In April, GM bragged about having paid back the balance of its $6.7 billion loan under the Troubled Asset Relief Program. Quotes below are from a New York Times article:
“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.”
And the White House piled on:
“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.”
The truth is, thanks to Senator Grassley, that GM did not repay the TARP with money from its pocket but from taxpayers pockets. The repayment had nothing at all to do with the health of the business.
“Mr. Grassley heard back from the Treasury last Tuesday. Herbert M. Allison Jr., assistant secretary for financial stability, confirmed that the money G.M. used to repay its bailout loan had come from a taxpayer-financed escrow account held for the automaker at the Treasury.”
The moral of the story is: always check your facts, corporate executives all too often say whatever they think they need to say to continue to get paid. All too often, they do not have investors best interests in mind.