GM pays back US & Canadian loans way early

[mhood]

Originally Posted by Supermans

I think not.

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[Hylton]

Originally Posted by Cmicasa the Great XvX

U don't seem to be the one understanding. THE TARP FUNDS WERE PART OF THE MONEY OWED. THEY WERE GIVEN BACK. It's no different than when the banks gave back their funds. All this talk is nothing more than rhetoric for haters of the Obama Administration and AMERICAN Industry.

and of course there are also the Ford Fans here....

Escrow funds are never owed unless drawn on. I'm actually going through an escrow process right now. I have a substantial amount of money set aside for me in case I need it. However, unless I draw on it, I don't owe that money. I don't even pay interest on it.

As soon as I draw from that reserve, my debt increases by the same amount and the interest against it kicks in. That's what happened here to pay off the debt which all the GM advertising is talking about- one hand got in debt so the other hand can get out of debt.

Bottom line is that the whole story is not being told to the American and Canadian taxpayers. It does look as if this whole thing was done just to put this whole "we're debt free" message out and if so, that's wrong IMO.

[The_Blur]

Originally Posted by Unfair

That doesn't even have to do with what I said I will just quote instead of trying to explain it myself...this is not a "I didn't use all of the loan case" this is a "I used other peoples money to pay you and still owe the same amount to those people case"

"The bottom line seems to be that the TARP loans were 'repaid' with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the administration have claimed in their speeches, press releases and television commercials,"

A lot of people are missing the point. GM isn't reaching into government funds to pay government funds anymore. GM is reaching into funds in its own bank to pay the government. This money has already been transferred from the US Treasury to GM. GM has full control of how to use that money. Since GM is doing well enough to leave that money alone, it makes no sense to wait to pay it back.

This is no different than paying off a car loan early using money from home equity or another loan that comes from the same bank. You have the money in your account given to you from the bank. There is no reason to hold off on using it to pay the loan.

GM took this one step further. GM has paid the interest, too. While we like to pay loans off early to avoid the interest, GM has paid back the interest as if it had paid on time but has chosen to make that payment 5 years early. If you did this, your bank would be incredibly happy with you.

The taxpayers are the US government's bank. Somehow, some taxpayers are not happy with receiving more money in interest than the actual payoff of the loan. It simply doesn't make sense. The government has received the money early in full with interest. The only explanation is that the taxpayers are not as educated about finances as bankers, and that lack of education shows in these complaints.

Furthermore, GM has never claimed to pay the full bailout. GM has only claimed to have paid the full loan. The elected US government has decided to make the GM bailout a 2-part financial investment. In the first part is a loan. GM has completely paid this amount as of Tuesday night. The second part of this bailout is an investment in the company. Before I get into this part of the bailout, I will point out that the Treasury is made up or experts and financial leaders who know what they are doing. Unlike some nearly functionless departments and bureaus of the government, the Treasury has high standards of excellence and does things in the most methodical way possible. Everything has a purpose, and that purpose is to make the most of revenue. What this department has decided to do is consider whether stock or interest is going to bring back more money for the government. Think of it like comparing the interest rate on your savings account to investing in the stock market. There's a much bigger return on a successful—must be successful—stock than there is in your savings account.

Unlike all of us on Camaro5 who think we know how to run a gargantuan business, the US government has some experience by administering the largest infrastructure in the world. With this experience, the US government has taken its substantial investment and turned that into a majority stake in GM. This means that the government can do whatever it wants to make GM successful. So far, despite complaints to the contrary, this has not led to any changes to GM's product line. Why is this the case? That's a great question to pose. Perhaps the answer is that GM already had an amazing product line that the government and perhaps the rest of the industry saw as profitable. Remember, this department of the government is made up of business leaders and accountants, experts in the field of finance and business. Because GM already had the product to be profitable, all the government wanted to do is reorganize the business to be sleek and profitable and get out with more money. That sounds easy enough. How will it happen? This is also a great question. The experts in our government have decided that going public will give the government and GM alike tons of money. With this product line and stocks sold at a discount, people will leap on the opportunity to buy stock, causing a high demand for the stock. High demand will cause the stock price to spike, leading to a high return on the stock that the government sells.

Here's how it works. The first shares will sell at a discount. Buyers will come out in flocks to buy this cheap stock. Speculators will bet that the stock price rises. The market will of course agree because GM is in better shape than it was 2 years ago as far as finances and new products. The following shares will have an increasing price due to the high demand. As these stocks run out, the government will slowly sell off its stock at the highest available price buyers are willing to pay.

How does this profit the government? A loan will have an interest rate. The interest rate is set. The price of stocks is not set. A loan has limitations that a stock does not have. The difference is in the risk. A stock is risky only because it might not sell, thus failing to bring in the dough. For the government, however, stock is a lot less risky because the government is in charge. By being in charge, the government can make decisions that keep GM profitable, including decisions to reorganize the company. For the rest of us, stocks are much more risky because we buy them as an investment only, not an opportunity to remake a company. Moreover, the government has more money than anyone else, so the company bears less risk because its primary shareholder will not go bankrupt.

