GM – Does the US Govt. still “OWN” them? GM’s Phony Bailout Payback

Apparently, there are folks out there that believe the US Govt. is totally out of the GM ownership thing………  wonder where that came from?  Doing just some rudimentary research using Wikipedia (Obviously as a reference point to further research) and the power of Google, I was able to find with relative ease that, in fact, the US Govt still does own a sizable portion of GM.

Back in Dec. 2009, barely a year ago, the US Govt. owned roughly 70%, and since then, it is down to around 34% ownership.  So where are people seeing/reading that the US Govt is out of the picture at GM?  I think it comes from a misunderstanding of what happened since the Govt. takeover at GM.

So what happened?  First the US Govt. stepped in with ~$50 billion, then Canada also offered ~$10 billion, at which point the US Govt  decided that $50 billion was kind of a high loan amount, so it pared it down to just under $7 billion and used the vast bulk of the remainder bailout money to transfer to GM through the purchase of 60.8 percent equity stake in the company—arguably an even worse deal for taxpayers than the loan, given that the equity position requires them to bear the risk of the investment without any guaranteed return.  (The Canadian government likewise gave GM $1.4 billion as a pure loan, and another $8.1 billion for an 11.7 percent equity stake. The U.S. and Canadian government together own 72.5 percent of the company.)  Link: http://reason.com/archives/2010/04/27/gms-phony-bailout-payback

So there actually WAS roughly $50 billion dumped into GM by our govt; it was the loan  payback that the popular news agencies seem to focus their reports on, and actually the GM CEO boldly announced  that GM had repaid the Govt FULLY (And oh joy – 5 years ahead of schedule), he was only speaking of the $7 billion LOAN and NOT the equity shares in GM the US Govt still owns, so no “Full” payback has occurred at all.

(More from the Reason.com article)  But wait! Even that’s not the full story given that GM, which has not yet broken even, much less turned a profit, can’t pay even this puny amount from its own earnings.

So how is it paying it?

As it turns out, the Obama administration put $13.4 billion of the aid money as “working capital” in an escrow account when the company was in bankruptcy. The company is using this escrow money—government money—to pay back the government loan.

So let me get this straight, GM is repaying its Govt. loans with $$ in an escrow account that was funded by the US Govt?  WTF-Over?

(More from the Reason.com article) In short, GM is using government money to pay back government money to get more government money. And at a 2 percent lower interest rate at that.  This is a nifty scheme to refinance GM’s government debt—not pay it back!

So what about paying back the REST of the $50 billion (The equity shares)?  Will GM “accellerate” that payback?  Um…. no, in fact, GM, along with the US Govt has indefinitely “postponed” the rest of the payback until at some unknown time in the future when both GM and US Govt are ready……….. huh?

This story doesn’t even touch the landmark sweetheart deal the UAW got from the bankruptcy court – a deal that already has the UAW bosses swimming in $$ from the sale of the “NEW” GM shares; a deal never seen before in US history where union interests had more say than the actual American investors……..  And people wonder why the backlash of Nov. 2010 and will continue through 2012 at least.

2011 – A New Beginning

Wow! So much has happened this year and it’s not even over yet!

Instead of waiting for it to end though, thought I might go over a few of the more interesting aspects of it all……

So I lived long enough (again) to get another year older and hopefully wiser in my ways

2010 seems to be the year of increased political angst; we had overzealous socialist democrats promising utopian paradise for all (eventually), but looks like reality got in the way of that (THANKFULLY)

I’ve been reading again more this year (A good thing) and went back to some “old school” stuff I almost forgot existed which has in turn motivated me to read even more and to finally understand

Sports/schmortz……… same old-sameoldsame………. nothing new this year other than the higher levels of the organizations paying lip service to the public about every social cause  in an attempt to gin up more ticket sales, or possibly PayPer View……For the first time in my life, I am SERIOUSLY considering dropping cable TV, but at this point, it would be only for me, as the wife/daughter still watch; I get everything I need from radio & Internet now

Finally upgraded cell phone after probably 10+ years of cursing them; now have Droid-X and loving it. There is a semi-evil thought in my mind to cancel Internet too and just get everything on the phone……… but wouldn’t work at this stage

I have found a new challenge that inspires me; Philosophy – particularly Aristotelian philosophy and Objectivism (I’m a huge Ayn Rand reader/fan from the 90′s) In fact, I will probably link to a few recommended (By me) books by Rand and similar writers in future blog posts

Technology: Well, IPv4 did NOT kill the Internet yet (Nor did DNS…..lol) and although I still maintain a great desire to excel and rise in the IT world, my current life/job situation is not exactly where I want to be at 44 years old (But having a job at this point in time is not a terrible thing either)

Which brings me to the state of our economy; wow….. seriously?? Government takes roughly $900 BILLION (Yeah, the one with the B) for the initial “stimulus” injection, which ended up pretty much doing the opposite for the country; bailing out institutions as they saw fit, and then something I NEVER saw in my lifetime of following politics: The democrat led House of Reps illegally (In my mind of understanding of how legislation works through Congress) does a “deem/pass” of the Senate version of obamacare so they can get it in before going on a break……… and some people have been scratching their heads as to WHY the Republicans (Let’s cut to the chase – it was the TEA PARTY) had such incredible landslide victories about a week ago.

Next week begins the “LameDuck” session of Congress; this practice or whatever they call it should be rescinded permanently and as soon as possible!  All the lameduck sessions do is give the outgoing (And in many ways relevant to this election cycle) congress a last chance to implement things they either couldn’t or wouldn’t do during a normal session – and leave it for the new incoming members to sort through the wreckage …. NO THANKS!

The state I live in (NC) has seen its democrat controlled General Assembly switch to Republican control (BOTH HOUSES) for the first time since 1898….. NOT 1998, 1898
Now THAT is hope/change I like and can look forward to.  My understanding is that over 20 State legislatures have both houses controlled by Republicans – that’s huge!  And don’t get me started on the Governorships

I am still going to post about technology related things; however, technology at this point in time is not generating the interest that US and world events are right now as related to political upheaval and real hope and change.