It appears the time has finally come for the Obama Administration to end taxpayers’ forced investment in General Motors. Reports continue to roll in that Treasury is expected to sell its remaining stake by year-end. Of course, the news will be trumpeted as a great success by those responsible for the heist that cost taxpayers (along with creditors and shareholders of old GM) billions of dollars.
The final figures confirming how taxpayers fared will have to wait for the closing tally, but the estimated loss to those who footed the GM bailout bill is in the $10 billion range. A full retrospective view will reveal that the losses go far beyond that monetary sum. Worse yet, the money was spent to reward political allies that would, in return for the payoff, come out in force to secure President Obama’s reelection.
The hyperbolic spin by General Motors and the Obama Administration will proclaim that billions of dollars was a small sum to pay (any amount is when it’s someone else’s money) to save millions of jobs. Few question the dubious job loss projection which is based upon a total collapse of the auto industry. In fact, GM’s last annual filing puts the total number of people it employs in the US at only 80,000. It is also questionable whether or not these jobs would really have been lost if GM went through a traditional bankruptcy without the governmental manipulation.
There is no denying that the UAW received favorable treatment in the bankruptcy outcome that was ordained by Obama’s Auto Task Force. The membership of that task force gives further evidence that the primary goal of the bankruptcy orchestration had nothing to do with improving operational efficiency at GM, but focused on getting the best deal for the UAW. Protection for UAW interests was something that would not have been ensured under a traditional bankruptcy that treated union and non-union claims equally; something the Obama team would not accept.
Startlingly, the members of the Task Force were not auto industry experts. Task Force head, Steve Rattner, was an allegedly corrupt hedge fund guy. Task Force member and union friend Ron Bloom had a history of helping the union and later caught heat for stating that “we did it all for the unions.” Another architect of the bankruptcy, Harry Wilson, was a self-proclaimed Republican, which was somehow supposed to give credence to the assertion that the Task Force was showing no favoritism. Mr. Wilson did such a good job for the UAW that the Teamster’s Union later insisted that he be brought in to help them at struggling trucking company, YRC Worldwide. Mr. Bloom went on to continue his service to the unions by helping unionized Postal workers.
The monetary sum that was lost by taxpayers on the GM bailout does not stop at the $10 billion mark. Treasury changed tax code so that GM could be forgiven for close to $30 billion in future tax expenses. An Administration that publicly called for corporations to pay their fair share in taxes hypocritically gifted tax loss carryovers to GM, giving them a free ride on paying taxes for years.
Another $17.2 billion went to bailout GM finance unit, GMAC. Haven’t heard much about GMAC? That’s because, in another move to fool taxpayers, the company changed its name to Ally Financial (which the government still owns) to distance itself from GM. Ally Financial continues to finance cars and dealerships for GM with taxpayer money.
Perhaps the country’s recent realization that our present leadership has been somewhat less than transparent and honest will lead to a reassessment of just how “successful” the auto bailouts were. How many lies were told to Americans regarding the GM bailout?
The claim that the goal of the GM bailout was to save jobs is not entirely accurate. The goal was to protect UAW jobs. In fact, a TARP watchdog criticized Treasury for forcing closure of dealerships, costing tens of thousands of non-union jobs. The union favoritism was even more apparent when non-union retirees at GM parts supplier, Delphi, lost their pensions while union retirees at the company were rewarded money from GM (as deceptively initiated by the Obama Administration) to “top-off” their pensions. Congress continues to investigate that dirty story.
Another unseemly deception by Treasury and GM came when then GM CEO, Ed Whitacre, announced that taxpayers had been repaid in full by GM. Again, the Obama Administration took part in the deception as emails surfaced showing coordination with the Treasury Department regarding the strategy to fool Americans into believing GM had repaid its debt to taxpayers. While many of the GM deceptions went unquestioned, this one was a little too blatantly false to pass muster as criticism was quickly levied upon GM for the lie.
We can also reflect back upon the initial claims by Team Obama that the GM “investment” would make money for Americans. Put that on the growing list of broken promises by Obama. We not only did not make money, we lost tens of billions of dollars. We also saw an Administration emboldened by their far-reaching intrusion into what should have been the private sector. Payback was given to political allies at the expense of taxpayers and non-union groups without significant questioning by the media. History should show that the GM bailout was anything but successful. It was an ugly chapter in the Obama Administration’s legacy book which cost the country dearly.
Mark Modica is an NLPC Associate Fellow.