GM is still Government Motors

[scarymary]

It would appear that GM CEO Ed Whitacre is being less than totally honest about the repayment of the loan it received from the government to bail out the company last year.........and not only that, there is more to the story than is being publicized. Here is the story from Forbes (http://www.forbes.com/2010/04/23/general-motors-economy-bailout-opinions-columnists-shikha-dalmia_print.html):


GM CEO Ed Whitacre announced in a Wall Street Journal column (http://online.wsj.com/article/SB10001424052702303491304575188473069446344.html) Wednesday that his company has paid back its government bailout loan "in full, with interest, years ahead of schedule." He is even running TV ads (http://www.gm.com/) on all major networks to that effect--a needless expense given that a credulous media is only too happy to parrot his claims for free. Detroit Free Press' Mike Thompson, for example, advises (http://www.freep.com/article/20100421/BLOG24/100421003/General-Motors-repays-its-loans) bailout proponents to start "warming up their vocal chords" to jeer their opponents with chants of "I told you so."
But before belting out their victory aria, GM-boosters ought to hear the whole story--not just the fairytale version about Government Motors' grand comeback that Mr. Whitacre is feeding them.
Uncle Sam gave GM $49.5 billion (http://www.carlist.com/blog/?p=1374) last summer in aid to finance its bankruptcy. (If it hadn't, the company, which couldn't raise this kind of money from private lenders, would have been forced into liquidation, its assets sold for scrap.) So when Mr. Whitacre publishes a column with the headline, "The GM Bailout: Paid Back in Full," most ordinary mortals unfamiliar with bailout minutia would assume that he is alluding to the entire $49.5 billion. That, however, is far from the case.
Because a loan of such a huge amount would have been politically controversial, the Obama administration handed GM only $6.7 billion as a pure loan. (It asked for only a 7% interest rate--a very sweet deal considering that GM bonds at that time were trading below junk level.) The vast bulk of the bailout money was transferred to GM through the purchase of 60.8% equity stake in the company--arguably an even worse deal for taxpayers than the loan, given that the equity position requires them to bear the risk of the investment without any guaranteed return. (The Canadian government likewise gave (http://www.clickondetroit.com/automotive/23200209/detail.html) GM $1.4 billion as a pure loan, and another $8.1 billion for an 11.7% equity stake. The U.S. and Canadian government together own 72.5% of the company.)
But when Mr. Whitacre says GM has paid back the bailout money in full, he means not the entire $49.5 billion--the loan and the equity. In fact, he avoids all mention of that figure in his column. He means only the $6.7 billion loan (http://news.yahoo.com/s/ap/20100407/ap_on_bi_ge/us_earns_gm) amount.
But wait! Even that's not the full story given that GM, which has not yet broken even, much less turned a profit, can't pay even this puny amount from its own earnings.
So how is it paying it?
As it turns out, the Obama administration put $13.4 billion of the aid money as "working capital" in an escrow account when the company was in bankruptcy. The company is using this escrow money--government money--to pay back the government loan.
GM claims that the fact that it is even using the escrow money to pay back the loan instead of using it all to shore itself up shows that it is on the road to recovery. That actually would be a positive development--although hardly one worth hyping in ads and columns--if it were not for a further plot twist.


Read the full story at Forbes...........this is not the complete article; there is more to this sordid story.

[Dr. Madd]

I smelled a rat from the first news.

[Rob]

Gee, something shady going on under Obama's watch? Really? Say it aint so...

Call me cynical, but I think Obama and the Democrats "demanded" from GM that they give back this cash (which is not profit as the article says)... so that way Joe Biden could go around the mainstream media and say to America "look, the bailouts weren't so bad, baby... they paid us back with interest, baby..." - as the article says, the only thing GM has paid back is money they didn't NEED in the first place and was essentially given to them "just in case" they needed it...

But now with November right around the corner, the Democrats can't allow people to go on believing the truth about the bailouts, so SPIN SPIN SPIN... Biden ended all his interviews with the MSM by saying "We couldn't have done it without you, baby..." and he was right... they could never get away with this in-one-pocket-and-out-the-other-pocket bullshit if the "mainstream" media didn't have their own "investment" they were trying to secure in this administration.

God help us.

