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This really is kind of silly and is people engaging in nonsense math. GM was expected to need {X} amount of cash to remain in business. They got that, with the

by ergo98 17y ago

This really is kind of silly and is people engaging in nonsense math. GM was expected to need {X} amount of cash to remain in business. They got that, with the government converting a large percentage to an equity holding (essentially like converting preferred shares). GM was expected to quickly burn through the escrow account as they bought off dealers, closed plants, etc. Yet somehow GM didn't burn through it. They ended up returning the cash. By every possible real way of considering it, they paid off the loan. Imagine that your friend gave you $20 for lunch, but agreed that he'd take your iPhone 3GS in return for $17 of it. Lunch comes to $16 so you give him his $3 back immediately -- did you not just pay him back? Does the money not count because it wasn't churned through a cycle first? Stupid math.

thecombjelly 17y ago
The problem is that it is misleading, at least to me. The way it is presented, I'm led to think that they paid back all of the money that they received from the government. So according to this article, around 50 million.
Qz 17y ago
Your analogy doesn't match up: "About $7 billion of that came in the form of a straight-up, low-interest loan. And about $13 billion came in the form of an escrow account. So how has GM, which lost $38 billion in 2007 even as it sold 9.4 million cars, paid back its debt? It took money from the escrow account to pay back the $6.7 billion loan." They literally used loan money to pay back loan money, and they're still in the hole for the stock part, as well as $6M of the escrow account.
- ergo98 17y ago
  >They literally used loan money to pay back loan money Which is exactly what I said. GM isn't "in the hole" for anything, and what remains in the escrow account is theirs free and clear. The governments obviously hope to recoup their "investments" when the company goes public again, which may or may not happen. They repaid the loan because they ended up not needing the cash. It can't get simpler than that. The only question is whether they overstated their original request, or if they really have turned around enough.
  - anamax 17y ago
    > They repaid the loan because they ended up not needing the cash. It can't get simpler than that. However, the point stands that they received lots of other bailout money, money that they haven't repaid. Yes, that money went for "ownership" and we can hope that is eventually worth more than it cost, but it isn't worth that now and it hasn't been returned to the US taxpayer. Basically, we hold part of GM as collateral. If they fail, we're out the money.
  - mistermann 17y ago
    Wow. This is what we refer to as "the real new math". If you're smart, you'll get on board.
anamax 17y ago
> Imagine that your friend gave you $20 for lunch, but agreed that he'd take your iPhone 3GS in return for $17 of it. Except in this case GM wasn't worth what the feds paid to buy parts of it. How do I know? Because no one was willing to pay what the US govt paid. It still isn't. The ownership stake is basically collateral. If they eventually make enough money, they'll pay it back and we'll release the collateral. Just like any other loan.
- philwelch 17y ago
  It's not collateral, it's an indication that, just like passenger rail, the market can't support automobile manufacturing in this country[1] so instead we'll use nationalization and massive government subsidies to save otherwise useless jobs[2]. [1] Except for Ford. [2] Specifically, jobs belonging to unionized left-wing voters in Michigan, who need to be shored up during the upcoming elections, since they were far more in Hillary's base than Obama's during the primary. Also, the salaries for those jobs go to union dues, which go to the UAW's political contributions, which go to the Democrats. So basically, the Democrats just voted themselves more public money. Not that the Republicans wouldn't do the same in their place, but....
pmcginn 17y ago
I think a more accurate assessment would be: Imagine your friend gave you $5,000 for lunch, but agreed that he'd take your Apple Newton in exchange for $4,500, in the hopes that some day people would like to buy small parts of the Newton for pennies, even though at the time of purchase the Newton looked downright toxic and hadn't looked attractive in years. Lunch comes to $4,400 so you give him $600 back and immediately spend some of the $4,500 making a commercial talking about how fiscally responsible you are, and in response he issues a press release stating that you have paid him back early, with interest. Meanwhile, the vast majority of people in the world somehow manage to commend both of you for your sound fiscal practices. A small minority of people will say "wait, hang on, HE PAID $5,000 FOR A FUCKING APPLE NEWTON?" They will be ridiculed on message boards. And I didn't bother shoehorning it in, but it's more than a fine point that it's not even your $5k to start with.

by ergo98 17y ago

thecombjelly 17y ago

The problem is that it is misleading, at least to me. The way it is presented, I'm led to think that they paid back all of the money that they received from the government. So according to this article, around 50 million.

Qz 17y ago

Your analogy doesn't match up: "About $7 billion of that came in the form of a straight-up, low-interest loan. And about $13 billion came in the form of an escrow account. So how has GM, which lost $38 billion in 2007 even as it sold 9.4 million cars, paid back its debt? It took money from the escrow account to pay back the $6.7 billion loan." They literally used loan money to pay back loan money, and they're still in the hole for the stock part, as well as $6M of the escrow account.

ergo98 17y ago
>They literally used loan money to pay back loan money Which is exactly what I said. GM isn't "in the hole" for anything, and what remains in the escrow account is theirs free and clear. The governments obviously hope to recoup their "investments" when the company goes public again, which may or may not happen. They repaid the loan because they ended up not needing the cash. It can't get simpler than that. The only question is whether they overstated their original request, or if they really have turned around enough.
- anamax 17y ago
  > They repaid the loan because they ended up not needing the cash. It can't get simpler than that. However, the point stands that they received lots of other bailout money, money that they haven't repaid. Yes, that money went for "ownership" and we can hope that is eventually worth more than it cost, but it isn't worth that now and it hasn't been returned to the US taxpayer. Basically, we hold part of GM as collateral. If they fail, we're out the money.
- mistermann 17y ago
  Wow. This is what we refer to as "the real new math". If you're smart, you'll get on board.

anamax 17y ago

> Imagine that your friend gave you $20 for lunch, but agreed that he'd take your iPhone 3GS in return for $17 of it. Except in this case GM wasn't worth what the feds paid to buy parts of it. How do I know? Because no one was willing to pay what the US govt paid. It still isn't. The ownership stake is basically collateral. If they eventually make enough money, they'll pay it back and we'll release the collateral. Just like any other loan.

philwelch 17y ago
It's not collateral, it's an indication that, just like passenger rail, the market can't support automobile manufacturing in this country[1] so instead we'll use nationalization and massive government subsidies to save otherwise useless jobs[2]. [1] Except for Ford. [2] Specifically, jobs belonging to unionized left-wing voters in Michigan, who need to be shored up during the upcoming elections, since they were far more in Hillary's base than Obama's during the primary. Also, the salaries for those jobs go to union dues, which go to the UAW's political contributions, which go to the Democrats. So basically, the Democrats just voted themselves more public money. Not that the Republicans wouldn't do the same in their place, but....

pmcginn 17y ago

I think a more accurate assessment would be: Imagine your friend gave you $5,000 for lunch, but agreed that he'd take your Apple Newton in exchange for $4,500, in the hopes that some day people would like to buy small parts of the Newton for pennies, even though at the time of purchase the Newton looked downright toxic and hadn't looked attractive in years. Lunch comes to $4,400 so you give him $600 back and immediately spend some of the $4,500 making a commercial talking about how fiscally responsible you are, and in response he issues a press release stating that you have paid him back early, with interest. Meanwhile, the vast majority of people in the world somehow manage to commend both of you for your sound fiscal practices. A small minority of people will say "wait, hang on, HE PAID $5,000 FOR A FUCKING APPLE NEWTON?" They will be ridiculed on message boards. And I didn't bother shoehorning it in, but it's more than a fine point that it's not even your $5k to start with.