Top Mitt Romney adviser Eric Fehrnstrom claimed that President Obama’s auto bailout was the GOP presidential hopeful’s idea. Fehrnstrom said Obama followed Romney’s course to help the auto industry during an appearance at a Saturday roundtable discussion hosted by the The Washington Post.
“His position on the bailout was exactly what President Obama followed,” Fehrnstrom said. “He said, ‘If you want to save the auto industry, just don’t write them a check. That will seal their doom. What they need to do is go through a managed bankruptcy process.'”
Another flat-out lie from Mr. Etch-A-Sketch. That isn’t what Romney said. Romney, scrambling for an answer in Michigan on why he opposed the auto bailout, came up with his latest position, which was the private investors should have bailed out the auto companies. The reason I know this is because it just happened.
Republican presidential hopeful Mitt Romney renewed his opposition to the Obama administration’s bailout of General Motors and Chrysler today in several Michigan newspapers, contending President Obama’s rescuemade the companies worse. I wish I could leave politics to the professionals, but Romney’s take just doesn’t square with the facts as I lived them.
“The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better.”
The crux of Romney’s argument: If Obama had not acted, private companies would have stepped in and run a “managed bankruptcy.” What this ignores is that in the fall of 2008, before Obama was even sworn in, no one on Wall Street or anywhere else was willing to lend GM and Chrysler a penny — let alone the $81 billion they and their financial arms eventually needed.
Even after Obama took office, GM and Chrysler searched frantically for paths to avoid bankruptcy, including a possible merger. Chrysler held a one-week garage sale of its assets in February 2009, inviting anyone with enough money to bid for parts of the company. No one bit.
“Ultimately, that is what happened. The course I recommended was eventually followed. GM entered managed bankruptcy in June 2009 and exited it a month later in July.
The Chrysler timeline was similarly swift. But something else happened along the way that was truly egregious. Before the companies were allowed to enter and exit bankruptcy, the U.S. government swept in with an $85 billion sweetheart deal disguised as a rescue plan.”
No entity blocked GM and Chrysler’s path to the bankruptcy court except their own executives. Had the government not intervened as Romney suggests, GM and Chrysler likely would have been liquidated by their Wall Street bondholders, some of whom held out for a few more pennies on the dollar at the risk of the entire bankruptcy case. One auto industry think tank estimated doing so would have led to 1.3 million job losses and threatened Ford, Toyota and other automakers.
“Chrysler’s ‘secured creditors,’ who in the normal course of affairs should have been first in line for compensation, were given short shrift, while at the same time, the UAWs’ union-boss-controlled trust fund received a 55 percent stake in the firm.”
Chrysler’s secured creditors were a group of Wall Street banks — including J.P. Morgan, Citigroup and Goldman Sachs — and investment firms, some of whom had bought the company’s secured bonds in the months ahead of bankruptcy hoping to cash in. They could have rejected the government’s offer of 28 cents on the dollar in cash for their $6.7 billion in bonds and paid to liquidate Chrysler themselves, but decided that not only would they come out even further behind, they’d also be blamed for destroying an American automaker. (GM’s secured creditors − also mostly Wall Street banks — were paid in full, and endorsed the Obama bankruptcy plan.)
As for the “union-boss-controlled trust fund,” that’s what’s known as a VEBA trust that now pays the health care of 426,409 retirees from GM, Ford and Chrysler — and in return, owns all future health-care obligations from the companies for those retirees. With this, Romney appears to argue that before hundreds of thousands of UAW retirees got health care, Wall Street should have been made whole.
The auto industry is important to the economic survival of the rural, conservative county where I live. Romney’s voters live here. Conservatives need to rack up huge margins in rural counties in Ohio to trump the huge Democratic margins in the counties where most of the people in Ohio live, and the shape-shifting “Mitt Romney” (whoever that might be) knows that.
We went to 17% unemployment waiting for the federal rescue to kick in and I was talking to the childrens librarian at the public library about her idea to use Friends of the Library funds to offer bagged lunches to kids at the library because she knew they wouldn’t get the federally-subsidized school lunch they were all signing up for when school let out that summer. Unemployment here is now at 8%. I believe that during this period Mr. Romney was busy writing self-aggrandizing op-eds in the New York Times and lining up his Wall Street donors. Romney went with the DC-generated conventional wisdom on the auto bailout rather than siding with his own voters in states he needs to win because he’s absolutely allergic to risk, and that looked like the safe bet. That’s what happened.