Replace: In line with information studies, GM paid again one mortgage so as to qualify for a brand new authorities mortgage at a decrease fee. This principally negates my authentic opinion relating to the mortgage compensation announcement. Learn additional at your personal threat.
Ever since Normal Motors introduced that it paid again its $6.7 billion authorities mortgage, quite a few individuals have identified that the corporate isn’t telling the complete story. GM merely shifted the cash it obtained by way of the TARP bailout and directed these funds again to the federal government. Whereas there’s reality to this matter of accounting, it doesn’t actually matter.
First, the concept that the TARP bailout funds not have to be used for different functions like steadiness sheet padding, capital expenditures, or working bills present that the corporate is in a minimum of a barely higher place than it was when it obtained the mortgage. If the money it has is healthier suited repaying a mortgage and lowering future curiosity bills, then don’t go away it sitting in a checking account.
Second, there’s no purpose TARP funds can’t be commingled. That is simply illustrated on a smaller scale, in your personal checking account.
On Monday, you obtain a present of $100 out of your pal and deposit it into your account. On Wednesday, you receives a commission for some work you carried out and deposit $100 into your account. On Friday, you could have $200 in your account and you may lastly purchase a $100 cellular phone with out hazard of brining your checking account all the way down to zero. Did you purchase the telephone with reward cash or your earnings? It doesn’t actually matter. Each sources helped you attain the purpose the place the acquisition was doable.
Now add a mortgage into the combination. On Tuesday of that very same week, earlier than you bought paid to your work, you borrowed $100 from a pal. Quite than shopping for a telephone on Friday, you repaid that pal $100 plus curiosity. Did you utilize the reward or earnings to pay again the mortgage? As soon as once more, it doesn’t actually matter. As soon as the funds are commingled, a greenback is a greenback.
It’s proper to criticize GM. The corporate was too large and didn’t adapt to altering shopper wants. They need to have been allowed to fail, and would have if it weren’t for the idea a GM failure would have important repercussions all through the worldwide financial system, already in a weakened state.
It does look dangerous if an organization seems to make use of TARP funds to repay a authorities mortgage, notably when the CEO boasts about it publicly, however it’s not a serious subject. GM is in a greater place now, and though this mortgage is simply a small portion of the funds obtained from the federal government, that is a minimum of a transfer in the proper route.
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