The Washington Free Beacon posted an article today reminding us of some inconvenient truths about the government bailout of the automobile industry. Since one of the campaign slogans of President Obama’s campaign this year will be, “Osama Bin Laden is dead, and General Motors is alive,” it might be wise to take a look at some of the facts surrounding the auto bailout.
The article reports:
The administration has already written off $7 billion in taxpayer losses in the American takeover of Chrysler and General Motors; those losses are expected to climb as high as $23 billion—27 percent of the $85 billion spent on the bailout.
While the bailout is widely credited with saving the two companies, increasing taxpayer losses have made it nearly as unpopular in 2012 as it was when Obama was elected. More than half of Americans still disapprove of the auto bailout compared with 61 percent in 2008.
Aside from the taxpayer losses involved, there is the violation of bankruptcy laws. We have laws for a reason–if they are wrong they need to be changed (these particular laws are not wrong), but until they are changed, they have to be followed.
As was pointed out at rightwinggranny in June of 2009, in bailing out Chryster, laws were broken:
The issue here is the secured debt. The government is trying to pressure those who hold secured bonds to accept less than the value of the bonds so that other creditors can be paid. We need to remember that one of the basic principles of bankruptcy law is that secured creditors (who loaned money only on the contractual promise that if the debt was unpaid they’d get specific property back) get paid off in full before unsecured creditors get anything. To do anything else is a violation of the US Constitution and its rules on private property rights.
Laws were broken in the auto bailouts in order to hand the companies over to the unions. Some Americans remember that. General Motors is alive, but aside from the taxpayer losses, the government and the unions have much more power in running the company than is appropriate.
The article at the Free Beacon further reports:
“They came in and forced these companies into pre-packaged bankruptcy where unions were made whole and creditors were squeezed out,” the expert said. “In normal bankruptcy they don’t rearrange stakeholders rights willy-nilly…there’s no way those union contracts would have been untouched.”
Labor is not the only constituency to which Obama has tried to appeal by championing the bailout. “After three decades of inaction, we’re gradually putting in place the toughest fuel economy standards in history for our cars and pickups,” Obama said in the same February speech. “That means the cars you build will average nearly 55 miles per gallon by the middle of the next decade—almost double what they get today.”
Obama tied the bailouts to strict environmental standards that have led to increasingly efficient cars, an achievement he has used to woo green advocates. The move has affected more than just the environment, establishing “dangerous” legal precedents, according to some legal experts.
General Motors may be alive, but it is a whole lot less free than it was before President Obama said, “I’m from the government, and I’m here to help you.”