Topic: GM Starts To Re-pay Its Debt to Governments

[Trainman]

Some good news from GM here, they are actually following through on their promise to re-pay the loans they got.  But they still have a way to go:

http://www.cbc.ca/money/story/2009/12/18/gm-first-repayments-of-government-loans.html

GM pays back first of government loans
Last Updated: Friday, December 18, 2009 | 5:02 PM ET
CBC News

General Motors Co. made the first repayment on its loans from the U.S. and Canadian governments on Friday.

The automaker sent $1 billion US to the U.S. Treasury and $192 million to Canada. The company plans to repay both governments in full by the end of June.

However, Ed Whitacre Jr., the chairman and acting CEO, said in a statement that this would depend on there being no further downturns in the economy.

GM owes the U.S. government $52 billion, with $6.7 billion of that in loans. The company owes $1.4 billion to the Canadian and Ontario governments. The U.S. government took about 61 per cent of GM shares when it bailed out the automaker.

Whitacre on Tuesday committed to repaying the loans by the end of June. His predecessor as CEO, Fritz Henderson, announced plans in November to start making eight quarterly payments in December.

GM posted a $1.2-billion loss for the third quarter but said it was generating cash and it felt comfortable committing to the repayment.

[Roddy]

Extremely misleading as GM is only repaying a portion of the total amount of cash given to them by the government.

[Leviathan]

You'd prefer that they didn't repay anything?

[tpl]

I'd prefer that they had never been lent any money.

But I do believe that GM is planning to pay back all the loans to both govs... whether the govs will ever get the other money back from their investment in the companies is another matter entirely.

[Leviathan]

Summed up nicely - couldn't agree more.

[toolatecrew]

[quote]"You're going out of one pocket into the other to repay the debt. It's definitely a PR move," said Brad Coulter, an auto industry turnaround expert with O'Keefe & Associates in Bloomfield Hills, Mich. "We're only a couple of months removed from the bankruptcy. They're going to have to continue to announce positive or at least neutral news to convince the consumer that it's OK to buy the product and convince the investment community and the capital markets that it's OK to reinvest in the supply base that supports them."

GM's total debt at the end of the third quarter stood at US$17-billion. That included US$6.7-billion in loans to the U.S. Treasury, US$1.4-billion in loans from the federal and Ontario governments, and US$1.3-billion in loans to the German state.

The U.S. and Canadian loans, totalling US$8.1-billion, are tucked away in an escrow account that GM has not tapped. GM said it will use that fund to make the repayments, meaning it is simply paying the governments back with their own money.
[/quote]
http://www.financialpost.com/story.html?id=2227951

Smoke and mirrors people. Basically they got "two loans" they are using one loan to make it appear they are paying back the other.

[ovr50]

Does the phrase "Ponzi Scheme" ring any bells....!!..

[articsteve]

"LOAN"    

GM has received $52 billion total in aid from the government as it navigated bankruptcy protection earlier this year. Of that total, $45.3-billion was converted into equity, giving the government a 61-per-cent stake in the auto maker.

What a great way to trick the ill informed that comprises most taxpayers; trade worthless stock for 45 BILLION dollars so it can't be called a "loan".  Then make endless feel good statements regarding product development and "loan" repayments so you can trick other ppl into buying another round of worthless stock when you launch an IPO.  This of course is only after you've stiffed previous stock holders the year before for 50 Billion or so in a thing called bankruptcy. 

OK, does it get better.  Oh ya!   


GMAC and TARP

A government program created for the establishment and management of a Treasury fund, in an attempt to curb the ongoing financial crisis of 2007-2008. The TARP gives the U.S. Treasury purchasing power of $700 billion to buy up mortgage backed securities (MBS) from institutions across the country, in an attempt to create liquidity and un-seize the money markets.

To get a piece of this action some very smart ppl, probably nobody at GM though, decided to turn GMAC into a bank.  Even though GMAC did not meet the criteria, they were granted banking status by the Bush Administration.