If you still think this was a bad idea, then you missed the point that this is considered the best route by some of America's best and brightest accounting experts. I hope this cleared up the process.

[FenwickHockey65]

Originally Posted by The_Blur

A lot of people are missing the point. GM isn't reaching into government funds to pay government funds anymore. GM is reaching into funds in its own bank to pay the government. This money has already been transferred from the US Treasury to GM. GM has full control of how to use that money. Since GM is doing well enough to leave that money alone, it makes no sense to wait to pay it back.

This is no different than paying off a car loan early using money from home equity or another loan that comes from the same bank. You have the money in your account given to you from the bank. There is no reason to hold off on using it to pay the loan.

GM took this one step further. GM has paid the interest, too. While we like to pay loans off early to avoid the interest, GM has paid back the interest as if it had paid on time but has chosen to make that payment 5 years early. If you did this, your bank would be incredibly happy with you.

The taxpayers are the US government's bank. Somehow, some taxpayers are not happy with receiving more money in interest than the actual payoff of the loan. It simply doesn't make sense. The government has received the money early in full with interest. The only explanation is that the taxpayers are not as educated about finances as bankers, and that lack of education shows in these complaints.

Furthermore, GM has never claimed to pay the full bailout. GM has only claimed to have paid the full loan. The elected US government has decided to make the GM bailout a 2-part financial investment. In the first part is a loan. GM has completely paid this amount as of Tuesday night. The second part of this bailout is an investment in the company. Before I get into this part of the bailout, I will point out that the Treasury is made up or experts and financial leaders who know what they are doing. Unlike some nearly functionless departments and bureaus of the government, the Treasury has high standards of excellence and does things in the most methodical way possible. Everything has a purpose, and that purpose is to make the most of revenue. What this department has decided to do is consider whether stock or interest is going to bring back more money for the government. Think of it like comparing the interest rate on your savings account to investing in the stock market. There's a much bigger return on a successful—must be successful—stock than there is in your savings account.

Unlike all of us on Camaro5 who think we know how to run a gargantuan business, the US government has some experience by administering the largest infrastructure in the world. With this experience, the US government has taken its substantial investment and turned that into a majority stake in GM. This means that the government can do whatever it wants to make GM successful. So far, despite complaints to the contrary, this has not led to any changes to GM's product line. Why is this the case? That's a great question to pose. Perhaps the answer is that GM already had an amazing product line that the government and perhaps the rest of the industry saw as profitable. Remember, this department of the government is made up of business leaders and accountants, experts in the field of finance and business. Because GM already had the product to be profitable, all the government wanted to do is reorganize the business to be sleek and profitable and get out with more money. That sounds easy enough. How will it happen? This is also a great question. The experts in our government have decided that going public will give the government and GM alike tons of money. With this product line and stocks sold at a discount, people will leap on the opportunity to buy stock, causing a high demand for the stock. High demand will cause the stock price to spike, leading to a high return on the stock that the government sells.

Here's how it works. The first shares will sell at a discount. Buyers will come out in flocks to buy this cheap stock. Speculators will bet that the stock price rises. The market will of course agree because GM is in better shape than it was 2 years ago as far as finances and new products. The following shares will have an increasing price due to the high demand. As these stocks run out, the government will slowly sell off its stock at the highest available price buyers are willing to pay.

How does this profit the government? A loan will have an interest rate. The interest rate is set. The price of stocks is not set. A loan has limitations that a stock does not have. The difference is in the risk. A stock is risky only because it might not sell, thus failing to bring in the dough. For the government, however, stock is a lot less risky because the government is in charge. By being in charge, the government can make decisions that keep GM profitable, including decisions to reorganize the company. For the rest of us, stocks are much more risky because we buy them as an investment only, not an opportunity to remake a company. Moreover, the government has more money than anyone else, so the company bears less risk because its primary shareholder will not go bankrupt.

If you still think this was a bad idea, then you missed the point that this is considered the best route by some of America's best and brightest accounting experts. I hope this cleared up the process.

/Thread.

[Hylton]

Originally Posted by FenwickHockey65

/Thread.

Why? Because you don't like the conversation? There is nothing wrong with the conversation here and members should be able to discuss this subject. If you don't like it, just unsubscribe.

[Bullitt]

Originally Posted by Hylton

Why? Because you don't like the conversation?

Just look under his user name and you'll know why.

[truth411]

Originally Posted by Bullitt

Just look under his user name and you'll know why.

sigh.

[ViperTomcat]

Originally Posted by The_Blur

GM isn't reaching into government funds to pay government funds anymore. GM is reaching into funds in its own bank to pay the government. This money has already been transferred from the US Treasury to GM. GM has full control of how to use that money. Since GM is doing well enough to leave that money alone, it makes no sense to wait to pay it back.

However the money was originally sourced from the US government, not from GM profits. That would be like this:

Sam: You're having a hard time, I'm going to give you $5,000

Max: Oh thanks! This will really help.

Tom: I'm also going to help you with this loan..for $3,000.

Max: Oh thanks! This will really help!

