Free Markets, Free People

The fake Chrysler loan “payoff”

You probably remember when GM made the big announcement that it had paid off its loans from the bailout?  You most likely also remember that subsequent investigation found that GM was simply using borrowed money from a government extended line of credit to “pay back” part of what was loaned under the bailout?  In other words it took taxpayer money extended under the LOC and gave it to the government as a payment of “debt”.  Overall, though, it’s debt remained the same.

This week Chrysler went through the same sort of shenanigans as Conn Carroll reports:

American taxpayers have already spent more than $13 billion bailing out Chrysler. The Obama administration already forgave more than $4 billion of that debt when the company filed for bankruptcy in 2009. Taxpayers are never getting that money back. But how is Chrysler now paying off the rest of the $7.6 billion they owe the Treasury Department?

The Obama administration’s bailout agreement with Fiat gave the Italian car company a “Incremental Call Option” that allows it to buy up to 16% of Chrysler stock at a reduced price. But in order to exercise the option, Fiat had to first pay back at least $3.5 billion of its loan to the Treasury Department. But Fiat was having trouble getting private banks to lend it the money. Enter Obama Energy Secretary Steven Chu who has signaled that he will approve a fuel-efficient vehicle loan to Chrysler for … wait for it … $3.5 billion.

This is simply more smoke and mirrors from the “Smoke and Mirrors” administration, now engaged in pre-election image burnishing.  In fact, the payback (someone call Debbie Wasserman Shultz) involves allowing a foreign auto company to take more control of Chrysler and then tossing a loan for 3.5 billion from government on top of the Fiat purchase of Chrysler stock at a reduced price.

They want you to believe this signals a stronger and profitable Chrysler.  In fact, it is a pathetic attempt to fool the public.

But it is even worse than that:

So, to recap, the Obama Energy Department is loaning a foreign car company $3.5 billion so that it can pay the Treasury Department $7.6 billion even though American taxpayers spent $13 billion to save an American car company that is currently only worth $5 billion.

Oh, and Obama plans to make this “success” a centerpiece of his 2012 campaign.

Again, don’t forget the $4 billion in loans the Obama administration has “forgiven” that taxpayers will never get back – all in an effort to make this truly horrendous deal for taxpayers seem better than it is so he can claim credit for “saving the US auto industry” during the coming political re-election campaign.


Twitter: @McQandO


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22 Responses to The fake Chrysler loan “payoff”

  • Shorter story: THEY LIE.

    • Shorter story II:  The sheeple believe it.

      • That puts the onus on you and me to educate our family, friends, associates, and neighbors…seems to me.

        • For the two years he was running for POTUS I was calling him a socialist suffering from narcissistic personality disorder.   The majority chose to believe his lies.

          • In law school, I took a course taught by a great guy and psychologist (not an oxymoron, btw) called “The Psychology of Communication”.  He said something with which I partly disagree, but which has a lot of truth in it; “communication is the response you get”.  We HAVE to find ways to effectively help people to understand.  Merely being right, and merely telling people really isn’t enough.  We have to work to tell them so they understand.  (Granted, some never will.)

  • How much money was paid in interest for those loans that the US Government otherwise wouldn’t have collected?

    How much money in local, state and federal taxes were paid from Chrysler Group LLC and their employees as a result of still being in business?

    Would the interest from the loans or those tax collections from the company and their employees have happened if the Chrysler loan would never have been given?

    Your smart people, do some math here and report back.  I’m guessing you’ll find that your math about the NET COST to taxpayers isn’t as great as you portray in this article or your comments.  Since we’re all about full disclosure and all, do the right thing and add this to your equation or continue to be a one-sided irrelevant commentator.

    • Its your theory – YOU do it. And if you come anywhere near the 4 billion forgiven, let us know.

    • How much money in local, state and federal taxes were paid from Chrysler Group LLC and their employees as a result of still being in business?

      What POSSIBLE evidence do you have they would have NOT emerged…MORE successfully…from a REAL bankruptcy?
      What about all the VERY discriminatory dealership closings?  What do you suppose the NET cost of those to have been?  Run the numbers yet?

    • So basically, Mccain, you admit that Chrysler hasn’t repaid their loan, and that anyone who says so is a liar.  Otherwise, you wouldn’t be talking about ‘net cost’, you’d be talking about ‘net profit’.  Imbecile.

