GM paying off their TARP loan - with interest!

[mugofbeer]

News Headlines

[dcsooner]

Can not wait to read what Red State Oklahoma will say negative about that?

[PennyQuilts]

Glad to hear it. I don't think the government should take a loss on its investment, at all, though.

[mugofbeer]

If their business continues to improve, the next step is for them to go public again. That is when the big payoff might/might not come for the rest of the $50 billion investment. That is up for next year probably but IPO's are timed for the largest payoff.

To me, this is proof to all those who are so vehamently against TARP payments that in times of national economic emergency, these DO pay off. It happened in the S & L crisis time in the early 90's and it's proving to pay off in a big way here. No, we certainly don't want our government involved in something like this routinely, but in times such as we had in the fall of 2008, it was a wise move to prevent the worldwide economic calamity we would have had.

Stimulus programs are a whole different ballgame though.

[Insider]

I am confused...how are you saying that GM has payed back the US government? GM still owes the US government $43 billion...

From the article you linked to...

"In addition to the nearly $7 billion in direct loans to GM, the U.S. Treasury extended $43 billion in bailout cash in 2009 -- for a total $50 billion investment.

The non-loan portion of help for GM was converted into equity during its bankruptcy and represents the 60 percent stake in the company owned by the government."

GM payed back the loan portion, but has not paid back the $43 billion bailout portion...

[mugofbeer]

You are correct. The distiction is that GM is paying back the LOAN portion and doing it early. The equity ownership of GM is still there and will remain until the time GM issues an Initial Public Offering of stock - hoped for next year. If the IPO is successful, which it should be if GM continues to post improvements in business, the value of the government's share of ownership will go up (The value of the Citibank investment was about double the original investment value). When the government starts to liquidate their equity position of stock (such as they are currently doing with their equity position of Citibank), is when the real payoff will be for the "investment." It likely won't happen all at once because dumping an enormous amount of stock onto the market at once can depress the price, but such as is being done with the Citi investment, they are selling gradually over a long period of time. Now, if things look really bright for a GM initial offering, the government could participate in the public offering and put their share of ownership on the table all at once in the IPO itself.

The bottom line is that if things go as they are now, the government's exit from GM will be done far earlier than initially expected and they may make a significant profit from it just as they have done with several other TARP recipients.

[jn1780]

You are correct. The distiction is that GM is paying back the LOAN portion and doing it early. The equity ownership of GM is still there and will remain until the time GM issues an Initial Public Offering of stock - hoped for next year. If the IPO is successful, which it should be if GM continues to post improvements in business, the value of the government's share of ownership will go up (The value of the Citibank investment was about double the original investment value). When the government starts to liquidate their equity position of stock (such as they are currently doing with their equity position of Citibank), is when the real payoff will be for the "investment." It likely won't happen all at once because dumping an enormous amount of stock onto the market at once can depress the price, but such as is being done with the Citi investment, they are selling gradually over a long period of time. Now, if things look really bright for a GM initial offering, the government could participate in the public offering and put their share of ownership on the table all at once in the IPO itself.

The bottom line is that if things go as they are now, the government's exit from GM will be done far earlier than initially expected and they may make a significant profit from it just as they have done with several other TARP recipients.

As long as the volt doen't burst into flames. LOL
And theres that pesky 27 billion dollar pension problem, but thats an issue for another day.
but for now...rally on!

[Kerry]

When are the members of the Board of Directors put there by the government going to be let go? Who gives a crap about "government ownership" when the Board of Directors is government appointed. Don't be mindless sheep. Until government appointed Directors are let go GM paying back anything is just one government entity paying another government entity. It would be like the Dpeartment of Energy paying back the Treasury. It doesn't make the Department of Energy a private entity - it is still part of the government.

[mugofbeer]

As long as the volt doen't burst into flames. LOL
And theres that pesky 27 billion dollar pension problem, but thats an issue for another day.
but for now...rally on!

I don't know all of the specifics of the government plan but in bankruptcy, its very possible that $27 billion pension problem went bye-bye.

