The fake Chrysler loan payoff

posted at 11:14 am on May 27, 2011 by Bruce McQuain

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, its 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.

This post was promoted from GreenRoom to HotAir.com.
To see the comments on the original post, look here.


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My position remains as it has since the beginning of this scuzzy little bailout game:

I will never — NEVER — even consider purchasing a GM or Chrysler product. Ever!

And as Ford is a union shop, they’re on my avoid-at-all-costs lists as well.

I have been holding off on a new vehicle purchase for a while, and it finally looks like I’ll be making one within the next couple months or so. (Been doing a lot of test-driving lately.)

Guess which car lots I’ve never even bothered pulling into. (This coming from a guy whose father, whom I love dearly, spent thirty years on a union assembly line for GM.)

I’ve already made a GM and Chrysler purchase. I was forced to with my tax dollars. You think I’m gonna do it on my own free will too?!

Dion on May 27, 2011 at 11:19 AM

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

“Golf clap.”

GrannyDee on May 27, 2011 at 11:19 AM

The Obama Administration — economics from people who have never worked outside of government.

I forget…what do they call that when the government runs everything?

Jaibones on May 27, 2011 at 11:21 AM

Hey Taxpayer! Give me more money so I can pay you back what I fleeced from you last year!

By Executive Fiat.

Steve Z on May 27, 2011 at 11:21 AM

Nice job Mr McQuain.

Its now up to Reps to properly message this disaster – in plain terms and get ahead of the narrative.

Simply ask “Will taxpayers ever get back the $4B you waived?”

Odie1941 on May 27, 2011 at 11:21 AM

Overall, though, its debt remained the same.

And the creditor is still the US taxpayer. Talk about a 3-card Monty.

BobMbx on May 27, 2011 at 11:22 AM

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

GrannyDee on May 27, 2011 at 11:19 AM

With one hand.

Steve Z on May 27, 2011 at 11:22 AM

Honda, Nissan, Ford, Cessna..my next vehicles.

shick on May 27, 2011 at 11:24 AM

There’s a lack of respect for the value of money with this administration. They treat it like funny money. In WWII, we actually sold War Bonds to help finance the war. Now we’re fighting 3 wars, no one is asked to sacrifice in the least. (We can blame Bush for this mindset as well, but Obama has quadrupled down on it, deficit-wise) They need money, they just borrow it. This is real money! Some Chinese somewhere is making pennies planting rice or working in difficult conditions in a factory or who knows what. This is real money, and soon there’s going to be a train wreck in the US, and it’s going to be awful.

Paul-Cincy on May 27, 2011 at 11:24 AM

Honda, Nissan, Ford, Cessna..my next vehicles.

shick on May 27, 2011 at 11:24 AM

I have and will buy Ford. They’re not taking any taxpayer money.

Paul-Cincy on May 27, 2011 at 11:24 AM

2008: Hope and Change…fantasy

2012: Fraud and Deceit…reality

CPT. Charles on May 27, 2011 at 11:27 AM

The Liberal line is that all these concerns have “paid back” all that money including TARP. They really believe it.

Sad.

Dr. ZhivBlago on May 27, 2011 at 11:28 AM

I don’t understand why this isn’t front page news. Really. Can’t someone make something out of this?

faraway on May 27, 2011 at 11:28 AM

Honda, Nissan, Ford, Cessna..my next vehicles.

shick on May 27, 2011 at 11:24 AM

I have and will buy Ford. They’re not taking any taxpayer money.

Paul-Cincy on May 27, 2011 at 11:24 AM

Ford are taking up over $7Bn in loans from the same DoE program.

lexhamfox on May 27, 2011 at 11:28 AM

I don’t understand why this isn’t front page news. Really. Can’t someone make something out of this?

faraway on May 27, 2011 at 11:28 AM

It was front page news. The buy back is to allow FIAT to increase its holdings so the US government isn’t the controlling interest. It frees up more investment avenues. I’m glad Chrysler is profitable again.

lexhamfox on May 27, 2011 at 11:32 AM

I heard this on the radio a few days ago; I think it was the Chrysler CEO talking about how great this was, that they wer paying “most” of the loans back, and “closing the door” on this chapter in their history, etc – and then the news reader said something in passing about the US government still owning a big portion of the company after all was said and done, etc.

I knew there had to be more to it, but even on its face, if you’re not paying *all* of it back, including the governments’ ownership interest, then you’re not “closing the door” on anything. Expand the story beyond that to all of this other stuff, and wow – what total BS.

Midas on May 27, 2011 at 11:32 AM

In fact, it is a pathetic attempt to fool the public.

