Expert: Romney's Plan for Managed Bankruptcy Would Have Saved Industry, Taxpayers Millions
“Bin Laden is Dead and GM is Alive!” That slogan emanating from Vice President Biden, which has resonated in states, like Ohio, which could decide this upcoming election. But Gov. Romney’s call from late 2008 to send Detroit into managed bankruptcy would have saved the auto industry as well, according to expert Edward Niedermeyer.
Niedermeyer wrote today in The Wall Street Journal that:
GM and Chrysler could have averted tens of thousands of lost jobs, and the government could have preserved billions of dollars in tax revenue, by undergoing a true bankruptcy reorganization, even if the government had provided full debtor-in-possession financing.
In a true bankruptcy guided by the law rather than by a sympathetic, rule-bending political task force, GM and Chrysler would have more fully faced their competitive challenges, enjoyed more leverage to secure union concessions, and had the chance to divest money-losing operations like GM’s moribund Opel unit. True bankruptcy would have lessened the chance that GM and Chrysler will stumble again, a very real possibility in the brutally competitive auto industry.
Certainly President Obama threw enough money at GM and Chrysler to create a short-term turnaround, but if the auto makers find themselves on hard times and return to Washington with hats in hand, his policy will have been no rescue at all.
Making matters worse, the Treasury Department issued notices which let ‘New GM’ acquire $45 billion in tax write-offs from its defunct predecessor, a blatant violation of basic bankruptcy law. This not only deprived the government of billions in tax revenue, it hid the true cost of the bailout while disproportionally benefiting the UAW, an unsecured creditor.
By giving the UAW’s unsecured claims against GM and Chrysler a higher priority than those of secured creditors, the government’s reorganization further damaged bankruptcy precedent. The net result was a $26 billion transfer to a key Democratic ally and political donor, according to analysis by scholars from the Heritage Foundation and George Mason University.
Furthermore, “Mr. Romney was well aware of the risk of an industry wide collapse, arguing in his op-ed in favor of a government role in the bankruptcies, namely to "provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk, according to Neidermeyer. He also added “with government-backed warranties and guaranteed debtor-in-possession financing, the industry could have avoided a meltdown just as effectively as it did with the president's approach.”
So, Romney wouldn’t have sucked the life out of the automobile industry, which is what liberals would like the American people to believe. It was an autoworkers union bailout to consolidate support for the president’s governing coalition at the time. So, while the vice president could say that bin Laden is dead – that seldom translates into votes in this cycle.
As Hans Bader of the Competitive Enterprise Institute wrote a post today on the Open Markets that:
... John Berlau and others have noted, the Obama administration’s handling of the Chrysler bailout also was flawed, ignoring better alternative rescue options with more synergies for the U.S. auto industry, and could result in the loss of American jobs and the transfer of U.S. jobs in Jeep production to Italy, home of Fiat, the troubled automaker that was given control of Chrysler by the Obama administration. (Fiat plans to “export new . . . Jeep models from Italy to prevent [Italian] plants from closing,” and “protect Italian jobs . . . by exporting premium brands from Italy to the U.S.”)Story Continues Below Ad ↓
Bader also noted that “in the bailouts, the Obama administration left GM’s uncompetitive, inefficient work rules and high labor costs largely intact to appease the UAW union, and saddled GM with future losses in the billions through massive deferral of UAW pension obligations.”
Again, we have the Obama administration peddling a false narrative, media outlets covering for him, and therefore the lie becomes accepted. And it seems that Obama’s ‘Benghazi-ing’ of the auto bailout is working. Romney and Obama are polling dead even 24 hours before the nation votes.