In those scary days of 2009, when the world economy teetered on the precipice, about to tumble into depression, General Motors needed to be saved. And saved it was by a controversial section (or at least controversial interpretation) of the Troubled Asset Relief Program (TARP). Quickly the administration and Congress made nearly $50 billion of bailout funds (provided by you and me and our children and our yet-unborn) to save GM. It was the right decision to be sure, but let’s not forget it was taxpayer money that came to the rescue; money that was to be paid back with interest.
Fast forward to April 2010. GM triumphantly claimed that it had repaid its TARP loans ahead of schedule and with interest (well not exactly). It does not take a math wiz to question how GM could go from bankruptcy to paying back the $49.5 billion they had received in TARP funds in just a year. Senator Chuck Grassley of Iowa was quick to pick up on that; GM shuffled its TARP funds, converting a portion of its debt into stock and viola! Money (TARP money) was used to “pay back” the Treasury. (“Nice work down in accounting fellas”). In effect, taxpayers were just paid back with different TARP funds, not robust earnings. Taxpayers get devalued stock and GM gets to claim it paid back the loans “in full.” But it could have been worse, and tens of thousands of jobs were saved.
Now, to the present day. GM is eyeing a profit of $10 billion. Congratulations. As this phoenix rises from ashes, we will give GM the slow clap, hardly time for a standing ovation. TARP losses related to the auto industry are expected to exceed $30 billion. No bit of fancy accounting can dispute that reality. As GM’s profits rise, we must not forget it all started with taxpayers digging deep into their pockets to help. So no bragging just yet, but a nice thank you and more automotive plants in the US would be welcome.
Assisted by Setareh Ebrahimian