I normally try to confine my posts to matters involving the economy. But sometimes, a speech, or a statement made by a politician so disgusts me that I simply have to comment on it or risk spontaneous combustion.
Yesterday involved such an event.
As reported in several Michigan newspapers, among them the Detroit Press, Republican candidate for President, Mitt Romney, purports to re-write his own history regarding the automobile loan program by the Bush and Obama Administrations to GM and Chrysler at the end of George W. Bush’s second term and President Obama’s first few months in office.
On Tuesday, February 14, 2012, Dr. Flip and Mr. Flop, Willard Mitt Romney, Republican presidential hopeful, inexplicably renewed his opposition to the Bush and Obama administration’s bailout of General Motors and Chrysler while campaigning in Michigan!!!
He did so in such a brazenly cynical manner, that he had to have assumed that the people of Michigan are either stupid, totally cut off from the rest of America, or have all been inhabited by pod people.
In several Michigan newspapers, Romney contended that President Obama’s rescue of GM and Chrysler actually made the companies worse. I fiercely struggle to leave politics to the pundits, talking heads, and political junkies, but Romney’s blatant re-writing of history simply defies all acknowledgements that Americans are capable of scratching their own ass, much less reading a newspaper.
Romney, a former Michigan resident, whose father George Romney (who fled to Mexico to avoid persecution by Mormon-haters…effectively making Mitt an “anchor-baby”)was a well-liked Michigan Governor and head of American Motors, is neck-and-neck with rival Rick Santorum in polls ahead of Michigan’s Feb. 28 primary.
One item, in particular, points to a major reason that Romney is having such a difficult time in what amounts to his home turf. Romney’s opposition in November 2008 to the government loans that literally saved GM, Chrysler and thousands of Michigan jobs, and by some estimates, over one million jobs nationwide, (more if Ford and Toyotas supply lines had been crippled from the loss of business as well) are not falling on deaf ears .
Some of the more obvious “inaccuracies” espoused by Mr. Romney come via a recent interview in the Detroit News as Mr. Romney desperately seeks to hang on to the hope that he can still win the upcoming Michigan Republican Primary:
- “Three years ago, in the midst of an economic crisis, a newly elected President Barack Obama stepped in with a bailout for the auto industry.”
In fact, it was President George W. Bush under whom the program began. It was GWB who was forced to lend GM and Chrysler $17.4 billion in December 2008 after Senate Republicans blocked a rescue plan in Congress. President Bush recently told reporters that warnings from Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson revealed that if he did not act to shore up GM and Chrysler, up to 1 million jobs would be lost forever. That figure alluded to the auto industry alone and the number of jobs lost could have expanded to one million more in the supply chain, which furnishes everything from upholstery to headlights.
Knowing what we know now, says Bush, “I’d do it again.”
- “The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better.”
Mr. Romney’s argument implies that had President Obama not acted, private companies would have stepped in and run a “managed bankruptcy.” Financial wizard that Mr. Romney purports to be, surely he willingly ignores that in the fall of 2008, before President Obama was even sworn in, no one, not one single private entity on Wall Street or anywhere else was willing to lend GM and Chrysler a penny — let alone the $81 billion they needed.
Both automakers’ bankruptcies required money on a scale not seen in U.S. history. Unlike, say, airlines, which can keep running with much smaller short-term loans while they restructure, automakers need massive amounts of up-front capital to pay suppliers and workers as they produce actual inventory; their in-house companies that finance the sales of their production need even more to keep making car loans that can bring in additional revenues.
The potential damage wasn’t just in lost jobs; Chrysler executives testified on the first day of Congressional hearings that without immediate cash the company risked losing or dismantling and thus destroying hundreds of millions of dollars’ worth of equipment and defaulting on the loans that secured that equipment.
Even after President Obama took office, GM and Chrysler searched frantically for paths to avoid bankruptcy, including a possible merger. Chrysler held a one-week garage sale of its assets in February 2009, inviting anyone with enough money to bid for parts of the company. Not one single buyer stepped forward. If you recall, capital was frozen and the nation stunned by the sheer size of the real estate collapse and subsequent bailouts of the major investment banks.
- “Ultimately, that is what happened [really?]. The course I recommended was eventually followed. GM entered managed bankruptcy in June 2009 and exited it a month later in July. The Chrysler timeline was similarly swift. But something else happened along the way that was truly egregious. Before the companies were allowed to enter and exit bankruptcy, the U.S. government swept in with an $85 billion sweetheart deal disguised as a rescue plan.”
First of all, GM and Chrysler’s path to the bankruptcy court was blocked by their own executives. Had the government not intervened as Romney suggests would have been the proper course of action, their Wall Street bondholders would have liquidated GM and Chrysler, most likely in the same manner that Bain Capital advised their own clients on a multitude of occasions.
“The Bain Way” is :
- Borrow money using the acquired companies’ assets as collateral.
- Allow the companies acquired to go bankrupt while keeping the borrowed funds squirreled away in the Cayman Islands or Switzerland, letting the creditors eat the losses.
- Romney and his cronies invest the ill-gotten gains into capital investments on which they pay only Capital Gains Taxes (15%) instead of Income Tax (30%).
- The Big Lie is that Romney “earned” that money to begin with so paying Capital Gains Tax is not only appropriate, why it’s DOUBLE taxation!!!! Horse-hockey!! He did nothing for that money but cheat the real taxpayers of this country into making money for him and his cronies!
Some actual bondholders (creditors of GM and Chrysler) were holding out for pennies on the dollar, at the risk of the entire bankruptcy proceeding, hoping to make huge profits by buying that equipment in the subsequent fire sale and selling it at 10x more than they paid for it.
Another Romney claim that borders on delusional if not dishonest:
- “Chrysler’s ‘secured creditors,’ who in the normal course of affairs should have been first in line for compensation, were given short shrift, while at the same time, the UAW’s union-boss-controlled trust fund received a 55 percent stake in the firm.”
Chrysler’s secured creditors were none other than the same group of Wall Street banks, including Goldman Sachs, Citigroup, and J.P. Morgan. They are same recipients of their own bailouts from government coffers.
As stated above, some of these investment firms had bought the Chrysler’s secured bonds (credit instruments) in the months ahead of bankruptcy hoping to cash in on the fire sale,(some for as little as 29 cents on the dollar). Yes, some were legitimate bondholders hoping to make a quick buck. I have no problem with that. But the investment banks were playing with money GIVEN to them by the taxpayers. “The Bain Way”.
As for the “union-boss-controlled trust fund,” that’s what’s known as a VEBA trust that now pays the health care of 426,409 retirees from GM, Ford and Chrysler — and in return, owns all future health-care obligations from the companies for those retirees.
It’s painfully evident that Romney apparently preferred that before hundreds of thousands of UAW retirees got health care, Wall Street should have been made whole for buying bonds with government bailout money hoping to cash in on GM and Chrysler’s ultimate demise.
Even in Detroit’s more conservative newspapers, the comments this morning on Romney’s new op-ed are running about 2-1 against him.
Romney has had plenty of time to alter his ill-conceived but typically clueless comments from his original New York Times op-ed. Instead Mr. Romney followed the typical modus operandi of a man who feels he is above the average American and has manipulated the tax code to make easy money over the years on the blood, sweat and tears of the “average” American.
Mr. Romney, who has never reported to another human being, and who has no frame of reference with the “average” American, has no business being the “leader” of all “average” Americans.
To Mr. Romney, We the People are merely disposable assets.