    • Full disclosure – yeah we’ll get on tracking all those numbers down right after the Government and Chrysler do.    Which might have been nice as justification BEFORE they were lent the money – you know, like Banks make regular people do when they ask for loans.
      “How much money in local, state and federal taxes were paid from Chrysler Group LLC and their employees as a result of still being in business?”
      Ah, a circle – the government collects local, state and federal taxes, hands the money to Chrysler, which hands it out via taxes or payroll, back to the government.  Is that the plan?  So…you’re saying it’s economical and profitable for the government to lend money to a company so it can pay the money back to the government not as loan repayment, but as taxes?
      The NET cost to the taxpayers?   IS WHAT WE LENT CHRYSLER there’s no magic there.   Are you seriously going to pretend we made money on this deal?  Seriously?
      Fine, let’s talk about opportunity cost then, we might have taken that exact same amount of money and invested it in something else that would have paid a far better return than Chrysler.  Your <sic> making demands – my turn.  Head out and figure out what we COULD have invested in instead of Chrysler that would have given us a better TAX PAYER return on the money and explain why we should have invested in Chrysler at a LOSS when we could have invested in something else at a profit and report back.  Do the right thing and add THAT to your equation.

  • Dr. Sanity has a good post up.
    “Many Democrats and certainly most leftists are completely shameless in the sense that they will never ever, for as long as they can possibly get away with it, going to admit to bad behavior. And in those rare cases where they simply cannot wiggle and maneuver and lie and deceive; or self-righteously tell you how wonderful they really are and all the wonderful things they have done for the ‘little people’; they will simply pretend they are still virtuous and have been victimized in some way. What’s sad is that they often believe it themselves.”

  • Did the government get money back this week or not?

    • Good question – if I hand you $100, and you give me back $1, did I get money back?
      The way these guys play they borrow $100 now and $200 later, they give back $100 and claim they now only owe $100 in total and the Treasury department says “yep”, that’s true”.
      God, I love that the whole country has become Chicago.

  • Wow, they ponied up $7.6 billion and to think they were losing money as of the end of the 4th quarter of last year.
    Must be a great economy!
    “The company lost $652 million on revenue of $41.9 billion for all of 2010, but had an operating profit of $763 million….
    Chrysler ended the year with $7.3 billion in cash, down from $8.3 billion at the end of the third quarter.”
    So…they ended the year with $7.3 billion in cash and made $763 million…and yet 5 months later they pay back a $7.6 billion dollar loan.
    I can only say – We need these guys in Washington!!!!! They’ll sort our financial mess out right quick, and there will be plenty left over to hand out free stuff to everybody!  I mean, if they can do THIS in 5 months with Chrysler’s budget just imagine what they could do with the US budget!  Social Security would be flush again, and the deficit could be eliminated and we could pay off the national debt in time for Obama to triumphantly return to the White House for his second term!
    On a national front, I’m thrilled that our relationship with Italy has gone so well that cars made by FIAT are now considered to be American.

    • Its no secret they swapped Debt to the government with Debt to private lenders.

      • We can always bail Chrysler out again to make sure those private investors don’t take a bath – well, provided they were unionized private investors, the rest of those profit taking anti-American investor scabs can take a hike just like last time.

        • That a question I have.  The money we’re talking about is money they got before the bankruptcy.  Although I can’t find a lick about Cerberus’ exit anywhere, I could swear that at the time, Cerberus walked with that money.

          • No, I think Cerberus lost whatever equity they had. But it was limited. As I remember, they bought Chrysler with a small amount of actual cash, the bulk being debt financing. And because it was structured as limited liability, Cerberus was not on the hook for the debt financing, Chrysler was.
            Net, net, Cerberus didn’t lose all that much. And of course they got a handy tax write off for their loss.

          • Yeah, and I believe that much of that TARP pre-bankruptcy money went towards that debt pay off.

  • There is more to this than what has been presented here.
    As a part of the buyout, the judgments from lawsuits against Chrysler and GM were basically forgiven.  In other words of the 3.3 billion dollars owed to litigants, the companies are paying nothing.

    All told, more than 2,500 litigation claims totaling roughly $3.3 billion have been asserted against Motors Liquidation Co., the formal name for GM’s bankruptcy estate, according to the most recently tally, nearly all of them stemming from product-liability lawsuits.

    I am not saying that all of the claims were legitimate, or that all of the awards were just.  If half are “legitimate,” that means the companies don’t have to pay 1.65 billion dollars.
    What I cannot understand is that there is a provision that allows those who help or purchase GM and Chrysler from assuming the debt as well.  In previous cases, such as asbestos related claims, the companies that purchased the firms were required to pay for damaged incurred before owning the company.
    Something isn’t right.