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Old 04-26-2010, 10:57 AM   #21
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Both sides describe it as an escrow account. An escrow account is not a line of credit. This isn't complicated stuff.
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Old 04-26-2010, 11:14 AM   #22
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Both sides describe it as an escrow account. An escrow account is not a line of credit. This isn't complicated stuff.
WHOSE money is in escrow, GM's or the taxpayers? That is the question.
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Old 04-26-2010, 11:17 AM   #23
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WHOSE money is in escrow, GM's or the taxpayers? That is the question.
It seems as if Grassley isn't the only person who doesn't understand how an escrow account works. Money is held in escrow to protect the lender. Lenders don't escrow their own money. Why would they? If they're making other money available to a borrower, its called a line of credit. Not an escrow account.

And it doesn't matter how the escrow account is funded. If it was originally funded with borrowed money, and then used to repay the loan, the loan is still repaid.
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Old 04-26-2010, 11:53 AM   #24
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And it doesn't matter how the escrow account is funded.
You answered this exactly as I thought you would. However, there is a difference in how I see it. Chase Bank was made to take money from TARP. Jamie Dimon stuck it in his bank until he was allowed to give it back, repaying the "debt" the Treasury made him take in. He held the funds "in escrow" until he was allowed to pay it back.

Sorry, using TARP funds held in escrow to pay another TARP fund back isn't the taxpayers getting their money back, politics aside. The fact that GM is touting that they "paid their debt back" is even more ludicrous, given the fact that the govt still owns almost 61% of a company in stock that doesn't even trade on an exchange..........
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Old 04-26-2010, 12:06 PM   #25
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Sorry, using TARP funds held in escrow to pay another TARP fund back isn't the taxpayers getting their money back, politics aside.
I'm sorry but now you're just making stuff up. Are you saying that GM still has a loan outstanding? Can you show some evidence of this, because not even Grassley in his op-ed said that was the case. And if their is no loan outstanding, what exactly is your point?

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The fact that GM is touting that they "paid their debt back" is even more ludicrous, given the fact that the govt still owns almost 61% of a company in stock that doesn't even trade on an exchange..........
It's not inconsistent to repay a loan while still having people own your equity. GM simply said they repaid the loan, which is true. You're trying to claim they said something else, which they didn't.

For what its worth, I don't really care one way or another. But it's just kind of astounding that people will go to extreme lengths (including, apparently, ignoring the plain meaning of words like "escrow") so that they can believe whatever they want to believe.
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Old 04-26-2010, 12:10 PM   #26
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If it was originally funded with borrowed money, and then used to repay the loan, the loan is still repaid.
Technically, yes. But at that point it's basically a shell game. If I took out a $25K car loan and then proceeded to get a $25K home equity loan to pay off the car loan, my car loan *is* paid off but it doesn't mean my balance sheet is any better; I still have a $25K debt liability either way.

So that would mean that GM wouldn't be any better off financially for having paid this off if they used other borrowed money to do it (other than possibly repayment terms or interest rates).
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Old 04-26-2010, 12:20 PM   #27
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Technically, yes. But at that point it's basically a shell game. If I took out a $25K car loan and then proceeded to get a $25K home equity loan to pay off the car loan, my car loan *is* paid off but it doesn't mean my balance sheet is any better; I still have a $25K debt liability either way.
Yes, but nobody is making that claim . . . that there is still a loan outstanding. Read Grassley's op-ed. He never says there is another loan outstanding. He mentions the escrow account and then veers off into some gobbledygook about equity. He's making the same mistake that FinanceDude is. That if the escrow account was originally funded with TARP, and a loan is repaid from that escrow account, then somehow the loan that funded the escrow account wasn't repaid. This is only possible if some other loan exists, or the government made some gift to GM . . . I'm not aware of anyone claiming either of those things.

Look, its true that the government hasn't gotten back 100% of the money it gave to GM. Nobody disputes that. The original $50B loan was converted into a $6.7B loan and a 61% equity interest. By all accounts the $6.7B loan was repaid. There is no claim I can find that suggests there is still a $6.7B loan outstanding. If you can find one, please share.

And with respect to the equity stake. Equity is never "repaid". So it is still accurate for GM to claim it repaid the government what it owes. Which isn't the same thing as saying the government recovered 100 cents on the dollar. And is consistent with what I said earlier.
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Old 04-26-2010, 12:51 PM   #28
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Maybe this will help:

GM repays loan to US… actually, not really (Update) | Radio Vice Online

I thought the comments from Sen. Carper (D-Delaware) and the Vice Chairman of GM were telling...seems they agree it is not really a repayment..........

Of course, you will disagree, but it seems Grassley isn't as far off his rocker as you think..........
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Old 04-26-2010, 01:01 PM   #29
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Maybe this will help:
.
Not really, but mostly because of sloppy reporting. In one article they say . . .

Quote:
What you weren’t told was that GM was able to repay the money by drawing down on a line of credit that it had from TARP!
Quote:
“The way that payment is going to be made is by drawing down on an equity facility of other TARP money.”
Quote:
GM seems to be using TARP funds from an escrow account at Treasury to make the debt repayments.
So which is it? A credit facility, an equity facility, or an escrow account? These are not minor details, and they are not interchangeable.

If it is a credit facility then a new loan is outstanding.
If it is an equity facility then the U.S. should now own more than 61% of GM.
If it is an escrow account then the loan was repaid with GM's restricted cash.

My view, based on this atrocious reporting, is that an escrow account was set up by the original $50B TARP loan. A large portion of that loan was converted to equity, but the escrow account was left funded as GM's restricted cash. That cash is now being released to repay what is left of the GM loan.
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Old 04-26-2010, 01:22 PM   #30
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Not really, but mostly because of sloppy reporting. In one article they say . . .

