Michigan Primary raises a big question: Who gets credit for the bailout?
Publicus Tacitus, the Roman senator, is given credit for coining the phrase, “Success has many fathers, but failure is an orphan.”
He’d feel right at home during the Michigan Republican primary campaign.
Over the past few weeks, candidates, their opponents and those who played a role have been debating just who should get credit for the auto industry bailout.
It’s a long-overdue discussion of what happened a little over three years ago, and the conversation shows just what a political hot button the situation still is for people in Michigan and the Midwest. Here’s a list of credit takers and how they make their cases.Mitt Romney: In his now famous 2008 New York Times op-ed, “Let Detroit Go Bankrupt,” Romney argued that the automakers should go through a “managed bankruptcy.” It was an inflammatory suggestion at the time, because automakers were just appealing to Congress for what they contended would be a “bridge loan” to help through a temporary crisis until the market got back on its feet.
In a sense, what Romney suggested happened, only probably not the way he envisioned it. Most likely, Romney meant a “pre-packaged” bankruptcy, in which the steps needed to restructure the companies would be agreed upon in advance. But, that leaves the question of who would have financed a Romney plan.
On Monday, financier Warren Buffett pointed out that banks were unwilling to provide lending so that the auto companies could restructure without federal help. Buffett, speaking on CNBC, said the bailout was one of the best things that happened to the American economy.
President Bush: After Republicans in the U.S. Senate decided in December 2008 not to support bailout legislation, the Bush administration provided an initial $13.4 billion in emergency assistance to General Motors and Chrysler. (By now, Ford had decided not to accept federal money.)
Without the assistance, one or both of the companies might have wound up in bankruptcy the following month, according to an internal memo by Lawrence Summers, an advisor to then President-Elect Obama. Earlier this month, President Bush said he was glad that he had provided the assistance because Detroit’s comeback was successful. “I’d do it again,” he told the National Automobile Dealers Association.
President Obama: The Obama administration did much of the heavy lifting on the bailout, creating an auto task force that oversaw the restructuring plan for GM and Chrysler. It negotiated for Fiat to take management control of Chrysler after its bankruptcy.
The administration provided debtor-in-possession financing so both could go through Chapter 11, as well as operating funds and loans to both car companies. United Auto Workers President Bob King, writing in the Detroit Free Press last week, gave the president full credit.
“I don’t have to tell you that cars made Detroit. But no matter what anyone tells you, it’s thanks to President Obama that Detroit is still making cars,” King said.
The UAW: But King also pats his own members on the back. Union members at GM and Chrysler granted concessions as part of the auto companies’ restructuring package. They agreed to a wage freeze, gave up cost-of-living allowances, and agreed to binding arbitration in case a deal wasn’t reached on their most recent contract.
As King put it, “We were willing to share the sacrifice to help our industry and this region survive.”
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