Sunday, May 2, 2010

The truth about GM repaying its TARP loan

Last week General Motors conducted a public relations blitz celebrating the repayment of its TARP loans. Treasury secretary Geithner also issued a press release saying GM has repaid its debt ahead of schedule.

Those with memories recall that GM received about $60 billion in government funds, but the TARP repayment amounted to a mere $6 billion. Also, GM is still not profitable. So where is the money coming from? GM CEO Ed Whitacre failed to note in his press release that GM drew upon another line of credit at the Treasury to pay off its TARP debt. Taxpayers continue to hold a sizable equity position in GM, but the odds that an IPO would make them whole are quite low. Today's NYT reports that the Congressional Budget Office expects taxpayers to take a $30 billion hit on GM.

My take: credibility is a precious asset, one that neither GM or the White House has in great supply right now. This phony message needlessly depreciates that asset further.

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