A leading Senate Republican has written to the Treasury Secretary asking him to justify claims that General Motors has repaid its TARP loans, saying it appears to be nothing more than an "elaborate TARP money shuffle."
America's largest automaker GM says it repaid the remaining $5.8 billion owed to the U.S. Treasury and Export Development Canada five years ahead of the maturity date, despite announcing a $4.3-billion loss for the six-months following its emergence from bankruptcy as a U.S. government controlled company.
Senator Chuck Grassley claims the repayment dollars haven't come from GM selling cars but, instead, from a TARP escrow account at the Treasury Department.
"It looks like the announcement is really just an elaborate TARP money shuffle," Grassley said.
Grassley said it’s a matter of the Treasury Department being straightforward with taxpayers about its management of the $700 billion taxpayer funded TARP program.
On Tuesday of this week, the Special Inspector General for TARP, Neil Barofsky testified before the Senate Finance Committee saying 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, he said.
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."
"Therefore, it is unclear how GM and the Administration could have accurately announced yesterday that GM repaid its TARP loans in any meaningful way. In reality, it looks like GM merely used one source of TARP funds to repay another.," Senator Grassley said.
"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," Senator Grassley said in his letter to the Treasury.
He said the bottom line seems to be that the TARP loans were "repaid" with other TARP funds in a Treasury escrow account.
"The TARP loans were not repaid from money GM is earning selling cars, as GM and When these criticisms were put to GM’s Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:
"Question: Are you just paying the government back with government money? Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d be able to pay this back."
"Mr. Girsky then said that GM originally planned to pay the loan over the next five years. So the question is why - other than a desire to justify excluding GM from the administration’s TARP tax proposal - would Treasury and GM reduce GM’s TARP debt with TARP equity and then mischaracterize it as a repayment from earnings? Accordingly, please explain:
"1) Your department’s justification for allowing GM to use funds from the TARP escrow account to repay TARP loans,
"2) The amount of funds remaining in the TARP escrow account at Treasury that may be released to GM, and
"3) The date that you anticipate that the remaining funds in escrow will be released to GM," the letter said.
(C) NewsRoom America 2010