Last week the Treasury Department bought a $5 billion stake in GMAC as part of a plan to transform the lender, formerly the financial arm of General Motors, into a bank holding company. The New York Times reported that GMAC wanted to become a bank mainly so it could be considered a "financial institution" and thereby qualify for money from the $700 billion Troubled Asset Relief Program (TARP).

Fast forward to Nov. 09/09

Nov 09, 2009 – The Federal Reserve said nine of 10 bank holding companies deemed short of capital in May have raised their reserves enough to withstand the risk of higher unemployment and slower economic growth.

“The one exception, GMAC, is expected to meet its remaining buffer need by accessing the TARP Automotive Industry Financing Program, and is in discussions with the U.S. Treasury on the structure of its investment,” the Fed Board said today in a press release.

http://www.prlog.org/10407363-fed-says-gmac-short-on-capital-deadline.html+gmac+and+tarpand+gartner&cd=2&hl=en&ct=clnk



In a move that many viewed as inevitable, Treasury Secretary Timothy Geithner announced that GMAC will receive further federal funding through TARP. Geithner said that GMAC will likely get an amount slightly lower than the $5.6 billion that was first considered by the Fed.

GMAC, the loan arm for both General Motors and Chrysler, has already received $13.4 billion in government capital, but is now asking the Federal Reserve to provide as much as $5.6 billion in additional aid in exchange for equity and stock.

The U.S. government currently owns a 35.4 percent share of GMAC as a result of previous exchanges of TARP funding for GMAC stock.

The Troubled Asset Relief Program, or TARP, was created last year to provide emergency funding for institutions believed to be “too big to fail,” and crucial for the national economy. In order for institutions to apply for TARP funding they needed to prove to the Fed that they could raise enough outside capital to be able to survive a possible second downturn in the economy.

Geithner said, “If you do not raise capital from the private markets, if you are unable to, we will put capital into you because it is important to the stability of the system.”

Unlike other TARP recipients, GMAC was unable to pass the “stress tests.”

Former SEC commissioner and current panelist for the Congressional Oversight Panel, Paul Atkins, said, “TARP was an emergency fund that was set aside to rescue firms in distress last year. Clearly, if GMAC failed, it would not bring down the financial system. Instead, this is a way for taxpayers to subsidize people buying cars.”

The exact amount of additional aid GMAC will request from the Federal Reserve has not yet been disclosed.

http://www.leftlanenews.com/gmac-set-to-receive-more-federal-aid.html+more+tarp+for+gmac&cd=3&hl=en&ct=clnk


Summary

Like OVR says; a Phonzi scheme, but a GIANT ONE.  GM announces to the market that it is paying back all their "loans" in full .  Meanwhile, TARP is, at the same time, giving GMAC another 5 Billion so GM dealers and GM customers can buy vehicles from the new GM.

Is that slick or what.

[Leviathan]

You really need a different hobby 

[tpl]

Artic just detailed what I said.  The 'Investment' is gone for ever. The 'Loans' will get repaid.   I wouldn't call it a Ponzi scheme...quite  but maybe it does fall into the definition.

"A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going."

[safristi]

   "PONZIAC" scheme then...........................

[TopGun]

Interesting that as of the time of this post, this thread received about 60% FEWER responses and page views than the GM "chrome" thread.

[Trainman]

Interesting that as of the time of this post, this thread received about 60% FEWER responses and page views than the GM "chrome" thread.

"Chrome" is way more sexy than numbers.

It's good PR for GM, this "repaying" of the loans.

[TopGun]

It's good PR for GM, this "repaying" of the loans.

"Why" "do" "you" "put" "the" "repaying" "in" "quotes"? 

[toolatecrew]

I guess a headline of GM returns unused portion bankruptcy escrow fund while truthful just isn't very sexy?

[Roddy]

It's good PR for GM, this "repaying" of the loans.

"Why" "do" "you" "put" "the" "repaying" "in" "quotes"? 

I would imagine because he has the fact that GM is making the initial instalments of the repayment, with money from the loan its self AND due to the fact that they aren't required (nor do they have any intention of), repaying a good portion of the money that was given to them earlier this year and in late 2008.