Have you seen the new General Motors commercial? In it, CEO Ed Whitacre highlights the taxpayer-funded bailout GM received and then brags: “We have repaid our government loan, in full with interest, five years ahead of the original schedule.”
That advertisement (Watch it here) gives the impression that A) GM is financially stable and able to repay its debts B) the government bailout was the right decision. And that was exactly how the Obama administration and network news media celebrated GM’s loan repayment of a $6.7 billion government loan.
But the ad is heavy on spin, according to The New York Times and Reason online. The Times reported that GM did make a repayment settling the $6.7 government loan, but it did so using TARP money held in escrow by the Treasury Dept.
The commercial caused congressmen, journalists and ordinary citizens to scratch their heads in disbelief. After all, GM had posted losses of $4.3 billion in the latter half of 2009. The auto company had been bailed out by $52 billion taxpayer dollars. The Washington Post reported that “a majority of the $52 billion” was “converted into a 61 percent government ownership stake.”
GM only repaid the “loan” portion of those $52 billion dollars April 21, but the “in full” phrasing of its ad could lead viewers to believe that taxpayers are no longer on the hook for GM.
Yet, there was no skepticism from the three broadcast networks. Diane Sawyer celebrated the GM announcement April 21 calling it a “happy surprise.”
Sawyer described the repayment as “keeping faith with taxpayers.” Bill Weir’s accompanying report led viewers to believe that GM was in a stronger financial position: “How did it happen? Well, Cash for clunkers and
Neither Sawyer nor Weir dug much deeper. The other broadcast networks were just as trusting, repeating the news of GM’s loan repayment. CBS called it “good news,” while NBC’s David Gregory mentioned that President Obama boasted about it.
The Treasury Dept. also bragged about the repayment in an April 21 press release that said GM “has fully repaid its debt under the Troubled Asset Relief Program (TARP). GM paid the remaining $4.7 billion of the total $6.7 billion in debt owed to Treasury.”
The claim turned out to be very misleading. A conservative think tank filed a complaint against GM with the Federal Trade Commission on May 4. Unlike the networks, The New York Times has reported the truth – that GM effectively used TARP money held in an escrow account to repay the TARP funds specified as the $6.7 billion “loan.”
“What neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan,” New York Times’ Gretchen Morgenson wrote on April 30.
Grassley Catches GM’s ‘Money Shuffle’
It was Sen. Charles Grassley, R-Iowa, who caught the deception and challenged the Treasury department on it.
Neil Barofsky, the special inspector general for TARP, had testified before the Senate Finance Committee on April 20. Barofsky told the Senate that the money GM was using to pay off the $6.7 billion loan did not in fact come from the company’s earnings, but from part of the $52 billion bailout given to GM in the first place.
Grassley cited Barofsky’s testimony about the origin of funds used to repay the $4.7 billion dollars. That letter even quoted an exchange with GM’s Vice Chairman Stephen Girsky who admitted GM was using TARP or taxpayer money to repay TARP money:
Question: Are you just paying the government back with government money?
Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d
be able to pay this back.
Radio and TV host Glenn Beck called for the mainstream media to cover the story and described what GM did in his own words on his April 27 radio broadcast.
“It’s like [you] taking money from one [of my] pocket and saying, ‘I’m gonna put it over in this pocket, ‘cause I’m repaying you,’” Beck said.
Despite Beck’s outrage, and many bloggers calling attention to GM’s tricky phrasing, the networks haven’t reported the criticism. The national newspapers have done a little better job. The New York Times hit GM the hardest on April 30 when it implied that GM and Treasury tried to “obscure” the truth and celebrated Grassley’s discovery.
USA Today explained in its April 21 story on the issue that the GM repayments came from an escrow account. Meanwhile, the Washington Post and Los Angeles Times have only circulated an Associated Press story citing Grassley’s criticism.
Despite GM’s assertion that the government loan had been paid “in full,” Grassley said the Congressional Budget Office estimates “taxpayers will lose around $30 billion on G.M.”
A spokesman for GM defended its advertisement telling the Times, “The bottom line is, our strong business performance has put us in the position that we don’t need these funds.”
The Washington Examiner’s Mark Tapscott reported May 4 that free-market think tank the Competitive Enterprise Institute, filed a complaint with the FTC, calling GM’s ad misleading, factually inaccurate, and constituting a violation of the Federal Trade Commission Act.
Broadcast Networks Praise GM for Loan Repayment
ABC, CBS and NBC were jubilant as GM announced it’s “in full” and ahead of schedule TARP repayment. The Obama administration and Treasury department used the announcement to appease voters still unhappy about the wave of
Obama touted it during his weekly radio address. White House economic adviser Larry Summers wrote on the White House blog that, “Just about a year ago, the American auto industry was on the brink of collapse. Today, General Motors announced that it has repaid its $6.7 billion loan to the
Then Summers gave Obama the credit saying, “ This turnaround wasn’t an accident of history. It was the result of considered and politically difficult decisions made by President Obama to provide GM and Chrysler – and indeed the auto industry – a lifeline, if they could demonstrate the will to reshape their businesses and chart a path toward long-term viability without ongoing government assistance.”
Summers went on CBS’s “Face the Nation” April 25 to make the same argument.
And their friends on the networks spread the spin. ABC’s Bianna Golodryga, who is engaged to White House budget director Peter Orszag, said on April 26: “this news has folks here in
Of course, the networks have reason to praise the success of the auto bailout since they promoted it almost two years earlier. In 2008, the Business & Media Institute found that the three broadcast networks aired almost three times as many positive (auto bailout) stories as balanced stories (31 to 12). Only one story was anti-bailout in nature.
NBC “Nightly News” anchor Brian Williams warned on Nov. 18, 2008, “GM may not make it without help, and others may have to merge.”
ABC correspondent Chris Bury suggested it was only fair that automakers get a bailout because the financial industry got one. “After riding to Wall Street’s rescue,” Bury said on “Word News” Nov. 11, 2008, “can the government just say no to American automakers that are bleeding cash by the billions?”