AS we inch closer to a clearer understanding of the products and practices that unleashed the credit crisis of 2008, it’s becoming apparent that those seeking the whole truth are still outnumbered by those aiming to obscure it. This is the case not only on Wall Street but also in Washington.
Truth seekers the nation over, therefore, are indebted to Senator Charles E. Grassley, Republican of Iowa, who in recent days uncovered what he called a government-enabled “TARP money shuffle.” It relates to General Motors, which on April 21 paid the balance of its $6.7 billion loan under the Troubled Asset Relief Program.
G.M. trumpeted its escape from the program as evidence that it had turned the corner in its operations. “G.M. is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse,” boasted Edward E. Whitacre Jr., its chief executive.
G.M. also crowed about its loan repayment in a national television ad and the United States Treasury also marked the moment with a press release: “We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,” said Timothy F. Geithner, the Treasury secretary.
Taxpayers are naturally eager for news about bailout repayments. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan.
This is what you get when you appoint a tax-cheat to be the Treasury Secretary.
Here’s what we need to understand about government bailouts. There should never be any such thing as a government bailout. GM and these other bailed-out companies made bad decisions that put them at a competitive disadvantage with respect to their competitors. The Obama administration bailed out these failing companies with money from other hard-working individuals and successful companies, including small businesses. The Obama administration did this for political gain with its favored special interest groups, e.g. – unionized labor, wall street bankers and GSE executives. Those are the groups that got Obama elected, and he paid them back with “bailouts”. Government has no right to get involved with bailing out their buddies with my money and your money.
I remember when people use to complain about profit margins of 8% in some big corporations when Bush was President. But at least they earned that money by selling things that people needed and freely chose to buy. They did operate on a government-backed expense account. Sometimes I wonder whether all of these problems are caused because we elect spoiled-brat, silver-spoon liberals who spent their entire lives getting into trouble and then begging their parents, (and grandparents, in Obama’s case), for bailout money. Maybe they are just making policy based on their experiences in making irresponsible choices and then being bailed out by their parents?
Moderate Republican Chuck Grassley, who supported Obama’s bailouts, wants to know how GM paid off their debts. He wrote a letter to Treasury Secretary Tim Geithner.
Excerpt:
General Motors (GM) yesterday announced that it repaid its TARP loans. I am concerned, however, that this announcement is not what it seems. In fact, it appears to be nothing more than an elaborate TARP money shuffle.
On Tuesday of this week, Mr. Neil Barofsky, the Special Inspector General for TARP, testified before the Senate Finance Committee. During his testimony Mr. Barofsky addressed GM’s recent debt repayment activity, and stated that the funds GM is using to repay its TARP debt are not coming from GM earnings.
Instead, GM seems to be using TARP funds from an escrow account at Treasury to make the debt repayments. The most recent quarterly report from the Office of the Special Inspector General for TARP says “The source of funds for these quarterly [debt] payments will be other TARP funds currently held in an escrow account.” See, Office of the Special Inspector General for TARP, Quarterly Report to Congress dated April 20, 2010, page 115.
Furthermore, Exhibit 99.1 of the Form 8K filed by GM with the SEC on November 16, 2009, seems to confirm that the source of funds for GM’s debt repayments was a multi-billion dollar escrow account at Treasury—not from earnings.
[…]In reality, it looks like GM merely used one source of TARP funds to repay another. The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment.
Ed summarizes:
In other words, this is just a shell game. As Jim Vicevich points out, it’s akin to paying off your Visa credit card with your Mastercard — and then bragging about your financial condition. Taxpayers are still on the hook for GM. Nothing at all has changed.
Instead, we have another good reason for government to refrain from bailing out private companies. It makes them act like government when it comes to transparency about their finances. This claim really does prove that GM now stands for Government Motors.
Michelle Malkin also has a good column here about MORE connections between Democrats and rich Wall Street investment bankers. The Democrats are tightly connected with large corporations and investment banks. As a small government conservative, I find this alarming and unsettling. I believe in separation of government and corporations.
To start with the obvious, even though Obama denies that he will manage the companies, we have all learned by now that he has no problem doing the very thing he is denying. (In ordinary life this political artfulness is called lying). He fired one CEO, forced Chrysler to accept Fiat (WSJ.com 6/5/09), told GM that it cannot move its headquarters out of Detroit (WSJ.com 6/3/09), and may have ordered that whoever buys GM’s European auto maker Opel must agree not to export cars to the U.S.. (WSJ.com 6/1/09) These decisions were made in secret with no Congressional oversight, by a man with no training or experience of any kind in business, never mind the auto business. The companies will be run by politicians, who will make decisions for the benefit of political agendas rather than on sound business principles. The result will be that the auto companies and the union will not make the deep changes required to make the companies profitable, so we can anticipate many more cash infusions.
