I’ve been looking at the reactions to Mitt Romney’s panicked, dishonest defense of his opposition to the auto bailout. I’ve chosen a couple of Romney’s particularly egregious lies, with the facts following each, because I really do think these lies give one a good sense of the man and his priorities.
Romney’s a Michigan native; his father George Romney was a well-liked governor and head of American Motors. Yet Romney is neck-and-neck with rival Rick Santorum in polls ahead of Michigan’s Feb. 28 primary in no small part because of his opposition in November 2008 to the bailouts that saved GM, Chrysler and thousands of Michigan jobs.
I covered those bailouts in Washington as a reporter for the Detroit Free Press, following them through Congress to the White House to the bankruptcy courts a few blocks off Wall Street. As a first-hand witness, I can attest that some of Romney’s new arguments hold their own — but most don’t.
We have a witness! Unlike, say, Grover Norquist or the franchise known as Politifact, this guy was there!
“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.
Both companies’ bankruptcies required money on a scale not seen in legal history. Unlike airlines, which can keep running with much smaller short-term loans while they restructure, automakers need massive amounts of up-front capital to pay suppliers and workers while they build cars; their finance companies need even more to keep making car loans that can bring in revenues. The potential damage wasn’t just layoffs; Chrysler executives testified on the first day of bankruptcy that without immediate cash the company risked destroying hundreds of millions of dollars’ worth of equipment.
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.
“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.
Romney opposed the bailout. Nearly all conservatives opposed the bailout. It was the DC-punditry- conventional wisdom standard to oppose the bailout. Mitt Romney really isn’t much of a risk-taker, so he followed the stampeding herd and took the safe bet against Detroit. Obama took the political risk, so is now collecting the political reward. If the bailouts had failed Obama would be getting killed on it, right now. That’s how political risk works. There’s a downside.
Romney, being Romney, wants it both ways: oppose the bailouts when it looks like they’ll fail, then try to weasel out of that when they succeed, by reciting stupid smears about “union bosses” to distract and cloud the issue. Did he learn this skill in the private sector? Dodging responsibility?
I know he’ll never admit he was wrong, but I do think it’s great that someone who knows something about what actually happened is examining his claims.