And pathetic it may be, but unfortunately it works.

Midas on May 27, 2011 at 11:37 AM

I don’t understand why this isn’t front page news. Really. Can’t someone make something out of this?

faraway on May 27, 2011 at 11:28 AM
It was front page news. The buy back is to allow FIAT to increase its holdings so the US government isn’t the controlling interest. It frees up more investment avenues. I’m glad Chrysler is profitable again.

lexhamfox on May 27, 2011 at 11:32 AM

Ah – did you miss the part where FIAT couldnt get a bank loan – due to the horrid debt/asset ratio on Chryslers books, hence the DoE step up for $3.5B????

The net debt is still the same (you know, the point of the article) and highly unattractive to investors, so they are staying far away. It also exposes the social/capilatistic divide – whereas the free market wanted nothing to do with a bloated, debt ridden, US Gov-backed entity, yet the Feds came in again by “loaning” them money.

Odie1941 on May 27, 2011 at 11:37 AM

On top of it all, it cost Fiat virtually nothing to acquire Chrysler! What a deal!

cartooner on May 27, 2011 at 11:38 AM

My position remains as it has since the beginning of this scuzzy little bailout game:

I will never — NEVER — even consider purchasing a GM or Chrysler product. Ever!

And as Ford is a union shop, they’re on my avoid-at-all-costs lists as well…

Dion on May 27, 2011 at 11:19 AM

Bingo. Just say no to the greedy UAW. Avoid other union businesses as well. Buy groceries at Publix and Walmart, not at Kroger.

slickwillie2001 on May 27, 2011 at 11:38 AM

I guess our government leaders have all flunked remedial mathematics.

The way I see it, anything short of a $100 Chrysler check mailed to every one of the 140 million US taxpayers should be a non-starter ($14 Billion/140 million = $100/taxpayer).

As we have seen time and time again, merely “returning” money to the US Treasury is a useless exercise. The Treasury apparently has no way to record and track receipts, it is notoriously inept at fund accounting, and it never publishes accurate financial statements.

Therefore, the only way to repay a debt to the public is to send the money directly to the public!! Any money which passes through Washington is automatically flushed down the Washington DC commode and lost forever.

/sarcastic muse piece>

Yeah…I know it’ll never happen…

landlines on May 27, 2011 at 11:42 AM

I thought we just spent this money propping up Muslim Brotherhood democracies in Egypt and Tunisia.

tomg51 on May 27, 2011 at 11:48 AM

I heard of this ‘pay back’ with borrowed money a couple weeks ago… As I remember it, it was private banks lending Shystler the money… “signaled that he will approve a fuel-efficient vehicle loan
-
The question then becomes… who is being forced to do the lending? Is it directly from the US vault, or is a private bank being paid off/or extorted to do the deed?
-
Either way…. SCAM.
-

RalphyBoy on May 27, 2011 at 11:49 AM

My hubby and I have been Chevy fans since day one. My hubby is a big ol’ gearhead and has owned more Chevys in his lifetime then we can count.
We just bought a new car, we decided we would NEVER buy a GM product again.
It literally broke my husband’s heart when we bought a Ford. He had never ever bought a Ford before in his life.
*sigh*

tencole on May 27, 2011 at 11:51 AM

Obama scammed the taxpayers out of $13 B so he could give away part of Chrysler to a foreign corporation?

Who owns most of Fiat?

faraway on May 27, 2011 at 11:56 AM

My hubby and I have been Chevy fans since day one. My hubby is a big ol’ gearhead and has owned more Chevys in his lifetime then we can count.
We just bought a new car, we decided we would NEVER buy a GM product again.
It literally broke my husband’s heart when we bought a Ford. He had never ever bought a Ford before in his life.
*sigh*

tencole on May 27, 2011 at 11:51 AM

A Shelby GT will take care of that GM broken heart ;)

Kudos to you and the hubby for sticking with your principles.

Odie1941 on May 27, 2011 at 11:57 AM

Obama scammed the taxpayers out of $13 B so he could give away part of Chrysler to a foreign corporation?

Who owns most of Fiat?

faraway on May 27, 2011 at 11:56 AM

FiatSpA is the parent company – with various holdings.

Heres whats also interesting about this – since 2004 – when Fiat almost went bankrupt, they brought in a CEO – Marchioni who literally has turned the company around through shrewd and smart investments… Again Fiat itself – with rising revenue, stock price, profit margin, etc – could not get a bank loan – so relied on the Feds to step in again. They also didnt use their assets as collateral to back the loan, hence is denial.