[jn1780]

Nope. Problem is still there.

GM's Pension: A Ticking Time Bomb for Taxpayers? - TIME

[Kerry]

I don't know all of the specifics of the government plan but in bankruptcy, its very possible that $27 billion pension problem went bye-bye.

Is there even a remote chance that you thought Team Obama would stiff the UAW?

[mugofbeer]

Here's a chirpy little tidbit I uncovered since I had a little time to look into the matter. Looks like they aren't out of any woods, just yet. At least they aren't disappearing but may actually survive:

General Motors Corp. may no longer be the world’s biggest automaker, but it still operates the country’s largest pension fund. The threat to its pension plans has always been an issue, butit took on a new urgency when GM disclosed April 7 that its plans were underfunded by more than $27 billion, with more than half of that being owed to U.S. workers and retirees. Across town, a post- bankrupt Chrysler faces its own pension shortfall. Moreover, a report last week from the Government Accounting Office (GAO) says the pension crisis in the auto industry could create an unprecedented crisis for the federal Pension Benefit Guarantee Corp., a government-sponsored organization to backstop company pensions.

Could taxpayers really be on the hook for UAW pensions?

Yes. GM could face a funding crisis in 2013 or 2014 when, under the current projections, the automaker will be required to make more than $12 billion in contributions to its pension funds to keep them solvent, according to the GAO analysis.

The funding could easily become a serious challenge for the PBGC, which says it is now facing $168 billion in possible plan terminations across a range of companies, many of them auto suppliers. The PBGC is privately funded, but since it was created by an act of Congress and its board of directors consists of the Secretaries of Labor, Commerce and Treasury, it’s possible that the U.S. Government would step in if the agency came up desperately short of funds.

What happens to GM and Chrysler pensioners if the PBGC takes over the funds?

The retirees could face dramatic cuts. The PBGC promises a certain level of benefits, but $35 billion of the two automakers’ promised pension benefits fall beyond the PBGC guarantees.

[mugofbeer]

OK, this thing seems to be falling apart at the seams. Now there are allegations that GM's announcement and commercials touting their loan payoffs are fake in that they are using one pot of TARP money to pay off their TARP loans. If this is true, Govt. Motors should, once again, replace the responsible management and make someone pay for this misleading action.

[rcjunkie]

OK, this thing seems to be falling apart at the seams. Now there are allegations that GM's announcement and commercials touting their loan payoffs are fake in that they are using one pot of TARP money to pay off their TARP loans. If this is true, Govt. Motors should, once again, replace the responsible management and make someone pay for this misleading action.

What the government needs to do is demand immediate and complete repayment, if not, take legal action and if this means GM falls into bankruptcy, so be it.

[Jersey Boss]

Small potatoes. Demand immediate payment from ALL of Wall Street that took money. At least GM actually produces a tangible product. What does the "Devils Casino" produce?

[mugofbeer]

What the government needs to do is demand immediate and complete repayment, if not, take legal action and if this means GM falls into bankruptcy, so be it.

rc - they filed for bankruptcy June 1, 2009. They are still in it.

[mugofbeer]

Small potatoes. Demand immediate payment from ALL of Wall Street that took money. At least GM actually produces a tangible product. What does the "Devils Casino" produce?

Ownership of corporations, help businesses and municipalities issue bonds, help the US government issue bonds, provide liquidity for commodities, and for the mortgage industry (until Oct. of 2008, anyway, now Fannie Mae and Freddie Mac do most of it). They obviously engineered a few things but they are vital to a capitalistic economy.

[Kerry]

OK, this thing seems to be falling apart at the seams. Now there are allegations that GM's announcement and commercials touting their loan payoffs are fake in that they are using one pot of TARP money to pay off their TARP loans. If this is true, Govt. Motors should, once again, replace the responsible management and make someone pay for this misleading action.

GM leadership is all government appointed. Accountability isn't going to happen. Hopefully GM will go out of business before they drive the other car companies out of business (not through competition mind you but by government action). If there is one things the US government can't stand it is competition.