USA: How did GM Pay Back Its TARP Loans So Fast? It Didn’t…..
It’s called “slight of hand”. You see, GM have used part of the $50 billion TARP happy day payout to pay off another part of the same loan. And it probably would’ve been OK, because people don’t really care how companies pay things off. But then the big-mouthed CEO of the company bragged in a TV commercial how they paid off the loan ahead of schedule and started crowing about how well the company has turned around, thereby forcing some clever people to figure out how they “paid” their loan off….There’s one born every minute.
As with the Pontiac Aztek, an ugly exterior masks an ever darker problem: Whitacre is being fanciful to the point of deceit. GM received $50 billion in TARP funds (never mind that TARP was only supposed to cover financial institutions). About $7 billion of that came in the form of a straight-up, low-interest loan. And about $13 billion came in the form of an escrow account.
So how has GM, which lost $38 billion in 2007 even as it sold 9.4 million cars, paid back its debt? It took money from the escrow account to pay back the $6.7 billion loan.
Do you remember when you were a kid and your parents gave you $20 to buy them a Christmas present? You bought them something worth $3 and pocketed the rest? That’s what GM has just done.
Oh, and do you remember when you hit your parents up for college? GM has applied for a $10 billion, low-interest loan from the government to modernize its plants so its cars will meet new federal mileage standards.
If you think all this constitutes paying back their debt in full and ahead of schedule, you might want to check out the new line of GM cars. And hope that the company’s safety engineers are better at math than their CEO.