ABC News' Matthew Jaffe, Jonathan Karl and Z. Byron Wolf report:
On Wednesday, the Treasury Department heralded General Motors’ repayment of a total of $6.7 billion in debt owed to the government. Treasury Secretary Tim Geithner called it a “positive sign for our auto investment.” President Obama’s top economic adviser, Larry Summers, wrote that it was “a bright spot on the road to recovery.” The automaker’s CEO Ed Whitacre touted the repayments at a GM plant in Kansas City and in a write-up in the Wall Street Journal, then flew to Washington to share the spotlight with leaders in Congress and the Obama administration.
But on Thursday, a Republican lawmaker put a damper on all the celebrations, warning that GM’s repayment of money from the $700 billion Troubled Asset Relief Program (TARP) was “not what it seems.” In a letter to Geithner, Sen. Chuck Grassley, R-Iowa, the ranking Republican on the Finance Committee, said GM’s repayment was “nothing more than an elaborate TARP money shuffle.”
The automaker, Grassley said, had used bailout funds from an escrow account at Treasury to make the payments.
“It looks like GM merely used one source of TARP funds to repay another,” Grassley said. “The taxpayers are still on the hook.”
That argument, Grassley said, was backed up by government watchdog Neil Barofsky.
In a report issued earlier this week, Barofsky, the special inspector general for the TARP, said, “GM has made several payments on its outstanding loan to Treasury and expects to pay it in full by June 30, 2010. The source of funds for these quarterly payments will be other TARP funds currently held in an escrow account.”
The Treasury Department responded by saying that “the cash in the restricted account was the property of GM.”
“That cash has the same property status as the company's other cash – the only difference was our right to approve of its use for a limited period of time following the bankruptcy,” a department spokesperson said in an e-mail to ABC News. “This account was expected to be used for extraordinary expenses, and the fact that GM has decided that it does not need to reserve these funds for expenses is a positive sign for our overall investment.”
After Wednesday’s repayment, Treasury stated, the government’s remaining stake in GM consists of $2.1 billion in preferred stock and a 60.8 percent stake in the automaker.