April 30, 2010 — -- Angry congressional Republicans escalated their attack on General Motors' claim to have repaid U.S. taxpayers for the car maker's bailout, calling it a "lie to the American people."
At issue is whether GM is correct in trumpeting what it says in a national ad and an op-ed in the Wall Street Journal that it has repaid -- with interest and ahead of schedule -- the $4.7 billion in bailout funds that it owed to the government.
The money for the loan repayment came from other bailout funds housed in an escrow account belonging to GM. To critics, that smacks of deception.
GM has built "a slick marketing campaign" that constitutes "a lie to the American people," Rep. Darrell Issa, R-Calif., and Rep. Jim Jordan, R-Ohio, wrote in a letter Thursday to GM CEO Ed Whitacre.
The letter notes a recent commercial in which Whitacre boasts that it has repaid its "government loan in full, with interest, five years ahead of the original schedule."
It's part of an "attempt to disguise what is merely the exchange of one pool of taxpayer money for another pool of taxpayer money as 'real progress,'" the letter said.
Issa and Jordan also faulted the U.S. Treasury Department, which heralded GM's repayment last week.
"We are concerned that GM, under your leadership, has come dangerously close to committing fraud, and that you might have colluded with the United States Treasury to deceive the American public," their letter said.
The government's remaining stake in GM consists of $2.1 billion in preferred stock and a 60.8 percent stake in the automaker, according to the Treasury Department.
Under questioning from Republican Sen. Susan Collins of Maine, who called the ad "very misleading," Treasury Secretary Timothy Geithner conceded at a Senate hearing on Thursday that some in his department are also concerned about the GM commercial. But Treasury has maintained that GM's loan repayment is "good news" despite the fact that the money used to repay the loan stemmed from the government.
A GM spokesman gave a similar response to the Issa and Jordan letter today.
"It's hard to understand how giving money back to the government could be considered a bad thing," said GM spokesman Greg Martin.
"The circumstances that allowed us to repay this money is because our business performance is much stronger and we're showing greater progress than anybody expected," he said.
'An Elaborate TARP Money Shuffle?'
Criticism of the repayment and the ad stems at least in part from a report to Congress last week by Neil Barofsky, the special inspector general for the TARP.
"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," Barofsky said.
"It looks like GM merely used one source of TARP funds to repay another," Sen. Chuck Grassley of Iowa, the ranking Republican on the Senate Finance Committee, said after Barofsky's report. "The taxpayers are still on the hook."
Grassley, the first lawmaker to voice concern about GM's loan repayment, said the repayment was "nothing more than an elaborate TARP money shuffle."
This week, Treasury's TARP chief, Herb Allison, sent a letter to Grassley defending the repayment.
Allison wrote that the funds in the escrow account in question stemmed from another loan from Treasury and the Canadian government. But the money, he said, was initially intended for "extraordinary expenses" and it was agreed to in advance that anything left over would be go back to both governments.
"It has long been public knowledge that GM would use these specific funds to repay the Treasury and Canadian loans, if it did not otherwise need them for expenses," he said in the letter dated April 27.
"In making its April 20 loan repayment, GM determined that it did not need to retain the escrowed funds for expenses. The fact that GM made that determination and repaid the remaining $4.7 billion to the U.S. government now is good news for the company, our investment, and the American people," Allison said.
General Motors said Thursday that stands by Allison's letter. GM spokesman Martin called the loan repayment a "good first step."
"Nobody is declaring victory. We have a lot of work to do, we realize that but the progress has been pretty steady," he said.
GM: America Will Recoup Investment
Martin said that the commercial ended its run on Tuesday. There are no plans to broadcast it again, he said.
The intent of the commercial, he added on Friday, "was to let people know that we are grateful for the second chance and we're making the most of it. We're going to build and sell the best cars and trucks that we know how to and, if we keep our focus on that, America is going to recoup (its) investment and that was the message we wanted to convey."