Wednesday, October 24, 2012

David Letterman Calls Bullshit on President Obama

David Letterman tells Rachel Maddow he is a little discouraged in his support for President Obama:
"President Obama was not telling the truth about what was excerpted from that op-ed piece."
The subject is the auto bailout and the claim is that President Obama saved GM while Mitt Romney would have put GM out of business.

The now famous "Let Detroit Go Bankrupt" editorial by Mitt Romney appeared on November 18, 2008. Of course, there are two types of bankruptcy, the "going out of business" bankruptcy and the "can't pay all the bills so the creditors have to accept less to keep the doors open" bankruptcy. Chrysler filed for bankruptcy on May 1, 2009 followed by General Motors on June 1, 2009.

So what happened in the six and a half months between November 18 and June 1? A lot of secret meetings were held in Detroit, NYC, and DC to determine which auto plants and dealerships around the country would be closed, which would stay open, and how much federal cash that would take.

I visited Detroit for a great uncle's funeral in April 2009. There was a feeling that times were tough but no feeling of impending doom. There was considerable scoffing at the notion that the U.S. government would be guaranteeing the warranties on GM cars, which had been announced at the end of March. GM will warranty its cars was the Detroit wisdom.

As for Chrysler, it had been owned by Germany's Daimler Motors and would end up owned by Italy's Fiat. If it had been liquidated, Form and GM might have been given the opportunity to buy its best brands, and they would have returned to American ownership.

The Ford family wanted to keep control of their company and Ford didn't take the bailout. They were able to avoid bankruptcy in no small part because they had proactively closed unprofitable auto plants and dealerships starting in 2006. Their reward was to watch their competitors have large portions of their debts forgiven and fill up on cheap government money.

One of Mitt's ideas in that op-ed has a distinctly populist ring:
"Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat."
Another of Mitt's ideas is exactly what eventually happened 4 to 6 months later:
"The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk."
Another one of Mitt Romney's prescriptions that took much longer to become true:
Management as is must go. New faces should be recruited from unrelated industries.
GM CEO Richard Wagoner was allowed to stay on until March 29, 2009, when he was replaced by longtime GM hand Fritz Henderson, who served as CEO until December 1, 2009. Eventually GM got around to hiring outsider Dan Akerson, a former telecom executive and private equity investor, as its CEO on September 1, 2010.

What then President-elect Obama should have done was immediately appoint Mitt Romney as his Car Czar. That would have sent a signal he was serious about the new era of bipartisanship he had promised. And the U.S. auto industry would have gotten where it needed to go a year or two earlier.

At the end of the day, I don't think U.S. taxpayers can complain too much about the auto bailout. It all went on the federal credit card, so it hasn't cost taxpayers anything out of pocket, yet. The U.S. might have to write off about $14 billion of the GM loan. That works out to about $45 person, or $122 per taxpayer. You can buy a share of GM today for $23.69. Some are agitating for the government to send them a share. Frankly, I don't want one.

In any case, the auto bailout was a bipartisan effort that started under President Bush and was completed under President Obama. But you'll never hear Barack Obama say, "President Bush and I saved the auto industry."

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