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Saturday, May 01, 2010

GM properly used escrow to repay U.S. loans, Treasury says

General Motors Co., which repaid $4.7 billion in U.S. loans last week, properly used escrowed cash for the payment, a Treasury Department official said in responding to complaints from a Republican senator.

GM used the escrowed funds created with government loans and overseen by the Treasury after determining the cash wasn't needed for “extraordinary” expenses, Herbert Allison, Treasury's assistant secretary for financial stability, said in a letter to Sen. Charles Grassley of Iowa.

Grassley, the top Republican on the Senate Finance Committee, on April 22 wrote to Treasury Secretary Timothy Geithner that GM's repayment “appears to be nothing more than an elaborate TARP money shuffle” because the money came from the U.S. Troubled Asset Relief Program.

Allison said Grassley was incorrect in saying the escrow account was held at the Treasury, when the funds were held by the automaker.

Allison's written response echoed the points made by a treasury spokeswoman last week.

“The bottom line is that the repayment was made on the dime of taxpayers across America, and it's misleading to say that GM repaid its TARP loans ‘in full, with interest, ahead of schedule, because more customers are buying' GM cars,” Grassley said in a statement on his Web site following Treasury's determination.

GM CEO Ed Whitacre last week met U.S. lawmakers, including House Speaker Nancy Pelosi, in Washington after announcing the repayment. Taxpayers own 61 percent of GM, a stake worth about $2.1 billion, as part of its 2009 bankruptcy financing.

The Treasury will start selling its GM shares when the automaker begins an initial public offering, Allison said.

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