A Republican senator describes General Motors Co.'s act of repaying its $4.7 billion federal loan to be nothing other than a "money shuffle." An auditor's report was cited by Sen. Charles Grassley of Iowa, the senior Republican on the Finance Committee.
He said that GM repayments stem from U.S. Troubled Asset Relief Program funds in an escrow account, instead of coming from GM earnings.
The U.S. Treasury and GM contested certain aspects of the claim made by Sen. Grassley.
In a letter to Treasury Secretary Timothy Geithner, Sen. Grassley expressed doubts with regards to statements made by GM and the administration about how meaningful the repayments of the TARP loans are. Sen. Grassley added that "taxpayers are still on the hook."
He believes that the recovery of TARP funds depends completely on the government's prowess at selling GM stock in the future. GM was able to pay off the remaining $4.7 billion in U.S. loans and $1.1 billion in Canadian loans less than one year after it filed for bankruptcy.
Under the bailout, GM got $50 billion of US assistance, much of which was converted into stock. The U.S. Treasury Department holds 61 percent of GM's common stock.
GM is currently preparing for an initial public offering that would enable the U.S. government to lower its stake. Treasury revealed that GM repaid its loan from its own cash account that was included in the government's overall investment. [via autonews]