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Fact Checking Obama’s Auto Bailout

RNC Communications - February 23, 2012

“Virtually Every Claim By The President Regarding The Auto Industry Needs An Asterisk, Just Like The Fine Print In That Too-Good-To-Be-True Car Loan.” (Glenn Kessler, “President Obama’s Phony Accounting On The Auto Industry Bailout,” The Washington Post, 6/7/11)

  • FactCheck.org: The President Is “Sounding Very Much Like A Used Car Salesman” When He Describes The Success Of The Auto Bailouts. “Notice the president — sounding very much like a used-car salesman — used the phrases ‘during my watch’ and ‘under my watch’ when describing the TARP loans as being ‘completely repaid.’” (Eugene Kelly, “Chrysler Paid In Full?” FactCheck.org, 6/6/11)

Obama Gave Large Stakes Of GM And Chrysler To Union Allies

After The 2009 Auto Bailout, The United Auto Workers Union “Was Given An Ownership Stake In Chrysler And Became One Of G.M.’S Largest Shareholders.” “In the industry restructuring that followed the auto rescue of 2009, the U.A.W., long a major contributor to Democrats, was given an ownership stake in Chrysler and became one of G.M.’s largest shareholders. Pensions of some union members and retirees were left intact, while salaried, nonunion employees took big hits.” (Jeremy Peters, “Auto Workers Tap Network For Obama,” The New York Times, 2/24/12)

  • The UAW Now Owns 41.5 Percent Of Chrysler And 10.3 Percent Of GM. “The Center for Automotive Research reports that the union trust fund now owns 10.3 percent of GM’s shares, while the U.S. Treasury owns 32 percent, and public shareholders own 35.2 percent. Italian automaker Fiat owns 53.5 percent of Chrysler, while the union trust owns 41.5 percent.” (Josh Hicks, “President Obama And Crony Capitalism: Examining Mitt Romney’s Claims,” The Washington Post, 2/20/12)

The Washington Post’s Fact Checker: “It’s Fairly Clear That The President Gave Precedence To The Union” In The Auto Bailouts. “In terms of the ‘sweetheart deal’ for the UAW, it’s fairly clear that the president gave precedence to the union and its blue collar members, who fared better than they would have been under Chapter 11. Meanwhile, scores of employees from the white-collar ranks are angry about cuts they had to accept. We won’t judge whether Obama’s stance was appropriate, but we can say that he came down on the side of the Democrat-friendly UAW.” (Josh Hicks, “President Obama And Crony Capitalism: Examining Mitt Romney’s Claims,” The Washington Post, 2/20/12)

  • Obama Forced Bondholders To Take A Backseat To The UAW. “That was the real issue for the White House because of its potential damage to union labor. So it proceeded to orchestrate an out-of-court prepackaged bankruptcy. Bond holders would have taken a severe haircut no matter what, but Mr. Obama's force majeure subordinated their rights to the UAW's.” (Editorial, “Halftime In Detroit,” The Wall Street Journal, 2/25/12)

Taxpayers Are Still Owed Billions That The Obama Administration Gave To GM and Chrysler

Most Recent Report Shows Obama Administration Increased Its Estimate Of Auto Bailout Loss To $23.77 Billion. “In the government's latest report to Congress this month, the Treasury upped its estimate to $23.77 billion, up from $23.6 billion.” (David Shepardson, “Treasury Ups Auto Bailout Loss Estimate,” The Detroit News, 1/30/12)

  • Much Of The Increase In Losses “Due To Sharp Decline Of GM’s Stock Price…”“Last fall, the government dramatically boosted its forecast of losses on the rescues of General Motors Co., Chrysler Group LLC and their finance units from $14 billion to $23.6 billion. Much of the increase in losses is due to the sharp decline of GM's stock price over the last six months.” (David Shepardson, “Treasury Ups Auto Bailout Loss Estimate,” The Detroit News, 1/30/12)
  • In Order To Break Even, The Obama Administration Would Have To Have Its 500 Million Shares Of GM Average $53 Per Share. “The Treasury, which initially held a 61 percent majority stake in GM, now holds a 26.5 percent share, or 500 million shares in GM. To break even, the government would need to average $53 per share for its remaining stake. At current prices, the government would lose more than $14 billion on its GM bailout.” (David Shepardson, “Treasury Ups Auto Bailout Loss Estimate,” The Detroit News, 1/30/12)

Obama Administration Recorded $1.3 Billion Loss On Chrysler’s Bailout. “The government booked a $1.3 billion loss on its $12.5 billion bailout of Chrysler.” (David Shepardson, “Treasury Ups Auto Bailout Loss Estimate,” The Detroit News, 1/30/12)

Congressional Oversight Panel: “To The Extent That Success Is Defined As A Return Of Taxpayer Money, It Remains Somewhat Unlikely That All TARP Funds Invested Will Be Returned.” (“The Final Report Of The Congressional Oversight Panel,” Congressional Oversight Panel, 3/16/11)

