SIGTARP Report – Obama Admin Lied about GM Bankruptcy Process

For years the Obama Administration maintained that they had no significant involvement in the day to day operations at General Motors as the company was guided through a taxpayer-funded bankruptcy process. A report from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) now sheds light on the process and confirms that the Administration did, in fact, drive decisions at GM. One such decision saw GM provide taxpayer funds to “top-off” pensions for politically-favored UAW retirees at Delphi while non-union retirees lost the majority of their benefits. Treasury officials previously denied any involvement in the actions.

The non-union retirees at Delphi have been trying to get their story heard for years. The Chair for the Delphi Salaried Retirees, Dennis Black, offered the following statement regarding the SIGTARP report, “SIGTARP’s finding that Treasury was greatly involved in the involuntary termination of our pension plan legitimizes our request that Treasury end its coverup. It’s withheld emails and other documents from us for 18 months.  We just want our day in court.”

The cover-up Mr. Black is referring to involves sworn testimony by Treasury officials who lied under oath about the Administration’s involvement in the decision to terminate non-union pensions at Delphi while protecting UAW pensions. Mr. Black does not feel that it is likely that perjury charges would be pursued by the Justice Department. The House Oversight and Government Reform Committee has, however, sought to get answers from Treasury on the reasons for their actions. The Obama Administration has stonewalled the efforts to this point.

The Oversight Committee has offered the following statements on the SIGTARP report:

“The Obama Administration said time after time that it would not play a role in the day to day operations of GM,” said Chairman Issa. “The SIGTARP report finds, unequivocally, that Treasury usurped authority at GM and played a heavy hand in decision-making at the company. This is troubling news that lends credence to the fact that the federal government essentially took over a private company and made decisions that chose winners and losers.”

“From the beginning, the Delphi salaried retirees and certainly my Congressional office have pushed the administration because we believe the Administration picked winners and losers,” said Rep. Turner. “The Administration has repeatedly denied they were involved in the decision making for both General Motors and the Pension Benefit Guaranty Corporation (PBGC) that resulted in Delphi salaried retirees losing their pensions. The report released today completely discredits the Administration’s statement that they did not influence GM and were not involved in GM’s or the PBGC’s decision making.”

Ron Bloom, the President’s auto czar, testified in 2009 that the Administration would not play a role in day to day decisions saying, President told the auto task force “to refrain from intervening in the day-to-day management of these companies.” The new SIGTARP report refutes this assertion.

It remains to be seen if the latest evidence that the auto bailout process was carried out in an unfair manner for those who did not have political clout will garner much media attention. It seems that the flurry of scandals bogging down the White House is getting minimal coverage with the Delphi Retiree scandal being put at the bottom of the list. For those of us that were close to the GM bankruptcy action, the evidence of dishonesty by Administration officials comes as no surprise.

The SIGTARP report accurately portrays the intrusive manner in which the Obama Administration oversaw the GM bankruptcy but misrepresents one major example of dishonesty during the process. Regarding GM bondholders, the report states, “SIGTARP found that Treasury made a deal with the bondholders prior to GM filing bankruptcy because of the bondholders’ leverage to object to and prolong the bankruptcy. An Auto Team official told SIGTARP that establishing a deal with the bondholders would eliminate a major risk of delay in bankruptcy court.”

The fact is that a deal with a majority of GM bondholders was never made prior to the bankruptcy filing. Treasury officials have also falsely testified at hearings that a majority of GM bondholders approved the bankruptcy plan. No such vote by bondholders ever happened and Treasury has never produced any documentation to back the claims that bondholders agreed to the plan. Regarding the so-called approval by bondholders, a NY Times article from that period states that, “Bondholder advisers said they would not disclose the names of investors who supported the government’s plan for G.M., which would include a quick sale of its best assets to a new company funded by the Treasury.”

Steve Rattner, an allegedly corrupt hedge fund guy, was the original head of Obama’s Auto Task Force who set the stage for the bankruptcy process. It was clear that Rattner would favor UAW claims over less politically-popular claims by GM bondholders (as well as intruding to protect Delphi’s UAW retirees over non-union Delphi retirees) despite the fact that all unsecured claims had the same legal standing. A Bloomberg article pre-dating the GM bankruptcy filing voiced the Obama Administration’s false claim that the Task Force was open to restructuring GM outside of bankruptcy and quotes Rattner as saying, “The UAW has been very constructive and very thoughtful. They don’t want to be the only ones giving blood or even necessarily being the first ones giving blood.”

The SIGTARP report touches on Rattner’s anti-bondholder sentiment when it refers to the expected payout to GM bondholders, “Auto Team leader Rattner stated in Overhaul, ‘We valued the package at about12 to 15 cents on the dollar, more than what they deserved (zero)…'” Bondholders “deserving zero” in a bankruptcy proceeding had no basis in bankruptcy law, but it clearly indicates where the loyalties of the Obama team lied.

The Delphi retiree case gives the clearest evidence that the GM bankruptcy process was deceptively manipulated by the Obama Administration to favor political cronies. Even as the truth emerges, claims are being made by those involved that the process was done fairly and that UAW interests were simply more important than non-union interests. The fact is that bankruptcy proceedings give corporations a chance to restructure new terms with all creditors, whether they are unionized or not. The Hostess bankruptcy is an example of how a restructuring can result in changes to labor contracts that bring about real labor concessions. During the GM bankruptcy process the Obama Administration made sure that political allies would not have to make the sacrifices that were expected from other parties. They clearly picked winners and losers and the American taxpayers that paid for it deserve to hear the truth.

Mark Modica is an NLPC Associate Fellow.