[scarymary]

Man, this man's term as president cannot come to an end soon enough to suit me. It is something new every damned day. And the media attempts to spin into something that will be good for all of us. I'm sick of it. He is disgusting. He is the most partisan hack I have ever seen in my entire life. I hope he has to go testify in the Blago case, and I hope he gets charged with something. Has anyone else seen any news about that? I saw it somewhere this morning or last night, but it seemed as though he was going to be subpeonaed to testify in the Blago case. I hope they nail that jackass to the wall too.

[Dr. Madd]

I know TL disagrees, but I want impeachment for this asshat.

[scarymary]

Why is the CEO of GM allowed by the American people to go in front of a camera and tell a blatant lie like this? Why are the people not questioning the credibility of this man? Why is the media not calling out this man on his attempt to fool the people into believing that GM is once again a profitable business model?

[Topiary Lady]

^
Because they count on the dumbed-down public to lap it up as truth. Is there a reason why our public schools have consistently produced graduating students who can barely even read? The progressive left NEEDS people who will blindly trust.

Every time we see things like this, it is more proof that the left believes that there are enough dummies in the USA who will just believe whatever you stick in front of them. Unfortunatly, in this last election, they were correct. There are three types of people who voted for Obama. There are the radicals who are openly on board with Obama's agenda. There are those who were on board, but didn't have the courage to say that we should give Socialism a try. And then - there are the dummies who really do not understand the difference between honesty and deceit.

[Peace_by_superior _power]

I bet in GM's books on their Balance sheet with the Liabilities they had a payable called "US government Loan" or something to that extent. I would also take it a step further and bet that the account now holds a zero balance as GM has repaid the loan. Using equity to gain capital in times of bad finances or to restructure debt is not only legal, but common.

Equity is not a loan therefore the stock that they bought that infused GM with capital is not a liability. Sure GM can buy back its stock, but right now reducing assets as well as their equity would probably kill their books and force them back into bankruptcy.

This is what my teacher is talking about when we discussed stock splits and how prices on split stocks tend to rise because people who have no idea what they are doing or talking about influence the market greater than those of us who know what we are doing and what will happen as a result of an action.

[Rob]

Why is the CEO of GM allowed by the American people to go in front of a camera and tell a blatant lie like this? Why are the people not questioning the credibility of this man? Why is the media not calling out this man on his attempt to fool the people into believing that GM is once again a profitable business model?

Probably because the gov't TOLD them to do this... this is to make the bailouts seem like a good idea. That's the same reason the media doesn't explain that to you... don't fool yourself, the media wants you to vote Democrat (at least all the people in the places that count)

[Jagger]

we should give Socialism a try.
We've been doing that for over century.

[Topiary Lady]

Out of context and baiting. Exactly what I asked for you and others to stop. Buh-bye.

[LiveandLetLive]

Just curious - what would your solutions have been to the GM and financial sector meltdowns? Would you have preferred these companies to all go out of business and lose millions upon millions of jobs and the complete breakdown of our financial system? Now if you believe that wasn't going to happen and it was just all fear mongering in order to have a government takeover, then that is one story. But if you believe most major economists that we were on the brink of these companies going belly up - what would your solution have been rather than a government bailout? All I hear is people screeming marxist takeover and socialism....but I dont think ive heard one person say what their solution would have been? Im not talking in the long term...such as lowering taxes, etc. but if you were president when all that was going on, what would you have done?

[scarymary]

Correct me if I'm wrong here, but didn't the bondholders get royally screwed in that deal? By law they were to have been paid first. But according to Oblahma, they were just speculators. I'm sure that in the long run, that any other president would have bailed out the company as well, but I have to ask..........where is the exit strategy in this deal. I haven't seen one. How long is the government going to prop up GM?

[LiveandLetLive]

Correct me if I'm wrong here, but didn't the bondholders get royally screwed in that deal? By law they were to have been paid first. But according to Oblahma, they were just speculators. I'm sure that in the long run, that any other president would have bailed out the company as well, but I have to ask..........where is the exit strategy in this deal. I haven't seen one. How long is the government going to prop up GM?

You know, I dont pretend to know all the specifics and ins and outs of all these bailouts and loans....and im sure someone got screwed, had to happen. I just havent heard anyone offer any other solutions other than just stating that this was Obamas plan from the start. Do you folks think he somehow orchastrated this whiole financial and GM fiasco from his days as State Senator, knowing that years from then he was going to be president and be "forced" to have the government bail these companies out and attempt to save the country from a total financial collapse? I just dont see the last year or two as being this whole startegy from Obama for total government takeover. I just want to hear other peoples solutions as to what they would have done, rather than just calling Obama a marxist and an evil man.

