As we inch closer to a clearer understanding of the products and practices that unleashed the credit crisis of 2008, it’s becoming apparent that those seeking the whole truth are still outnumbered by those aiming to obscure it. This is the case not only on Wall Street but also in Washington.
Truth seekers the nation over, therefore, are indebted to Senator Charles E. Grassley, Republican of Iowa, who in recent days uncovered what he called a government-enabled “TARP money shuffle.” It relates to General Motors, which on April 21 paid the balance of its $6.7 billion loan under the Troubled Asset Relief Program.
“So it’s good news in that they’re reducing their debt,” Mr. Barofsky said of G.M. But he went on to note that G.M. was using other taxpayer money to make the loan repayment, according to the transcript of his testimony.
So what GM really did was pay off one taxpayer debt with another. Which is no different from your friendly neighborhood debt-tard that transfers his balance from one card to another ad-infinitum (is that even still possible for mere ‘persons? anymore?’ I haven’t seen a credit card offer in the mailbox in ages).
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.
It’s the corporate version of opening a HELOC. Crikey, they’re making monkeys out of us.
The original debt is still there ladies and gentlemen.
“Much of it will never be repaid,” Mr. Grassley added. “The Congressional Budget Office estimates that taxpayers will lose around $30 billion on G.M.”
Nothing to see here folks, move along, move along…
Of course, there is much joy in Mudville when a recipient of government aid repays its obligations. And it is also natural that the administration is keenly interested in reassuring taxpayers that losses on their bailout billions will be smaller than expected. Still, employing spin and selective disclosure is no way to raise taxpayers’ trust in our nation’s leadership.
[ NYT ]
“The problems that exist in the world today cannot be solved by the level of thinking that created them.” Albert Eninstein