I was impressed this week to see a commercial proclaiming that GM had repaid loans from the American people five years early. Very impressive indeed, and surely a sign of economic recovery that this huge auto manufacturer was able to dig out of a hole and pay back what they owe.
Well… maybe not.
From Senator Grassley’s note to Treasury Secretary Tim “TurboTax” Geithner”:
General Motors (GM) yesterday announced that it repaid its TARP loans. I am concerned, however, that this announcement is not what it seems. In fact, it appears to be nothing more than an elaborate TARP money shuffle.
On Tuesday of this week, Mr. Neil Barofsky, the Special Inspector General for TARP, testified before the Senate Finance Committee. During his testimony Mr. 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.”
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In reality, it looks like GM merely used one source of TARP funds to repay another.
Wow! This is a great idea and an example for all of us to follow. Pay off your loans with a loan from the original lender.
In fact, from now on I plan to pay my credit card bill in total by using that same credit card… no more worries about credit card bills for me. They will be paid in full every month and it won’t cost me a dime.
Should be interesting to see how this plays out… perhaps there is a reasonable explanation. If not, there is surely an explanation that will satisfy the kool aid drinkers among us.
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