As he campaigns for reelection, President Obama can claim few major successes during his presidency, but one he will be claiming, over and over again, is the rescue of General Motors and Chrysler.
The claim is of course double-the-fun for the president and his aides, because it allows them to not only portray Obama as the champion of the working man, but to blast Republicans as misers who would have preferred to see all those autoworkers out on the street, dodging the very cars they produced.
The truth is that no one wanted to see these workers harmed, but many Republicans believed the companies could come out of a normal bankruptcy process in far stronger shape for the future – with less in the way of obligations to the unions – while saving taxpayers lots of money.
Writing in the Wall Street Journal today, James Sherk and Todd Zywicki detail how the Obama bailout amounted to a $26.5 billion gift to his union allies, the United Autoworkers.
Among their findings:
GM and Chrysler owed billions of dollars to the union’s Voluntary Employee Beneficiary Association (VEBA) when they went bankrupt.
A bedrock principle of bankruptcy law is that creditors with similar claims priority receive equal treatment . . . In the auto bankruptcies, however, the administration gave the unsecured claims of VEBA much higher priority than those of other unsecured creditors, such as suppliers and unsecured bondholders.
Based on GM’s current stock price, VEBA collected assets worth $17.8 billion—$12.2 billion more than if the administration had treated it like the other unsecured creditors.
The same thing happened at Chrysler, only to a greater degree. Chrysler’s junior creditors recovered none of their $7 billion in claims. In normal bankruptcy proceedings, the UAW would have also collected nothing. Instead it walked away owning almost half of new Chrysler and a $4.6 billion promissory note earning 9% interest. Had the stock and note gone to the Treasury instead, the bailout would have cost taxpayers $9.2 billion less.
Let’s discuss another “bedrock principle”: When you give money that is not yours to someone else, you are taking money from a third party.
The government has no money of its own. It has your money. It took it from you and gave it to a union.
We’ll see if the Romney campaign has the courage to call this what it is, a sleazy deal masquerading as a noble offer of a helping hand to workers.