I wrote about GM's shenanigans where they claimed to have "paid back the taxpayers, in full, with interest, ahead of schedule" a few weeks ago. Then I saw the ad they were airing on TV - it's so brazenly wrong that it even made my wife gasp at the audacity. Take a look, and make sure you enjoy the multimedia extravaganza I've put together for you in this blog post (potentially NSFW language ahead):
Whoa whoa, GM - in the immortal words of The Wolf in Quentin Tarantino's Pulp Fiction: "Let's not start sucking each others dicks quite yet."
I am writing about this again today because the NY Times's Gretchen Mortgenson wrote an article about it today, with the tagline, "Fair Game: At GM, Repaying Taxpayers With Their Own Cash." Of course, that header immediately made me think of Teddy KGB in Rounders: "It's a fucking joke anyway, after all, I'm paying you with your money."
Amazingly, GM's CEO, Ed Whitacre didn't clarify, "your money: I'm still up $45Billion from the last time I stick it in you."
I was excited to see that Mortgenson was trying to explain the "TARP money shuffle" to her readers, but I think she missed the absurd simplicity of these accounting shenanigans. I want to make sure everyone understand this, so I'll try to simplify.
1) GM has a big pile of debts they can't pay back so:
2) The US Treasury gives them a huge loan: $52 billion
3) Now, GM has a) the same huge pile of debt it had before, along with b) a new pile of $52B in debt to the Treasury, and c) $52B in cash.... then:
4) GM declares bankruptcy, which massively reduces 3a, as preexisting debtholders restructure the debt they hold. It also massively reduces 3b, as the Treasury restructures the debt they hold - taking equity instead. In fact, it reduced the Treasury debt to $6.7B, which GM then paid back - using the cash it had - WHICH IT GOT FROM THE TREASURY!
Voila - the TARP shuffle.
At least we can feel good that GM is spending money bragging about it's "payback," while the American Taxpayer is still $45Billion in the hole on this transaction.