Gary Jason writes about how Obama is intervening in the free market to screw creditors and take care of his union supporters with taxpayer bailouts.
I will argue that the unprecedented action by the current administration in manipulating the bankruptcies of Chrysler and GM, and in effect nationalizing the companies, is egregiously unethical by every one of these major ethical perspectives. For this reason, I believe that this action makes it morally imperative for Americans to boycott these socialized companies.
… the Obama administration spent tens of billions in taxpayers’ dollars to take control of the companies and force the outcome it wanted. Obama, who received millions in contributions from the United Auto Workers union, has forced a settlement that will give UAW far more equity in the companies when they come out of bankruptcy than it was due compared to the secured debt holders.[i] Obama’s agents used threats and intimidation (calling holdout bondholders speculators and hedge funds at one point) to get the creditors to accept being shafted. (WSJ.com 5/11/09)The result is that the vast majority of the two companies will be almost clearly owned by the federal government and the UAW, and the UAW arguably controls the federal government.
The result is drenched in irony. The UAW was a major reason why the companies hit the wall, and now the UAW will be rewarded with major control and ownership. It is as if a rape victim were forced to marry her rapist. The result makes the crony capitalism we saw in Russia look clean by comparison; it, at least, was a kind of capitalism.
And what are the long-term consequences?
…To start with the obvious, even though Obama denies that he will manage the companies, we have all learned by now that he has no problem doing the very thing he is denying. (In ordinary life this political artfulness is called lying). He fired one CEO, forced Chrysler to accept Fiat (WSJ.com 6/5/09), told GM that it cannot move its headquarters out of Detroit (WSJ.com 6/3/09), and may have ordered that whoever buys GM’s European auto maker Opel must agree not to export cars to the U.S.. (WSJ.com 6/1/09) These decisions were made in secret with no Congressional oversight, by a man with no training or experience of any kind in business, never mind the auto business.
The companies will be run by politicians, who will make decisions for the benefit of political agendas rather than on sound business principles. The result will be that the auto companies and the union will not make the deep changes required to make the companies profitable, so we can anticipate many more cash infusions.
Worse yet, we can foresee that now that the UAW and feds have control of Chrysler and GM, they won’t stop there. Their natural instinct will be to achieve monopolistic control. The UAW has helped drive Chrysler and GM to the wall and is now co-owner with the government of most of the equity. They will likely next target Ford, to get equity ownership of it. Then look for the UAW and the administration it controls to attempt to force the employees of foreign auto makers in this country to join the UAW, or use environmental and other regulatory laws to put those companies out of business.
Obama and the Democrats are willing to use threats and intimidation to ram through their socialist policies. Here is a long list of unconstitutional interventions. (H/T 4Simpsons) He does not care about laws and rights – he wants power over your liberty. He wants to control your life.
The Road to Serfdom
For those of you who did not know before, the greatest economics book of the 20th century was Nobel-prize winning economic F.A. Hayek’s “The Road to Serfdom“, which is analyzes the history of socialism and fascism in Nazi Germany and Russia. This book is #1 on Human Events’ Top 10 books every Republican should read.
Human Events writes:
Friedrich Hayek (1899-1992) was an Austrian economist awarded the Nobel Prize in 1974. He defended capitalism and individual liberty against collectivism. In “The Road to Serfdom,” he describes how government planning of the economy leads to tyranny. President Reagan cited Hayek as one of his favorite economists. “To decentralize power is to reduce the absolute amount of power, and the competitive system is the only system designed to minimize the power exercised by man over man,” wrote Hayek. “Who can seriously doubt that the power which a millionaire, who may be my employer, has over me is very much less than that which the smallest bureaucrat possesses who wields the coercive power of the state and on whose discretion it depends how I am allowed to live and work?”
When Michele Bachmann stands up on the floor of the House and advocates against government intervention in the free market, she is literally standing between the American people and mass-murdering, rights-trampling, faith-destroying communism.
And by the way, Obama means to do the exact same thing with the health care and energy sectors.
WINTERY KNIGHT 