  • COP: “Even If TARP Funds Are Fully Repaid, The Government’s Intervention In This Industry May Have Lasting Effects.” (“The Final Report Of The Congressional Oversight Panel,” Congressional Oversight Panel, 3/16/11)
  • COP: It Is “Unclear Whether The TARP Will Ultimately Reverse” The Domestic Auto Industry's Downward Trend. “The domestic automotive industry was trending downward before the financial crisis hit and it is unclear whether the TARP will ultimately reverse that trend in the long term.” (“The Final Report Of The Congressional Oversight Panel,” Congressional Oversight Panel, 3/16/11)

TARP’s Inspector General Said That Obama’s Mishandling Of The Auto Bailout Led To Tens Of Thousands Of Jobs Being Lost

“The Government-Orchestrated Bankruptcies Of General Motors And Chrysler Led To Tens Of Thousands Of Direct Factory, Supplier And Other Related Job Cuts.” “While government influence at decade's end helped Detroit recover financially, the government-orchestrated bankruptcies of General Motors and Chrysler led to tens of thousands of direct factory, supplier and other related job cuts. The primary benefit of the U.S. industry restructuring for employment has been the balance of jobs saved rather than jobs created.” (John Crawley, “Analysis: Obama Seeks Lift From Detroit Auto Jobs,” Reuters, 1/12/12)

TARP Inspector General: Tens Of Thousands Of Jobs Were Lost Due To Hasty Factory Closings. “The report by Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program of the Treasury Department, said both carmakers needed to shut down some underperforming dealerships. But it questioned whether the cuts should have been made so quickly, particularly during a recession. The report, released on Sunday, estimated that tens of thousands of jobs were lost as a result.” (Nick Bunkley, “TARP Audit Questions Rush To Close Auto Dealers,” The New York Times, 7/18/10)

  • Dealership Closings Were Not “Necessary For The Sake Of The Companies’ Economic Survival Or Prudent For The Sake Of The Nation’s Economic Recovery.” “It is not at all clear that the greatly accelerated pace of the dealership closings during one of the most severe economic downturns in our nation’s history was either necessary for the sake of the companies’ economic survival or prudent for the sake of the nation’s economic recovery,’ the report said.” (Nick Bunkley, “TARP Audit Questions Rush To Close Auto Dealers,” The New York Times, 7/18/10)

Obama’s Auto Task Force Pressed GM And Chrysler To Close “Scores Of Dealerships,” Without Considering the Consequences. “President Obama’s auto task force pressed General Motors and Chrysler to close scores of dealerships without adequately considering the jobs that would be lost or having a firm idea of the cost savings that would be achieved, an audit of the process has concluded.” (Nick Bunkley, “TARP Audit Questions Rush To Close Auto Dealers,” The New York Times, 7/18/10)

  • “Chrysler Terminated 789 Dealerships Last Summer And General Motors Announced Plans To Wind Down 1,454 Dealerships By October Of 2010.” (Catherine Clifford, “Watchdog: Auto Dealers Shut Down Too Fast,” CNN Money, 7/19/10)

Treasury “Contributed To The Accelerated Shuttering Of Thousands Of Small Businesses” And Added “Tens Of Thousands Of Workers To The Already Lengthy Unemployment Rolls.” “‘Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses ... potentially adding tens of thousands of workers to the already lengthy unemployment rolls,’ said the report, released by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), Neil Barofsky.” (Catherine Clifford, “Watchdog: Auto Dealers Shut Down Too Fast,” CNN Money, 7/19/10)

  • GM And Chrysler Dealerships Were Encouraged To Close At A Quicker Pace. “GM and Chrysler were both required to submit restructuring plans to the Treasury's Auto Team in February of 2009, but the plans were rejected because Treasury deemed that the car makers weren't moving to close dealerships at a rate fast enough to keep their businesses viable. So the auto manufacturers accelerated the process, with the help of bankruptcy laws that let them cancel dealer contracts.” (Catherine Clifford, “Watchdog: Auto Dealers Shut Down Too Fast,” CNN Money, 7/19/10)

The Congressional Oversight Panel Questioned Whether The Auto Bailouts Should Be Called Successful

Congressional Oversight Panel: Treasury’s “Differing And Conflicting Goals” Call Into Question Whether The “Interventions In The Auto Industry Should Be Called Successful.”  “These differing and potentially conflicting goals make it difficult to determine whether the TARP’s interventions in the auto industry should be judged to be successful. Instead, the articulation of multiple goals, without specification of their priority, allows Treasury to claim success if the program achieves any one of these goals.” (“The Final Report Of The Congressional Oversight Panel,” Congressional Oversight Panel, 3/16/11)

Congressional Oversight Panel Wrote In Its Final Report: “It Is Difficult To Say Whether Government Intervention Was The Best Option.” “It is clear that GM and Chrysler were in dire straits in late 2008. Although it is difficult to say whether government intervention was the best option, the TARP funds the companies received provided them with at least some short-term stability.” (“The Final Report Of The Congressional Oversight Panel,” Congressional Oversight Panel, 3/16/11)

  • COP: “Whether The Programs Aimed At Helping The Automotive Industry Can Be Called ‘Successful’ Will Be Difficult To Determine …” (“The Final Report Of The Congressional Oversight Panel,” Congressional Oversight Panel, 3/16/11)

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