So which is it? A credit facility, an equity facility, or an escrow account? These are not minor details, and they are not interchangeable.

If it is a credit facility then a new loan is outstanding.
If it is an equity facility then the U.S. should now own more than 61% of GM.
If it is an escrow account then the loan was repaid with GM's restricted cash.

My view, based on this atrocious reporting, is that an escrow account was set up by the original $50B TARP loan. A large portion of that loan was converted to equity, but the escrow account was left funded as GM's restricted cash. That cash is now being released to repay what is left of the GM loan.
Why did a Democratic Sentaor and the vice chairman of GM agree that it was not really a repayment? So, in your view, NOONE knows the real deal but you?
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Old 04-26-2010, 01:23 PM   #31
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My view, based on this atrocious reporting, is that an escrow account was set up by the original $50B TARP loan. A large portion of that loan was converted to equity, but the escrow account was left funded as GM's restricted cash. That cash is now being released to repay what is left of the GM loan.
And indeed, that is precisely what is going on. According to GM's 10-K, they have $15.4B in restricted cash on the balance sheet, $12.5B of which is held with the US Treasury (UST).

Here is how they describe it . . .

Quote:
Old GM received total proceeds of $52.7B from the UST . . . From these proceeds, $12.5B remained deposited in escrow at December 31, 2009. Amounts remaining in the escrow account will be distributed to us at our request upon certain conditions as outlined in the UST Credit Agreement. Any unused amounts on 6/30/10 are required to be used to repay the UST Loans and Canadian Loan on a pro rata basis. Upon repayment of the UST Loans and the Canadian Loan any funds in escrow will be returned to us.
This is clearly GM money that is being held as security against the outstanding UST loans. The reporting on this is awful. And Grassley should know better.

It took me all of 22 minutes to look up the truth and transcribe it here. You'd think a Senator with a staff and these various news organizations could have done the same.
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Old 04-26-2010, 01:28 PM   #32
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And Grassley is an idiot.
This is starting to unacceptably stray from the issue-driven discussion and into the type of partisan political sniping we've tried to keep this board free from.

Please, let's stick to the issues and keep the partisan labels and name calling out of it. Thanks.
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Old 04-26-2010, 01:31 PM   #33
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The bottom line is that we have NOT recoup'd the money we lent GM.
The current spin emphasing that "GM Pays Back Gov't Loan" is just that.......spin to divert attention away from the fact that we still need to send the thugs in and get the rest of our money back, regardless of which shell they've hidden it under.
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Old 04-26-2010, 01:33 PM   #34
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This is starting to unacceptably stray from the issue-driven discussion and into the type of partisan political sniping we've tried to keep this board free from.
I've deleted the insult to the esteemed Mr. Grassley.
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Old 04-26-2010, 01:36 PM   #35
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The bottom line is that we have NOT recoup'd the money we lent GM.
The current spin emphasing that "GM Pays Back Gov't Loan" is just that.......spin to divert attention away from the fact that we still need to send the thugs in and get the rest of our money back.
It's not spin. After bankruptcy some debts are extinguished. Some are equitized. This is true for all companies that go through reorganization, not just GM. Companies that emerge from bankruptcy don't continue to owe these debts. That is the whole point of bankruptcy.
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Old 04-26-2010, 01:40 PM   #36
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No, actually it is spin. We have not recoup'd the money lent to GM. They're trying to sell it as though we have. That's either spin or an outright lie. As always, I'm giving them the benefit of the doubt.
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Old 04-26-2010, 01:48 PM   #37
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Ummm, ok. But GM has still repaid what it owed the US Government according to its plan of reorganization. That is all anyone is entitled too. If you want more you should send a request to the U.S. Bankruptcy Court for the Southern District of New York where all of this was decided.
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Old 04-26-2010, 02:06 PM   #38
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Something tells me that I am gonna regret this, but...

I still don't get it. So the old GM received $52.7B from TARP. $12.5B of that is (or was) in escrow.

The U.S. and Canada also lent some more billions (probably to the new GM).

Some of the escrow money was used to repay the U.S. and Canadian loans.

Is this anywhere close to being a correct summary?

But back to that $52.7B. Are we ever gonna see any of that money back? Was it a loan or an outright gift? Was it part of the debts that were discharged during the bankruptcy?

When (and let us hope that it is not if) the government starts to sell its share in GM (as it appears to be doing right now with Citi), it will be interesting to try to figure out just how much the bailout cost us.
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Old 04-26-2010, 02:26 PM   #39
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Ummm, ok. But GM has still repaid what it owed the US Government according to its plan of reorganization. That is all anyone is entitled too. If you want more you should send a request to the U.S. Bankruptcy Court for the Southern District of New York where all of this was decided.
But unlike in other reorganizations, its not the sharehlders and bondholders taking it in the shorts, its the taxpayers. As someone who is not in favor of bailouts in general much less to corporations who make poor business decisions for decades, I want to know when we the taxpayer will be paid back. This is NOT the straightforward bankruptcy and reorganization that most corporations got through.......that ended when many billions of taxpayer dollars got involved.........

How are taxpayer bailouts the same as traditional company bankruptcies?
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Old 04-26-2010, 02:34 PM   #40
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Ummm, ok. But GM has still repaid what it owed the US Government according to its plan of reorganization. That is all anyone is entitled too. If you want more you should send a request to the U.S. Bankruptcy Court for the Southern District of New York where all of this was decided.
I think many tax payers are interested in knowing that the political connection GM has to our current administration cost them big bux...... and so be it. Whether there is legal gargon and spin telling us to bend over and take it or not, some of us don't like it. You seem to think it feels good. So...... enjoy!
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