*two months later*

Tom: I dont need all of this..so I'm going to repay Tom's LOAN with money from SAM.

Essentially GM hasnt paid out any of its hard earned money at all. They havent paid out any money from their own profits, all they've done is paid off one loan from the government..with money GIVEN to it by the government.

[The_Blur]

Originally Posted by ViperTomcat

However the money was originally sourced from the US government, not from GM profits. That would be like this:

Sam: You're having a hard time, I'm going to give you $5,000

Max: Oh thanks! This will really help.

Tom: I'm also going to help you with this loan..for $3,000.

Max: Oh thanks! This will really help!

*two months later*

Tom: I dont need all of this..so I'm going to repay Tom's LOAN with money from SAM.

Essentially GM hasnt paid out any of its hard earned money at all. They havent paid out any money from their own profits, all they've done is paid off one loan from the government..with money GIVEN to it by the government.

You're implying that GM shouldn't pay the loan unless GM has worked for the money. GM didn't earn the money. It was all borrowed. Earning money is getting paid for a job well done. GM did a terrible job managing its finances, and that is why it needed the money at all. None of it was earned. It was, however, paid back.

What should GM have done with the money? There's no reason to keep it. GM has enough incoming money to fund its operations, and that money was serving no purpose.

GM anticipated needing more money than it really required to operate. It doesn't matter how you slice it. This is good news. GM turned around fast enough to not use all the money.

Let's also point out that all the loan money has the same source, the US Treasury. The Treasury is home to all of America's tax money. It might have been distributed using 2 different policies, but it all comes from and returns to the same source. Even if the account numbers are differnt, they are both held by the US Treasury. At the end of the day, it's all the same pile of money, and GM paid some of it back early with interest. That's impressive. GM could have sat on that money and collected interest at the bank. Instead, GM decided the right thing to do would be to give the money back. GM gave the money back to the government as promptly as the government offered the money to GM. That's business with integrity.

[fielderLS3]

Originally Posted by mhood

I don't understand how you can blast "Government Motors" while driving a 1SS. Doesn't the obvious hypocrisy bother you? Personally, I've just about had it with Faux Nuz, Talk Radio Conservative rants and having it infect my favorite car forum. Can't you take your cut and paste arguments to Politico and give it a rest here?

Liking the Camaro doesn't require anyone to be happy about a government takeover of the company that builds it for that company's "own good." If "Government Motors" is too harsh of name because that isn't the "official" name of the company, maybe we can agree on "Government Owned General Motors?"

It takes years to get a new car to the market. All of the planning, design, engineering, etc. on the Camaro was done before the takeover when GM was still an independent company fully free to build the cars they thought people wanted (in the Camaro's case, their thoughts were right). I am deeply worried about the 6th gens. The thought of a "muscle" car built for efficiency first and fun last using the Camaro name depresses me (Mustang II ring a bell...how'd that "little jewel" turn out). If a 4-cyl finds its way into that engine bay because someone at the EPA thinks it should be there, I'll go nuts.

[BaylorCamaro]

Great news!

[The_Blur]

With the direction these two threads have taken, it is time to merge. Please review the thread before posting additional commentary. As much disagreement as is in this thread, I'm thoroughly impressed with the amount of respect contained in some of these posts. Keep up the discussion, and stay friendly. We're all one community.

[fielderLS3]

Glad the thread is staying open. I'm happy we can all have a civil debate.

Originally Posted by The_Blur

Remember, this department of the government is made up of business leaders and accountants, experts in the field of finance and business. Because GM already had the product to be profitable, all the government wanted to do is reorganize the business to be sleek and profitable and get out with more money. That sounds easy enough. How will it happen? This is also a great question. The experts in our government have decided that going public will give the government and GM alike tons of money. With this product line and stocks sold at a discount, people will leap on the opportunity to buy stock, causing a high demand for the stock. High demand will cause the stock price to spike, leading to a high return on the stock that the government sells.

I see what you are trying to say. However, there isn't a real great track record of the government successfully reorganizing a business to be sleek and profitable and getting more money out of it. When Chrysler actually repaid its loan in the 80s, it was such a shock even to the government that it took a month for anyone to figure out what to do with the check Lee Iacocca handed them. In theory, these are experts in the fields of finance and business, but remember that these are the same "experts" who are running the "inflation will save us" Federal Reserve, running a 13 figure annual deficit, felt that encouraging sub-prime loans was a great idea, and often don't know what is in their own legislation when they vote on it.

Ultimately, it doesn't really matter what any of us think of the bailout at this point. Like to or not (not in my case) it happened, and we have to move on from where we are standing, not from where we would like to be standing. I'm still rooting for GM, but I'm just trying to be realistic based on history. The sooner they are able to go public and have the government divest itself, the better it will be for everyone.

[Hylton]

Originally Posted by The_Blur

With the direction these two threads have taken, it is time to merge. Please review the thread before posting additional commentary. As much disagreement as is in this thread, I'm thoroughly impressed with the amount of respect contained in some of these posts. Keep up the discussion, and stay friendly. We're all one community.

Thanks Blur! Great point and I agree!