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Let's Hear It for Government Motors GM!

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Author Topic: Let's Hear It for Government Motors GM!  (Read 4193 times)
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ekg
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« on: April 21, 2011, 12:06:10 pm »

Didn't GM already pay back all or the majority of the bailout money? Not that the tax payers will benefit either way. I can't help but to think that the deluge of problems with Toyota helped GM. Part of me felt like it was wrong and that the free market should dictate who does and doesn't stay in business. However what is called a free market is anything but and therefor, considering the ripple effect that any of those car companies going belly up would have had on the economy and the devastation to people's lives, I guess I'm ok with that aspect of the bail out.

Yes and no..

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It's true that GM has squared up on its government loans, but Whitacre isn't telling the full story.

With GM in deep trouble and hundreds of thousands of jobs in the balance, the Obama administration -- through the Troubled Asset Relief Program (TARP) -- stepped forward with tens of billions of dollars worth of assistance. As of March 31, 2010, the U.S. Treasury had committed approximately $52.4 billion to GM.

Only a fraction of that, $6.7 billion, was in the form of loans. Most of the government's GM investment was converted to an ownership stake in the New GM, the company that emerged from bankruptcy: $2.1 billion in preferred stock; and 60.8 percent of the company's common equity.

GM had already made several installments in paying back the $6.7 billion loan. But on April 21, 2010, GM announced that it had paid back the entirety of the remaining $4.7 billion in loans from the U.S. government (and another $1.1 million to the Canadian government). GM had until 2015 to pay back those loans.

So the loan portion of the GM bailout was, in fact, settled, with interest, five years ahead of schedule.


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We think the TV ad would leave most reasonable viewers with the impression that GM has fully settled up with the government. Whitacre can accurately claim that GM has retired its $6.7 billion in loans from the U.S. government. But with the government still owning 60 percent of the company and the prospects slim for getting all its money back, we think that's highly misleading. And so we rate Whitacre's statement Half True.

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