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Thursday, April 22, 2010

GM Repays Government, in a Manner of Speaking

It’s all over the news: GM repaid its loan to the federal government — early. The Obama-engineered bankruptcy worked. Did it?

The story takes on a new aspect when we realize that Neil Barofsky, Treasury Special Inspector General of TARP, told both Rep. Thomas Carper of Delaware and Neil Cavuto of Fox Business News that GM repaid the loan with other borrowed money. How’s that again?

“It’s good news in that they’re reducing their debt, but they’re doing it by taking other available TARP money,” Barofsky said, according to Jamie Dupree of Cox Radio.

“It sounds like it’s kind of like taking money out of one pocket and putting in the other,” Carper said.

Barofsky nodded.

“The way that payment is going to be made is by drawing down on an equity facility of other TARP money,” he added.

In his exchange with Cavuto, Barofsky said:

“The one thing a lot of people overlook with this is where they got the money to pay the loan. It isn’t from earnings. They didn’t earn and extra 4 1/2 billion dollars. So there’s money in escrow.”

“Wait a minute,” Cavuto said, “They paid off a credit line with another credit line?”


Why is this not being widely reported?

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.