General Motors CEO Ed Whitacre is all over the airwaves with the company’s new ad touting the fact that it paid back all of its government loan early and with interest. One problem: The loan was only a small part of the total taxpayer money dumped into the struggling car company.
PolitiFact details the problem with Whitacre’s characterization of his company’s status with taxpayers:
It’s true that GM has squared up on its government loans, but Whitacre isn’t telling the full story here.
With GM in deep trouble and hundreds of thousands of jobs in the balance, the Obama administration — through the Troubled Asset Relief Program (TARP) — stepped forward with tens of billions of dollars worth of assistance. As of March 31, 2010, the U.S. Treasury had committed approximately $52.4 billion to GM.
Only a fraction of that, $6.7 billion, was in the form of loans, however. Most of the government’s GM investment was converted to an ownership stake in the New GM, the company that emerged from bankruptcy: $2.1 billion in preferred stock; and 60.8 percent of the company’s common equity.
In short, the government still owns a very large portion of GM stock. This means that if the company does not perform well, taxpayers [picapp align=”left” wrap=”true” link=”term=ed+whitacre&iid=7655541″ src=”3/d/f/7/GM_Chairman_And_8822.jpg?adImageId=12673996&imageId=7655541″ width=”111″ height=”146″ /] aren’t going to get their money back.
The troubling fact that the federal government already has sway over the company through its stock holdings is bad enough. The government’s “investment” in this company and others has allowed it to dubiously direct large portions of our supposed “free market” economy.
But, the government not getting the money back may be worse. Taxpayers all now have an incentive in seeing one car company succeed, to the possible detriment of other car companies, like Ford, that never took a taxpayer bailout. So much for letting the “best car win.”
* The preceding was originally posted on the Young Americans for Liberty blog.