GM Repays Loans...With Borrowed Money

The question of the day seems to be, did GM really repay its loan? Sure, GM's been putting out a LOT of commercial airtime these days suggesting that they did exactly that, but the real deal--according to Senator Charles Grasslee in a piece he wrote for Fox News--is not really as clear-cut as GM suggests.

GM's initial word, that they've been hawking relentlessly over the air, is that they repaid "the taxpayers in full, with interest, ahead of schedule, because more customers are buying (GM) vehicles". But, and this is where things start to get a little trippy--based on Neil Barofsky's testimony before the Senate Finance Committee, GM did repay the loans, but not with earnings. Rather, they repaid the loans with OTHER LOANS, provided at taxpayer expense.

So what does this mean? Well, it basically means that GM's not technically lying but they're being spectacularly disingenuous. They DID pay off that loan, ahead of schedule, and in full. Just like they said. But it's the HOW they did it that should leave everybody thoroughly nonplussed. Barofsky's report details that the source of funds for GM's TARP debt repayments was in fact a "TARP-funded escrow account at Treasury".
Basically, they paid off their mortgage with credit cards and burned the mortgage note at a big barbecue.

So what will this do? Chances are pretty good that this will restore the average person's faith in GM because the average person has not the time nor the training to go digging around in massive SEC filings where all the footnotes and curlicues explain the situation in super-tiny font that a Dilbert strip once named "Enron Beelzebub". But is this a long-term solution for GM? Chances are, no, so they'll likely be needing cash again before too much longer.