Monday, April 26, 2010

The Fungibility of Government Funding

A while back I wrote a blog entitled “There’s a Ford in my Future”. Among other things, the post extolled the Ford Motor Company’s proud history of not succumbing to government intimidation back during the Roosevelt Administration, and more recently not accepting government bailout money during the Obama Administration. By contrast, I also lamented the foolhardiness and questionable legality of the Obama Administration’s bailout of Chrysler and GM.

As I was listening to the radio a week or so ago, I was beginning to think for a very brief moment that I had been mistaken. The syndicated ABC radio news broadcaster announced excitedly that GM was able to pay off its government loan in full. The taxpayers were getting their money back, even ahead of schedule!.

“Could I have been wrong?” I thought. “Was this an instance where an otherwise foolhardy and irresponsible waste of taxpayer dollars actually paid off?”

These questions were racing through my mind for a very brief moment indeed when they were interrupted by the concluding segment of the news segment: “GM is still losing money”.

“Whew!” I thought with a sigh of relief and laughter. These people aren’t even good liars. You would think that if the pro-government media really wanted their propaganda to stick they would have left out that minor detail, lest some people with at least a third grade arithmetic aptitude might start to ask, “How can they begin to pay back a loan if they are still losing money?”

Don’t try this at home kids, but the way you pay off a loan in this economy is with another loan! Read the details for yourself at, which states in part:

The backers of the bailouts to General Motors cried with triumph this week when the automaker announced that they had repaid their bailout loans ahead of schedule. That mounted to proof of the wisdom of government intervention, the argument went, and wondered aloud hy bailout critics didn’t acknowledge their errors. Perhaps it’s because the government essentially got paid off with even more government money:
In effect, GM used federal money it had received from TARP (Troubled Assets Relief Program) funds, which the government had used to purchase major shares of GM stock in order to prop up (and also control) the teetering automaker. (The fraudulently triumphant news reports had hinted at this when they said that GM hoped next to start buying back government owned stock. They didn’t explain how they planned to do this if they were still losing money.) In any event, this is just an accounting shell game of using one government loan to pay off another government loan. Money is indeed fungible.


JD Curtis said...

Why bother people with such confusing things known as "facts"?

Adam Nardoli said...

By contrast, I also lamented the foolhardiness and questionable legality of the Obama Administration’s bailout of Chrysler and GM.

Don't you mean Bush's? Remember TARP?

The syndicated ABC radio news broadcaster announced excitedly that GM was able to pay off its government loan in full.

You probably heard one of the new GM advertisements... or the ABC is saving money by reporting adverts as news.
Here's one of the ads from GM's TV side of the campaign:

used to purchase major shares of GM stock

Major? Oh really?

Anyway, JD is right, why bother you with facts...

The Maryland Crustacean said...


Though I take perverse pleasure whenever I provoke a fresh relapse of Bush Derangement Syndrome, no I did not mean Bush. Yes, I thought he was foolhardy in proposing TARP, which was put forward as a government solution to fix a government induced problem. The idea was to buy up toxic assets (mostly real estate based) which were brought to us courtesy of idiotic government policy known as the Community Reinvestment Act and facilitated by government sponsored entities known as Freddie Mac and Fannie Mae (The Bush Administration had warned us back as early as 2005 that the accumulation of "liar loans" were a disaster waiting to happen, but we were assured by Senator Christopher Dodd and Rep. Barney Frank that everything was just fine.)

But I digress. Then candidate Obama and his ilk were screaming loudly for the passage of TARP because "we have to do something" . So was everyone else, but some courageous house Republicans did put up some initial resistance.

I still think it was a stupid idea, but the original TARP was meant for the government to buy the toxic assets and holding them until the storm blew over, at which point the government would sell them and at least get a partial return on investment. When Obama becaome President, he morphed TARP by assuming authority not to buy the specific toxic assets which were threateneing to topple brokerage houses and financial insitutions, but to recapitalize banks by buying their stock, and also doing so with other troubled corporations in other industries, such as GM and Chrysler. This was arguably beyond the scope of TARP and therefore illegal, but Mr. Obama could do no wrong.

In any event, as was made clear by the more thorough news reporting, GM paid off the loan portion of their bailout by using the TARP money with which the government purcahsed GM stock. And these are the findings of the Inspector General for TARP.

JD Curtis said...

Don't you mean Bush's? Remember TARP?

It took the meddling of Hoover to begin the policies later expanded on by FDR. I think that history is repeating itself. But unfortunately, I don't ever see it swinging back toward small government conservatism. I hope I'm proven wrong though.