Time once again to fact check the fact checkers. One of the most contested issues from the final Presidential Debate was the federal auto bailouts. President Obama makes the claim that he saved the auto industry whereas Mitt Romney preferred to let it liquidate. The LA Times ran a fact check article on this and as expected, sided with the President. You can read it here – http://www.latimes.com/news/politics/la-pn-fact-check-debate-auto-bailout-20121022,0,7740119.story
First we need to step back. The fact is that it was President Bush who extended the rescue loans under the umbrella of the TARP, not President Obama. President Obama further extended TARP financing to the automakers once in office, but the fact remains that President Bush gets the credit for extending taxpayer funds in December of 2008 when the automakers would have went bankrupt.
Which leads to the second point. President Obama has extensively used the now infamous Romney quote in his ads to “Let Detroit go bankrupt”. Which President Obama then promptly did. Romney promoted a managed bankruptcy without a government check. Never did he insinuate allowing the automakers to liquidate. You can read the referenced op-ed in the Nov. 18, 2008 NY Times here – http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=0. You will find it crystal clear that Romney was referencing a multitude of scenarios regarding reforming the automakers. Nowhere does he make the claim to prefer that the automakers simply cease to exist.
President Obama then makes this claim.
You were very clear that you would not provide government assistance to the U.S.
auto companies even if they went through bankruptcy
Yet the Romney op-ed contains this quote.
The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk
Again, the difference is Romney preferred federal government financing guarantees to a check. I would think any reasonable person would consider a loan guarantee as government assistance so once again, President Obama fails the fact check. The loan guarantees would have provided the relief lenders sought to mitigate the risk involved to lending to a failed corporation. People forget that. Despite the President’s claims of success, there is no denying that GM and Chrysler failed.
The LA Times article then references this quote from Steven Rattner, the former head of Obama’s auto task force.
In late 2008 and early 2009, when GM and Chrysler had exhausted their liquidity,
every scrap of private capital had fled to the sidelines,” Rattner wrote in the
New York Times in February
Every scrap? Consider the case of LyondellBasell Industries. They received $8.25 billion in private debtor-in-possession (DIP) financing finalized on March 1st of 2009. You can read the background here – http://www.cadwalader.com/assets/article/080109RapisardiDavisButterworths.pdf. You won’t find this little tidbit of information on any liberal media anywhere because it doesn’t fit the narrative.
You also won’t hear anyone from the Obama Administration talk about Project Quark. Never heard of it? It was an internal Ford Motor Corp. project to head off supplier issues should an industry bankruptcy occur. It later expanded to include Honda, Toyota and Nissan. GM declined to participate. Here is a Wall Street Journal article describing the book that revealed the project –http://online.wsj.com/article/SB10001424052970204781804577269410217101038.html . The point is that the manufacturing arm of Ford never took bailout funds and had been pro-active for several years in preparing for the eventual demise of GM and Chrysler.
Taking it all into context, it seems clear that the fact checkers failed here. The auto industry could have gone through a standard managed bankruptcy and avoided all the payoffs and skirting of the bankruptcy process the Obama Administration oversaw. Financing was still available even in a tight market. GM was simply a bad risk but a government loan guarantee would have alleviated that. As it is now, taxpayers are going to take it on the chin for many billions of dollars in losses, perhaps over $25 billion.
Which is preferable? Government loan guarantees without any certain loss of taxpayer money or bailouts with a multi-billion dollar price tag?