Disgruntledpatriot's Blog

April 27, 2010

GM using one credit card to pay off the other

Filed under: Sick and Tired — Trever Bierschbach @ 6:13 am
Tags: , , ,

First I want to start by saying, I wanted to write about Cass Sunstein’s paper about banning conspiracy theories and how the government should infiltrate opposition groups.  It’s like something out of 1984 or Atlas Shrugged.  Well in doing my research for the post I found this article by Glenn Greenwald, and I can’t hope to even come close to hitting it on the head like he did so I will just let you read his article, and give props to him.  Well done Mr. Greenwald.

Now, on to the point.  The Associated Press, and others, happily reported that GM paid back its initial government loan with interest, ahead of schedule.  The article also reports, in the same exuberant fashion, that GM still owes the government $45 billion.  They also note that GM is losing money, and that the taxpayers are expected to lose money overall, according to the Congressional Budget Office.  Yah I know, doesn’t make any sense to me either.

The article also quotes several ranking government officials talking about how great this is, how it shows GM is on the upswing, etc.  Guess they didn’t get the memo that GM is still losing money.  But, this is great right?  We are getting our money back, with interest.

No, turns out that GM used other government money to pay off the initial government money. In my opinion I would say that they just gave back money from the second loan, and still owe us money from the first one.  It’s not really like paying off one credit card with another, it’s more like paying off one credit card with the same one.  I know, doesn’t work that way for us so why does it work that way for GM?  This second revealing article goes on with:

“But it still is, as Barofsky notes, relatively good news. The fact that they were able to use money in that escrow account to pay back the first round of loans is because it doesn’t look like they’re going to need that money for operating capital — and that means the company is getting close to a break even point, which is certainly worth celebrating so soon after emerging from bankruptcy.”

Raise your eyebrows as well?  The company is losing money, the only way they are going to be able to pay this money back in the near future is to sell of company shares according to the first article in this post.  That isn’t making money, or turning a profit, that’s selling shares of a failing company to the public to give that money to the government.  Would that be considered fraudulent trading?  Is that the same as a Ponzi scheme?  I think perhaps our politicians and government officials need to start following the old adage, don’t count your chickens before they hatch.  (Is that what an adage is?)  Maybe they aren’t tired of looking stupid every time something goes the opposite of how they predicted.

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