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Democrats’ rhetoric driven by auto bailout
CHARLOTTE, N.C. — Democrats here clearly think they have a political winner in President Obama’s decision to bail out the American auto industry, but numbers on the bailout’s cost released this week suggest that the move could pose some political potholes for both presidential campaigns this fall.
“General Motors is alive and bin Laden is dead” is Vice President Joseph R. Biden’s summary of the Obama administration’s first-term record, and convention organizers set aside podium time on the final night of the convention Thursday for former Michigan Gov. Jennifer M. Granholm to address the $85 billion taxpayer rescue of General Motors Co., Chrysler LLC and their financing arms.
An animated Ms. Granholm, bringing the crowd to its feet with an electric, energetic speech, hailed Mr. Obama as “the cavalry” for the beleaguered automakers when nobody — “not the banks, not the private investors and not Bain Capital” — would step up.
“He organized a rescue, made the tough call and saved the American auto industry,” she told delegates, without noting that the first bailout checks were written during the George W. Bush administration. “Mitt Romney saw the same crisis and you know what he said: ‘Let Detroit go bankrupt.’”
Perhaps even more critical than Ms. Granholm’s home state is the auto bailout’s impact in the swing state of Ohio, where Mr. Obama’s campaign has begun running ads touting his decision in 2009 and slamming his Republican rival’s opposition at the time to the government-managed bailout.
“Ohio auto workers are leading the recovery, with autos supporting 1 out of every 8 Ohio jobs and workers in 80 counties. That’s why President Obama stepped up, rescued the jobs, saved the industry,” the Obama ad says, before asking: “What would Mitt Romney have done?”
But an analysis by the independent fact-checking group ProPublica found that for all the touted success, the auto bailouts are on track to be the most costly move for the federal Treasury from the $700 billion Troubled Asset Relief Program, with losses far exceeding the costs of bailing out Wall Street’s banks and investment firms.
Despite record profits at GM in recent quarters, its share price of $22.45 still is about $30 less than the break-even price that the federal government needs to unload its remaining 26 percent share of the company without a loss. GM has paid back $22.8 billion of the $50.7 billion in TARP money it received under Mr. Bush and Mr. Obama, while GMAC (rechristened Ally Financial), the Detroit automaker’s financing arm, still owes almost $14 billion of the $16.2 billion it received from taxpayers.
Daniel Howes, a columnist for the Detroit News, wrote Thursday that some of the less-attractive parts of the bailout are being glossed over in the story Mr. Obama and his aides are telling, including the underwater stock price, strong-arm tactics that protected union investments at the expense of bondholders and pensioners, and the breaking of long-standing franchise agreements of thousands of independent dealers as a way to slash distribution costs.
“The bottom line,” he wrote: “The president’s call to rescue Detroit from itself — a call his predecessor George W. Bush made first and said he would do again — succeeded more than his Republican rival, Gov. Mitt Romney, and his proxies may be willing to admit. But it wasn’t always pretty, and that success came at a price, roughly $85 billion, that some continue to argue was not worth paying.”
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About the Author
Raised in Northern Virginia, David R. Sands received an undergraduate degree from the University of Virginia and a master’s degree from the Fletcher School of Law and Diplomacy at Tufts University. He worked as a reporter for several Washington-area business publications before joining The Washington Times.
At The Times, Mr. Sands has covered numerous beats, including international trade, banking, politics ...
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