It's all a shell game...

I've always loved Ford Motor Company, but my affection for them has only grown recently as both Chrysler and GM took massive bailouts from the government to basically subsidise their failure to remain competitive in the marketplace. Ford made a number of smart moves financially just before the recession began, and that, coupled with their star CEO implementing massive product development, manufacturing and quality control changes has left them in a great position to not just weather the storm, but expand their market share.

But GM announced a week or so ago that they too are now back on the straight and narrow road of capitalism, repaying their government loans back early, in full and with interest. Here's the heart-warming commercial I'm sure you've already seen:



Unfortunately, it's all a farce. Republican Senator Chuck Grassley was the first to call it simply a "TARP money shuffle." The official response from the Treasury department seemed to initially contradict this; the statement claimed that GM properly used escrow funds to repay the loan, and that this escrow was not held by the US Treasury, but by GM. That's all well and good, except that the New York Times revealed that this is all merely a game of semantics on the part of the Treasury and General Motors.

According to the Times, the inspector general overseeing the bailout program noted in a Senate Finance Committee meeting that the money being used to pay back the Treasury was "other taxpayer money." The Treasury noted last Tuesday that the money used to repay the bailout was in an escrow account held for General Motors by the US Treasury. This is probably the most troubling quote from the NYT article:

Emphasizing that the cash in the account was “the property of G.M.,” Mr. Allison said that the department had approved the company’s use of the money to retire the original debt because it was “consistent with Treasury’s goal of recovering funds for the taxpayer and exiting TARP investments as soon as practicable.”

Why should you care? The issues are twofold: first, the money isn't "the property of GM" in the first place. It's the taxpayers' money, and represents what comes out of your paycheck every two weeks that is supposed to go to legitmate financial needs of the government. Second, while the Treasury has backed off of their original claim that taxpayer money was not used for the payback, GM deceptively continues to claim they have payed back their loans and are somehow more prepared to survive in the market, while this is clearly not the case. GM used government money, paid by you in your taxes, to repay the bailout money they owed to the Treasury.

How can GM be "a company America is proud of" as CEO Ed Whitacre states in the ad, if they can't even pay off their bailout with their own funds? GM is no more out from under the bailout now than it was before it paid off its loans, it only wants you to think it is. Taxpayers should be embarassed and angry at this charade, and disgusted at the misleading tactics of the US Treasury and General Motors. It's not the taxpayer's job to support a failing business, and until GM can actually turn a profit, that's exactly what it is.



Sources:
http://www.nytimes.com/2010/05/02/business/02gret.html
http://www.businessweek.com/news/2010-04-28/gm-properly-used-escrow-to-repay-u-s-treasury-says-update1-.html