Accoriding to filings, within 2 months – Fiat can own up to 70% of Chrysler

If Bambi and Debbie Bubbles is going to run with this as both a success and a reliance on non foreign aid… let them bury themselves.

Odie1941 on May 27, 2011 at 12:04 PM

Chrysler and GM are less vehicle companies than they UAW support systems.

Barnestormer on May 27, 2011 at 12:08 PM

Honda, Nissan, Ford, Cessna..my next vehicles.

shick on May 27, 2011 at 11:24 AM

I have and will buy Ford. They’re not taking any taxpayer money.

Paul-Cincy on May 27, 2011 at 11:24 AM

Parade rainer.

Modified future vehicle list: Honda, Nissan, Ford Tracker, Cessna.

shick on May 27, 2011 at 12:12 PM

And Chrysler still uses the mostly-government-owned GMAC for its dealer loans and individual car loans. The government first gave GMAC an illegal bank charter and then took it over in order to mantain financing for GM and Chrysler cars and dealers. So you can add another $17 billion to what we paid for this Chrysler deal and the GM deal.

We would have been better off just throwing $10 billion at the UAW.

rockmom on May 27, 2011 at 12:12 PM

Sorry Paul-Cincy, I meant to reply to lexhamfox.

shick on May 27, 2011 at 12:19 PM

Having oldheimer’s but didn’t Bush defer the auto bailout decision to the newly elected 0?

What about the taxes Chrysler and GM were not made to pay?

marinetbryant on May 27, 2011 at 12:50 PM

It’s actually only $2.4 billion net (at least at the moment) that’s going to the Feds – The Detroit Free Press has the repayments as $5.9 billion to the Feds (which includes $3.5 billion in what is effectively refinancing), and $1.7 billion to the Canadians.

Let’s go back to an old post of mine to run the numbers:

- The various entities of Chrysler/UAW Motors/Chrysler Financial received $12.3 billion of TARP/Debtor-In-Possession funding (not including the untapped $2.1 billion portion of its $7.1 billion line of credit).
- Cerebus paid $1.5 billion to pay off the Chrysler Financial loan in full and $1.9 billion of the $3.5 billion bailout loan it assumed upon Chrysler’s bankruptcy.
- UAW Motors paid about $0.6 billion in interest as of the end of April on its line of credit.
- If one were to count interest, and ignore the Obama administration wrote off both the $1.6 billion Cerebus did not pay back from its $3.5 billion loan obligation and the $1.9 billion DIP financing, we were still on the hook for $8.9 billion.
- Fiat came up with $2.4 billion of its own money and $3.5 billion of Energy Department money to wipe out the line of credit “in full”.

In short, we just spent $3.0 billion $6.5 billion, less anything we get back in the sale of our soon-to-be-less-than-8.8% stake in UAW Motors and the hopeful payback of that $3.5 billion refinancing, to hand the UAW and the Italians a car company.

I will give Fiat some credit; unlike Government Motors, it did come up with some actual cash to complete the loan repayment.

Steve Eggleston on May 27, 2011 at 12:55 PM

My family is going to need a new truck this year, and we had narrowed the field down to the Dodge Ram, Ford F-150 and Toyota Tundra. After this it’s a two horse race. Sorry Dodge, you’ve done a great job with your new truck offerings, but I can’t buy a Chrysler product in good faith.

smfoushee on May 27, 2011 at 2:01 PM

Great blog!

Does this rate as a SCANDAL? ;o)

DannoJyd on May 27, 2011 at 2:52 PM

Just to show you how stupid the libs are, Juan Williams was actually spouting the ‘they are paying the bailout money back’ line on FOX recently. If all the libs actually believe this cr@p, then we should be able to get all kinds of loans from them and never have to worry about paying it back. Only problem with that is, they only loan to their union buddies while leaving stock holders out in the cold. That whole auto bailout for GM & Chrysler should never have happened.

Kissmygrits on May 27, 2011 at 3:01 PM

Icing on the cupcake: Chrysler’s big winners are .. ( wait for it ) .. their gas-guzzler trucks & SUVs.

GM guy – - stocking up on parts for my old C1500, Impala & Firebird.
/.

CaveatEmpty on May 27, 2011 at 5:04 PM

The hell of it is is the fact that The Gang That Couldn’t Shoot Straight thinks this is an accomplishment.

Heh.

hillbillyjim on May 27, 2011 at 6:54 PM

BTW, excellent post, Mr. McQuain.

(I hope I got the case right on your last name.)

hillbillyjim on May 27, 2011 at 7:48 PM