Bailout final cost may be "only" $87B

[ziggy29]

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).

 

[Gone4Good]

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.

 

[FinanceDude]

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..........

 

[Gone4Good]

Maybe this will help:
.

Not really, but mostly because of sloppy reporting. In one article they say . . .

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!

“The way that payment is going to be made is by drawing down on an equity facility of other TARP money.”

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.

 

[FinanceDude]

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?

 

[Gone4Good]

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 . . .

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.

 

[ziggy29]

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.

 

[youbet]

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.

 

[Gone4Good]

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.

 

[Gone4Good]

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.

 

[youbet]

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.

 

[Gone4Good]

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.

 

[IndependentlyPoor]

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.

 

[FinanceDude]

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?

 

[youbet]

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!

 

[samclem]

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.

If they wanted the same answer you derived, they could have interpreted the information the way you did.

As a taxpayer, I won't be "paid back" until the government gets paid for all the GM equity we hold.

 

[Gone4Good]

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?

I guess I should just accept the idea that facts have little purchase with you.

But shareholders were wiped out. Bondholders took extreme haircuts. GM went through bankruptcy. The US government is getting everything it is entitled to.

Sorry, but its true.

 

[Gone4Good]

As a taxpayer, I won't be "paid back" until the government gets paid for all the GM equity we hold.

What does that even mean? How do you get paid back for the equity you hold? It doesn't have a redemption value. You own a certain number of shares. It is worth what it is worth. And the government will realize every dime of that value in due course.

I think I understand what you all mean . . . "I want 100 cents on the dollar". But that isn't what the plan of reorganization calls for. You got equity. And its worth whatever it is worth. You're not entitled to a penny more.

Do any of you see the irony that the same people who were complaining (erroneously in my view) that the government was undermining creditors rights in the bankruptcy process now think the government should undermine creditor rights by taking more than what the bankruptcy process yielded. Probably not.

 

[samclem]

I guess I should just accept the idea that facts have little purchase with you.

But shareholders were wiped out. Bondholders took extreme haircuts. GM went through bankruptcy. The US government is getting everything it is entitled to.

If facts are important, lets use complete facts.
Did all bondholders take the same "extreme haircuts?" No. All of us who were "regular" bondholders got less equity than the union retirement accounts got, despite the fact that the regular bondholders were owed more. This deal courtesy of . . .well, we all know how that happened.

From the Houston Chronicle:

A study late last year by the conservative-leaning National Taxpayers Union estimated that the GM bailout will cost $12,200 per car, assuming GM meets its sales projections. Include Chrysler, and government support for the auto industry comes to $800 per taxpaying family, the study found.
Those numbers don't include other government programs that benefited the automakers, such as last year's “Cash for Clunkers.”
Against that backdrop, in saunters Whitacre, bragging about paying back loans that amount to a sliver of the money GM still owes us. I hope he's right that it's the first step — a baby step, really — in a GM turnaround.
But paid in full? Not even close.

GM leaders should spare us the carefully worded PR bluster. While technically accurate, I'd rather that they not buy more ads of this type with my tax money and instead work on making and selling good cars--and on paying back what they really owe. Their cockiness is inappropriate and certainly unbecoming.

 

[Gone4Good]

If facts are important, lets use complete facts.

I'm not going to rehash all of that because we've been through it. The only question I'll ask is this . . . what in God's green earth does the relative payouts among two separate creditor classes who are not under discussion in this thread have anything to do with whether GM repaid its government loan?

The answer is obviously nothing.

 

[Gone4Good]

While technically accurate,

Thank you! That's all I'm saying.

 

[Alan]

This thread has now run its course folks.

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