Hawaii’s Democratic Senate President Colleen Hanabusa, who is running for Congress, says that federal bailouts aren’t as ineffective as some critics say.
In an interview with KITV, Tuesday morning, Hanabusa said: “Reports are coming back that we may not be losing the kind of money that the people are saying. We may actually come out on the positive of some of the bailouts that was done. General Motors, for example, paid up their debt five years early.” (Hanabusa’s comments begin at 4:00.)
Hanabusa, who is running against Republican Charles Djou to represent the state’s 1st congressional district was responding to a question about ideological differences between the two major political parties and offered the stimulus example.
But is it true that GM has repaid its bailout debt?
Hanabusa’s statement was likely based on an April 21 Wall Street Journal editorial penned by former GM CEO, Ed Whitacre. In the piece, Whitacre said, “Today, General Motors is announcing that it has made a payment of $5.8 billion to the U.S. Treasury and Export Development Canada. We’re paying back — in full, with interest, years ahead of schedule — loans made to help fund the new GM.”
Or, perhaps Hanabusa saw this nationally televised commercial (below), featuring Whitacre making the same claim.
The problem is that since April, it’s become clear that this “paying back – in full, with interest,” never actually happened. At least not in the way GM implied.
Here is what happened:
In the summer of 2009, the federal government loaned GM $49.5 billion through various avenues to help salvage the company from liquidation. Approximately $6.7 billion came in the form of a pure loan, with the government purchasing a 60.8 percent equity stake in the company. GM also received about $9.5 billion from the Canadian government.
Whitacre’s editorial indicated that it repaid the money it owed the federal government.
Not only did GM try to pass off paying 8.5 percent of its total government loan as a repayment in full, but it also used federal money to repay the feds.
The money did not come from company earnings — it came from $13.4 billion the government allotted GM as working capital in an escrow account established after the company filed for bankruptcy.
Essentially, GM used money given to it by the government to pay the government back and then claimed to have repaid its debt in full.
GM did fully disclose that the repayment money came from its government loans, but claimed that since the company no longer needed the money to keep itself afloat, it shouldn’t matter where it came from. Only that it was, in fact, paid back.
Sounds like funny logic.
Several news outlets reported on the misleading statement by GM including the Wall Street Journal, Forbes and Fox News. Also, MSNBC and Yahoo! News, while not specifically mentioning Whitacre’s claim, pointed out that actual payment of the bailout funds would take the company years.
In other words, GM did not pay back in full the loans given to it by the federal government, as Hanabusa said.
Further, Whitacre was replaced in September 2010 by Daniel Ackerson as GM’s new chief executive officer.
It appears the nickname “Government Motors” still aptly applies.
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