Zeev's Turnips Talk Politics (ZTTP)

[EZ2]

Over-lending on a loan to achieve quick initial repayment (and thus inflate the loan's perceived value), in the private economy, is called fraud. Where did GM come up with the money? It's a question that merits asking.

More than meets the eye to GM payback story
Joseph Ashby

How did a recently bankrupt company that is still hemorrhaging money pay back a multi-billion dollar loan five years early?

Halleluiahs are ringing throughout the media over General Motor's bailout repayment. "GM pays back government loans from US, Canada" announces the Associated Press headline.

ABCNews.com adds this:


"This turnaround wasn't an accident of history," said White House economic adviser Larry Summers. "It was the result of considered and politically difficult decisions made by President Obama to provide GM and Chrysler - and indeed the auto industry - a lifeline, if they could demonstrate the will to reshape their businesses."


Well, it's settled, President Obama is the world's most courageous (and successful!) investment banker...right?

No, not really.

The fact (which the news reports eventually point out, despite the misleading headlines and opening paragraphs) is that the US and Canadian governments poured $60 billion into GM. The vast majority of the bailout money was either forgiven or converted into post-bankruptcy ownership stake. The GM bailout is still expected to lose $36 billion--in other words, a 72% loss.

But perhaps more important is to ask where the $8.1 billion payback came from. Earlier this month, CNN Money reported that GM posted a $3.6 billion loss in fourth-quarter 2009. Even casting aside one-time expenses and various accounting complexities, the company was $600 million short of breaking even.

So how did a recently bankrupt company which is still hemorrhaging money pay back a multi-billion dollar loan five years early? Could it be that the mountain of bailout cash was much more than turned out to be necessary?

It's hard to conclude that the repayment is anything other than a political and marketing ploy where the federal government receives "repayment" with the very same loan money handed out starting in 2008. In addition to Summers touting "success," General Motors has already released a full-minute radio and television add seeking to reengage disaffected Americans under the pretense of GM's supposedly paid-in-full-with-interest loan.

Over-lending on a loan to achieve quick initial repayment (and thus inflate the loan's perceived value), in the private economy, is called fraud. Where did GM come up with the money? It's a question that merits asking.


http://www.americanthinker.com/blog/2010/04/more_than_meets_the_eye_to_gm.html