Any literate person knew that a very big detail was missing from the GM media blitz about having repaid its government bailout loan “in full, ahead of schedule and with interest”. While it repaid $6.7 million dollars in loans, the government still had some $50 million invested in GM stock.
Now we learn that things are worse than that. It turns out that GM repaid the loans by borrowing more from the federal government.
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.
I suspect that GM’s publicity about its “early repayment” of the loans, failing to disclose the rather material fact that it “repaid” by borrowing more, will lead to a class action lawsuit by investors.
Even the New York Times, which has been very consistently in the tank for Mr. Obama, could not ignore this story. The Times article noted both the misleading way in which this “repayment” was sold to the public, and the explicit involvement of Treasury Secretary Geithner.
G.M. also crowed about its loan repayment in a national television ad and the United States Treasury also marked the moment with a press release: “We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,” said Timothy F. Geithner, the Treasury secretary.
Taxpayers are naturally eager for news about bailout repayments. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan.
Perhaps more importantly, the Administration participated by approving the new borrowing and joining in the media blitz. So, there almost certainly will be Congressional inquiries — even subpoenas, if the Republicans manage to retake the House — over the degree of the Administration’s involvement in misleading the public. We may find that the Administration pressured GM to participate in this charade, to lessen the considerable public opposition to the bailout.
The Administration’s predicted legal defense: “What lies are good for GM are good for America!”
The Administration’s predicted personnel action: Throwing Tim Geithner under the bus.