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General Motors Loan Repayment was a Shell Game

May 2, 2010 By Chuck

Just two weeks ago General Motors (GM) announced that they had reimbursed the government (taxpayers) by paying back the balance of the TARP $6.7 Billion loan. General Motors even went on the air with the following television commercial:

But is General Motors being completely honest? Not according to Senator Charles Grassley, Republican of Iowa and Neil Barofsky, inspector general for the TARP. Essentially all that General Motors did was to use ‘other’ taxpayer funds held by the Treasury to pay off its original loan. This makes the claims that General Motors has repaid their debt to the American tax payers a tricky shell game.

In a letter sent to Secretary Tim Geithner on April 22, 2010 Senator Grassley had this to say:

Dear Secretary Geithner:

General Motors (GM) yesterday announced that it repaid its TARP loans. I am
concerned, however, that this announcement is not what it seems. In fact, it appears to be nothing more than an elaborate TARP money shuffle.

On Tuesday of this week, Mr. Neil Barofsky, the Special Inspector General for
TARP, testified before the Senate Finance Committee. During his testimony Mr.
Barofsky addressed GM’s recent debt repayment activity, and stated that the funds GM is using to repay its TARP debt are not coming from GM earnings. Instead, GM seems to be using TARP funds from an escrow account at Treasury to make the debt repayments.

The most recent quarterly report from the Office of the Special Inspector General for TARP says “The source of funds for these quarterly [debt] payments will be other TARP funds currently held in an escrow account.” See, Office of the Special Inspector General for TARP, Quarterly Report to Congress dated April 20, 2010, page 115.

Furthermore, Exhibit 99.1 of the Form 8K filed by GM with the SEC on
November 16, 2009, seems to confirm that the source of funds for GM’s debt repayments was a multi-billion dollar escrow account at Treasury—not from earnings […]

[…] Therefore, it is unclear how GM and the Administration could have accurately announced yesterday that GM repaid its TARP loans in any meaningful way. In reality, it looks like GM merely used one source of TARP funds to repay another. The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government’s ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment.[…] (Senate documents)

Furthermore, the Congressional Budget Office maintains their estimates that the American taxpayers in the end will lose approximately $30 Billion of the total General Motors bailout funds.

So did General Motors pay back the taxpayers? No, they just moved funds from one accountshell-game to another. General Motors, and the U.S. Treasury Department, have simply pulled a fast one on the American taxpayer with what appears to be nothing more than an old fashioned shell game.

Filed Under: Government, Market Updates Tagged With: , , , ,

GDP Comes in at 5.7% and the Market Is Not Impressed

January 29, 2010 By Chuck

GDP comes in hot at a whopping 5.7% and the market was not impressed. And why should it be, a significant part of the GDP was nothing more than a huge inventory gain. It is my view that this GDP print is a ‘one hit wonder’. The stimulus money from the Government played a big role in goosing production which leads me to think of the old saying “hurry up and wait”, in this case a wait (and hope) that the gains in inventory are matched with future gains in sales which I still foresee as tepid for a considerable time to come.

Speaking of production, a report this afternoon off the wires is that General Motors is increasing production of large vehicles (SUV’s and trucks) and is reducing production of smaller fuel efficient cars. I guess General Motors has still not learned the lesson that drove them into bankruptcy in the first place.

A lot of bearish indications on the charts, which I will cover in detail in the weekend video. One particular chart that shows extensive damage is the Nasdaq.

Nasdaq 100 Chart

More later…

Filed Under: Market Updates Tagged With: , ,

Another Bailout – GMAC To Get More Money

December 30, 2009 By Chuck

Again I ask whatever happened to President Obama’s statement four months ago that there would be no more bailouts?

Here we go again…

[...]GMAC Financial Services is close to getting approximately $3.5 billion in additional aid from the U.S. government, on top of $12.5 billion already received since December 2008, according to people familiar with the situation.

The announcement, expected within days, will coincide with GMAC taking additional steps to absorb losses related to its mortgage operations, these people said. The cleanup is designed to return the Detroit-based finance company to profitability in the first quarter of 2010, according to one of these people.

A GMAC spokeswoman declined to comment on any potential government action but said, “GMAC has been conducting a strategic review of its business and evaluating options to address the challenges in its mortgage operation.” The spokeswoman said GMAC wants to prepare itself to repay the U.S. government.[...]

GMAC says they want to prepare itself to repay the U.S. Government. Is taking more tax payer funds a necessary step before repaying the Government? I don’t know what kind of math GMAC is using to come up with an idiotic statement like that, but if it is the same math they use to balance the books at their retail bank (Ally Bank) then I would run as fast as I could away from that one.

[...]The mortgage-related write-downs to be announced as early as this week will affect assets held by ResCap and Ally Bank, GMAC’s online bank. Ally Bank was created after the company received approval in late 2008 to convert to a bank holding company and qualify for government money under TARP. The arrangement left the Federal Reserve with regulatory authority over the parent.[...]

