billion in GM debt.
Treasury put $17.4 billion of the $49.5 billion bailout in an escrow account, which required GM to obtain Treasury’s permission to draw down. It is from this account that the repayments boasted of by Whitacre were made.
A spokesman for Issa and Jordan noted that on Nov. 16, 2009, GM said it intended to use the taxpayer money in the escrow account to finish paying back the original $7.1 billion loan. The repayments would be made no later than June 30, 2010, drawing on the taxpayer money in the escrow account to pay back the taxpayer loan.
Issa and Jordan are not the first to raise concerns about government influence over GM advertising as a result of the bailout. I reported on such worries in this space last year.
On the Senate side, Sen. Charles Grassley, R-IA, is demanding some answers from Geithner, wondering in a letter made public this week if Treasury approved what effectively amounted to GM misusing TARP escrow funds that were supposed to be used to settle claims in GM's bankruptcy settlement with parts supplier Delphi:
"In reality, it looks like GM merely used one source of TARP funds to repay another. The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment.
"I am also troubled by the timing of this latest maneuver. According to Mr. Barofsky, Treasury had supervisory authority over GM’s use of these TARP escrow funds. Since GM’s exit from bankruptcy court, Treasury had approved the use of the escrow funds for costs such as GM’s obligations to its parts supplier Delphi."
You can read Grassley's entire letter to Geithner here.
Accusations and worries of improper government interference with business are inevitable results of government picking winners and losers in the private economy, as was done with the trillions of tax dollars used by the Bush and Obama administrations to bail out Wall Street investment firms, GM and Chrysler, insurance giant AIG, and multiple banks.
There is a name for the kind of regime that allows private ownership of businesses but effectively tells them what to produce and sell. It's called Facism. America is far from there, but becoming a bailout nation is a significant step in the wrong direction.