An interesting report from The Fiscal Times:
Obama's Auto Bailout Was Really a Hefty Union Payoff
In the second presidential debate, Mr. Obama attacked early on, saying, "Governor Romney said we should let Detroit go bankrupt."
Note to Obama fans: GM did go bankrupt - filing for Chapter 11 protection against its creditors on June 1, 2009. It's what happened next that the president can take credit for - a handout of $49.5 billion in taxpayer money to GM, some $27 billion of which remains outstanding, and another $17 billion to its financial arm Ally Financial, which still owes $14.7 billion.
In other words, Obama didn't save General Motors; American taxpayers did, with an assist from the Federal Reserve. While liberals rant about the bailouts of Wall Street, it is worthwhile noting that of the $417 billion in TARP funds spent to stabilize the economy, only $65 billion has yet to be repaid - and more than half of that is owed by GM and Chrysler. The latest TARP report from the Congressional Budget Office says that the government invested nearly $80 billion in those two auto giants and that taxpayers are still on the hook for roughly $37 billion.
In the same report, the CBO projects that handouts to Wall Street firms will ultimately net the government a cool $11 billion profit. They say the auto industry, on the other hand, will never pay back taxpayers. According to the congressional bean counters, $20 billion is gone for good.
Where did that money go? Mainly, it went to paying off debts owed by GM and Chrysler, and - in an historic distortion of our bankruptcy proceedings - to securing the pensions and livelihoods of UAW workers. It turns out the real debt was that of Mr. Obama to organized labor, which had ponied up some $400 million to help him defeat John McCain.
The Obama administration strong-armed the auto companies' creditors into accepting undeniably unfair terms - terms that saw pensions obliterated for non-union workers but saved for those carrying a UAW card. Terms that saw non-UAW shops close but UAW factories stay open. Terms that doled out ownership in GM with political favoritism as a guiding principle.
These charges are not at issue. In the government-managed reorganization of GM, bond holders (secured bond holders, who normally are at the top of the pay-out chart) were given equity in the carmaker at a price of $2.7 billion per one percent ownership. The government ended up paying $834 million for every one percent it claimed; the UAW paid only $629 million.
Why did the UAW receive such favorable treatment? The government at the time argued that the UAW was already making sufficient sacrifices. While true that union members gave up cost-of-living increases and agreed to a no-strike rule, they were protected against the kind of pay cuts that would have made GM truly competitive.
Months earlier, Congress refused an emergency loan to the auto makers because the UAW would not lower pay to compete with foreign car makers operating in non-union U.S. factories. The reality is that the UAW could have been harder pressed. If GM and Chrysler had stopped turning out cars, the union was toast.
A lot more at the site. The progressives reward failure if there are enough campaign contributions and support. I voted with my dollars -- have driven Dodge trucks for the last 30 years. It was time to retire my old Dakota so I bought a Ford E-350 and love it.
