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GM to start repaying government loan -- sort of

General Motors -- the former Detroit giant that you, the taxpayer, now own 61 percent of -- said it will start repaying government loans to the tune of $6.7 billion.

Wow. That's a great headline, right? GM's ready to start paying back the bailout money you lent the automaker. (Did you get a vote on that bailout, by the way? I can't seem to remember . . . oh, that's right. You didn't.)

Dig a little deeper into the headline, though, and you won't be so impressed.

GM actually said it is going to start giving back $6.7 billion the government placed in an escrow account for the automaker as a contingency, in case things got worse.

That's part of the $52 billion the government has plowed into GM, which went through a government-backed bankruptcy earlier this year.

Well, things didn't get worse -- so GM said it could start "repaying" the $6.7 billion contingency fund with a $1.2 billion "payment" in December, and add additional "payments" until the total amount is "paid off" over the next eight quarters.

Sorry for all the ironic "quote marks," but I think you get the point I'm trying to make. Don't misinterpret the $6.7 billion give-back to the government as a sign that GM -- which you own -- is back on its feet. What it means is that GM didn't sink as low as it thought it might and the government feared it would, and that's cold comfort at best.

-- Frank Ahrens
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By Frank Ahrens  |  November 16, 2009; 11:01 AM ET
Categories:  The Ticker  | Tags: GM, General Motors, bailout  
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Comments

Well, given the REAL story - why the bogus headline?!?

Posted by: Heerman532 | November 16, 2009 12:11 PM | Report abuse

Oh and the 2 trillion dollars of worthless pieces of papers in bank vaults are never mentioned.

No bank reform with a return to Glass Steagall and every thing is okay with the large banks being insolvent with simply worthless pieces of paper as a backstop for the trillions of dollars of deposit.

Do nothing and we must protect the high bonuses and allow the banks to continue as investment bankers to buy up more pieces of paper that will be worthless but generates those high bonuses.

The government is in the red for all the trillions of deposits but it is a major problem that GM is struggling.

Oh and by the way the great banks with their large bonuses are still not lending and they never will until they are forced out of investment banking and back in the business of making loans.

Posted by: bsallamack | November 16, 2009 12:17 PM | Report abuse

Frank, actually I don't get the point you are trying to make. Are you trying to say that it is a bad thing that 'GM did not sink as low' and that you are upset about it? And also using your logic above, then the government only gave $45.3 billion not $52 billion. Do you want to make that correction in your future posts?

Posted by: sucker_taxpayer | November 16, 2009 12:58 PM | Report abuse

@sucker_taxpayer

Frank's point is that the GM announcement is misleading. It leads one to think that GM is making enough money that it can start repaying its loans - meaning an actual cash transfer from GM back to the government. Instead what it's doing is a paper transaction - reducing an available line of credit. And not even reducing it right away, but over 2 years.

That's like me telling my credit card company that deciding not to use my available credit is the same as paying my credit card bill.

Posted by: eurydice9276 | November 17, 2009 9:59 AM | Report abuse

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