From the Ally Bank web site:

Who we are

We are Ally Bank, built on the foundation of GMAC Financial Services. And with that experience we’ve learned that these times demand change and a new way of doing business. So we’re taking banking in a new direction.

That means talking straight, doing right and being obviously better for our customers.

You may be asking…

Is my money safe with Ally?

Yes it is. We’re one of the best capitalized banks in the country. And all Ally accounts are covered by the FDIC up to $250,000 per depositor. (emphasis added)

They are capitalized so well that they need another infusion of tax payer funds. I’m sorry, but I have to say to GMAC and Ally Bank that you are just one more example of what is wrong with the entire system.

To the Government I say: please let GMAC die already, enough is enough.

From the ‘Move Your Money‘  campaign we have the following video – - -

More on this topic (What's this?)
Gerald Celente: US oligopoly is a big lie (Investment Postcards from Cape Town, 8/10/10)
GMAC has been nationalized (naked capitalism, 10/29/09)
GMAC Joins the Black Hole Club (naked capitalism, 10/27/09)
Read more on General Motors, 2008 Financial Crisis at Wikinvest
Filed Under: Market Updates Tagged With: , , ,

Tax Payers Lose Again – General Motors & Chrysler

December 8, 2009 By Chuck

Remember the nearly $85 billion of “YOUR” money that was given to General Motors and Chrysler to rescue them from themselves? Yea, that $85 billion. Tax payers awoke one morning and discovered that they owned two car companies that unfortunately has since the mid 1980′s produced poorly designed and manufactured vehicles. It did not matter if you wanted to be part owner of a car company, but you are. And you are also taking a loss on “YOUR” investment.

Washington — The Obama administration will tell Congress Wednesday that it expects to lose about $30 billion of the $82 billion government bailout of the auto industry, two administration officials familiar with the report said today.

The estimate — the first public accounting of losses connected to the rescue of General Motors and Chrysler — is in line with what the Government Accountability Office, the Troubled Asset Relief Congressional Oversight Panel and former auto czar Steve Rattner have suggested. (Source: Detroit News)

While $30 Billion is slightly less than a previous estimate, it is still a loss of 37% of your money and you didn’t even ask to be invested in it to begin with.

More on this topic (What's this?)
GMAC Joins the Black Hole Club (naked capitalism, 10/27/09)
GMAC has been nationalized (naked capitalism, 10/29/09)
Super-sized 'McMansions' Meet Reality (Wealth Daily, 8/19/10)
Read more on General Motors, Chrysler at Wikinvest
Filed Under: Market Updates Tagged With: , ,

Need Your GM Car Fixed?

July 9, 2009 By Chuck

img044 1024x792 Need Your GM Car Fixed?

Filed Under: Market Updates Tagged With: ,

GMGMQ – General Motors Investors In Danger

July 1, 2009 By Chuck

The former GM stock symbol became GMGMQ and was moved to the ‘pink sheets’ upon their bankruptcy filing. It amazes me that there are still people buying this shell of a stock thinking they are going to ‘make a killing’. It is a shame that there are many people out there in the world who are being misled by ‘stock pumpers’ that appear all over the Internet.

Some people even think the Government will rescue the common shareholders and give them something.

Folks, this is all nonsense, if you are currently holding ‘long’ positions in the bankrupt stock symbol GMGMQ.PK then you are at risk of losing every dollar without any advance notice. General Motors themselves have issued statements to people buying shares of the bankrupt stock, trying to warn them that their money is in danger:

GM management has noticed the continuing high trading volume in GM’s common stock at prices in excess of $1. GM management continues to remind investors of its strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios.

gmgmq stock chartThis is the second time that GM management has alerted the investor community that the common stock will have no value when the judge puts the gavel down and declares the process completed. Yet people continue to buy up shares thinking they will still make a fortune. And the advice they are getting from stock trading message boards is utterly ridiculous and sad.

This afternoon when GM announced its second warning to common share holders the stock dropped very quickly, but only moments later the fools were back in there buying it right back up.

One only has to look at the type of crap that is on the Internet to see why so many people lose so much of their money. How sad and pathetic that some people actually ‘beleive’ this stuff:

(disclosure: NO position whatsoever in GMGMQ, bonds, or other GM related holdings)

(click image for larger view)

gmgmq crap

Filed Under: Market Updates Tagged With: ,

General Motors TV Commercial Spoof

June 13, 2009 By Chuck

A Saturday morning laugh…

Filed Under: Market Updates Tagged With:

General Motors Advertising Campaign

June 1, 2009 By Chuck

GM has not been in bankruptcy for one full day yet and already the company is hitting the media with it’s ‘feel good about us’ ads.

At least they did not do what Chrysler did last year (yet). Remember the huge ‘Thank You America’ poster that ran in all major newspapers around the country thanking the American people for the ‘bailout’. See it HERE

Filed Under: Market Updates Tagged With:
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