If you want to get to the bottom of any story, tale or crime, the best advice is “follow the money.” The Obama administration has been saying that the bailout of the auto industry was a huge success so you would think that the money trail would be clear.
In fact, following the money in this story is something that only experts can do. Even then, conflicting stories about how much was loaned, how much was given, how much has been paid back and how much is outstanding abound. I am convinced that no one – either layperson or government official – knows fully. So it was with great interest that I started to read a summary of the deal from our friends over at Questions and Observations. One of their sourced articles was from the examiner.com claiming that the Obama administration knew Chrysler and GM officials were lying when the car companies claimed to have paid back the loans in full back in 2010. Not only did the Obama administration know, they helped perpetuate the lie.
The federal government knew of deceptive advertising by General Motors well in advance, and tacitly approved of it. Only later did federal officials distance themselves from those deceptive claims, after they drew criticism from an inspector general, Republican members of Congress, and even some journalists at liberal newspapers. Not, however, before the Treasury Secretary himself had trumpeted GM’s deceptive claims, which the Treasury Department had plenty of time to review before GM made them.
In April 2010, GM and Chrysler held press conferences announcing they had repaid the loans and bailout funds given to them. GM’s president Ed Whitacre made the following commercial to announce the good news of the loan being repaid:
At the time, something didn’t seem right. Republican Congressmen began to ask how the loan was repaid. Representative Paul Ryan sent a letter to the Treasury Department asking for the details. The letter was ignored. It wasn’t until further investigations were called for that GM and Chrysler owned up to the fact that they hadn’t really repaid the money, they had simply transferred the funds from the TARP bailout to “repay” the auto industry “bailout.”
It was a trick. It was deceptive. It was an accounting sleight of hand.
The Competitive Enterprise Institute (CEI) sent a Freedom of Information Act to the Treasury Department asking for documents and correspondences dealing with the April 2010 announcement by Chrysler and GM.
The Treasury Department, under the most transparent administration ever, stalled for a year before releasing the documents.
The reason for the delay? By holding off and fighting the FOIA request, GM and Chrysler could ride the “happy happy, joy joy” wave the announcement created. People were happy to hear that GM and Chrysler had done so well in restructuring and sales they could repay the loans.
Only problem was that it was a lie.
The documents show that the publicity blitz hailing the “repayment” of the loans was coordinated between GM, Chrysler, and members of the Treasury Departments. The documents show the Treasury Department “taking the point” on calling news agencies, news outlets and media representatives.
Yet it was the Treasury Department that had not received a check from either GM or Chrysler. They were touting GM and Chrysler repaying the bailouts when they knew they had not.
Just another day in the Obama administration. No wonder they want to keep the actual amounts, repayments and accounting details so secret. They are simply hoping the American people will take their word for it.
This is one American that will not.
So how much is still out there?
According to this article from the Washington Examiner:
American taxpayers have already spent more than $13 billion bailing out Chrysler. The Obama administration already forgave more than $4 billion of that debt when the company filed for bankruptcy in 2009.
So, to recap, the Obama Energy Department is loaning a foreign car company (Fiat) $3.5 billion so that it can pay the Treasury Department $7.6 billion even though American taxpayers spent $13 billion to save an American car company that is currently only worth $5 billion.
And that is just the details for Chrysler. It does not include GM’s numbers.
It should be remembered that Obama sold the automobile industry buy out as a good thing for the country. He predicted dire consequences if the companies were allowed to fail. To be honest with you, it was inconceivable to me that GM would shut their doors. While I am not a proponent of the bailout, the thought of GM being gone was shocking and almost a kick to American pride.
However, I fell into the trap that I believe Obama and his cronies had laid. Upon reading the Questions and Observations article I had an epiphany. The world became much clearer. I feel like an idiot for missing the obvious, but I am a smarter idiot now.
Simply put, there is a difference between being “bankrupt” (out of money) and being in “bankruptcy” which allows a company to reorganize, readjust, stabilize and come out the other side a better, more profitable company.
QandO cites an article from Jim Marzi at the National Review Online:
First, in the event of a bankruptcy, you don’t burn down the factories, erase all the source code on all the hard disks, make it illegal to use the brand name Chevrolet, and execute all of the employees. Others take ownership of the assets, and the employees go on with their lives. Some of these assets will be put to use generating revenues, profits, and taxes, and some of these former employees will get jobs or start businesses, and generate revenues, profits, and taxes. In order to measure the effect of the bailout over, say, five or ten years, you have to compare the actual taxes collected to what would happened over this same period in the counterfactual case where the bankruptcy was allowed to proceed. What owners would have bought the factories and IP assets, and what would they have done with them? What businesses would the former employees have started? Who would have moved to Arizona and retired? What new industry clusters will evolve in Arizona because of this transfer of people?
And what would have come out of the bankruptcy? Leaner companies better equipped to address the market and turn a profit. What wouldn’t have come out of the bankruptcy are the level of union pensions and benefits the administration preserved. Obama, through his bailout and modified bankruptcy made sure those were weren’t destroyed. Consequently you have pretty much the same conditions that existed prior to the bailout still in existence today with the added twist of more union control.
The taxpayers did not have to put a dime into Chrysler or GM. It can be argued that the companies would have been better off to have simply entered into bankruptcy and reorganized, but that would have meant the end of the automobile union workers. At the very least, it would have meant their influence was greatly diminished.
Obama could not politically afford to have that happen. It was better in his mind to lose taxpayer dollars than political currency.
So using taxpayer dollars, the auto bailout happened. The unions actually gained more power within the company. The Treasury Department conspired with GM and Chrysler to lie to the American people.
Obama has said that he plans to make the “revival” of GM and Chrysler a centerpiece of his re-election campaign.
We all should remember what has happened with the bailout when we walk into the voter’s booth.
I know I will.