[scarymary]

I'm not saying he orchestrated anything. But it certainly did appear to me at the time that it was conveniently timed for putting a democrat into the White House. And more so for putting a radical big government loving Chicago thug politician in the White House. He is nothing better than a puppet for George Soros. I also don't pretend to know all the ins and outs of these bailouts and loans, but I can guarantee you this.........should it happen again in the future, do you believe that the taxpayers will be on the hook for these too big to fail institutions? I certainly do. Washington DC is owned lock, stock, and barrel by Wall Street, gargantuan corporations, and big banking. Now ask yourself why..............because that is where money is. I don't believe that bigger government is the solution to this problem though.

You asked an interesting question in that previous post or at least made a suggestion...........what if these institutions weren't actually on the brink of collapse? Why were some of them forced to accept the bailout cash?

[LiveandLetLive]

I'm not saying he orchestrated anything. But it certainly did appear to me at the time that it was conveniently timed for putting a democrat into the White House. And more so for putting a radical big government loving Chicago thug politician in the White House. He is nothing better than a puppet for George Soros. I also don't pretend to know all the ins and outs of these bailouts and loans, but I can guarantee you this.........should it happen again in the future, do you believe that the taxpayers will be on the hook for these too big to fail institutions? I certainly do. Washington DC is owned lock, stock, and barrel by Wall Street, gargantuan corporations, and big banking. Now ask yourself why..............because that is where money is. I don't believe that bigger government is the solution to this problem though.


Well I dont think there was any sort of behind the scenes conspiracy and i really dont know what the best solution was or is either. I agree that the whole idea of too big to fail isnt a sustainable in the long-term. Companies that dont perform well, or dont provide a service at a reasonable price, need to be allowed to fail so other companies that can provide a better product more efficiently can come in and succeed. These are long term fixes though and need to be addressed.

I want to know if people here would have been OK with all these companies collapsing? If so, do you have any idea what kind of situation we would be in right now? If not, what steps would you have taken to allow them to stay is business, other than a government bailout?

[LiveandLetLive]

I'm not saying he orchestrated anything. But it certainly did appear to me at the time that it was conveniently timed for putting a democrat into the White House. And more so for putting a radical big government loving Chicago thug politician in the White House. He is nothing better than a puppet for George Soros. I also don't pretend to know all the ins and outs of these bailouts and loans, but I can guarantee you this.........should it happen again in the future, do you believe that the taxpayers will be on the hook for these too big to fail institutions? I certainly do. Washington DC is owned lock, stock, and barrel by Wall Street, gargantuan corporations, and big banking. Now ask yourself why..............because that is where money is. I don't believe that bigger government is the solution to this problem though.


And of course its about money - thats capitalism. Its been that was at least since the undustrial revolution - if not earlier. The govenment and the system has always favored the wealthy - becasue they tend to (or at least used to) create more jobs and prosperity. Look at the Rockeffellers, the Mellons, etc. The government was in their pockets at the close of the 19th century/early 20th century. Just the way it always has been. the difference is that those folks actually created something and employed people. Last year the top 25 hedge fund managers made a combined $25+ billion....yes billion! And they created nothing - just raded money back and forth. Thats the equivalent of 650,000 entry level teachers. This is not sustainable....but we need to start talking about solutions, rather than just saying everying obama is doing is wrong.

[scarymary]

Well, they certainly didn't do Lehman Brothers any favors, now did they? This too big to fail mentality has to end. Would the world as we know have come to an end if these institutions had been allowed to sink or swim? I don't think so. Everyone would have had to endure some pain, some more than most...........but in the long run, it would have been better for the taxpayers. Why is no one addressing government's role in the financial meltdown? You would think that someone would want to look at what role they played in this mess, but so far, not one representative has addressed it. Yes I do believe that government played as much a role in this as the big financial institutions. Government needs to get the hell out of the mortgage business, and let the banks and mortgage companies run their businesses as separate entities. The government has no business telling mortgage companies who they should or shouldn't loan money to. That is only inviting complications and failure. Do I believe that everything government touches turns to crap? Absolutely not. But there are some things the government shouldn't be involved in at any cost. Look at what it has cost the taxpayer to have government in the business of guaranteeing payment on defaulted home loans.