Former Vice President Dick Cheney was strongly opposed to saving General Motors and Chrysler and tried to convince then-President George W. Bush not to approve a proposed bailout of the floundering Detroit makers.
Ultimately, the outgoing Commander-in-Chief decided to approve a partial rescue, at a cost of $17.4 billion for GM and Chrysler and another $7.5 billion for Chrysler Financial and what was then known as GMAC. The money helped carry the two makers and their lending arms through until early 2009 when the White House guard changed, newly-elected Pres. Barrack Obama authorizing billions more in rescue money.
“Although I understood the reasoning, I would have preferred that the government not get involved and was disappointed — but not surprised — when the Obama administration significantly increased the government intervention in the automobile industry shortly after taking office,” the oft-controversial Cheney writes in his new memoir, “In My Time.”
The auto industry, as a whole, plunged into its worst downturn since the Great Depression in 2008, and it became increasingly clear, during the final days of the Bush Administration, that at least two of Detroit’s Big Three could no longer survive without a helping hand. The only maker tentatively positioned to make it through the downturn was Ford, which had mortgaged its assets before the depth of the downturn became apparent, raising billions in cash.
Cheney was not the only one opposed to a bailout of GM and Chrysler. In fact, Congress rejected a proposed rescue effort forcing the White House to ultimately tap into the $700 billion Troubled Asset Relief Program, or TARP, which had been created to save the American banking system – which also started augering in after the collapse of Lehman Bros.
While the former vice president didn’t think the auto rescue was valid, he favored saving the banks – even though many observers felt they had precipitated the global economic meltdown.
“Providing sufficient support to avoid the collapse of our banking system was something only the federal government could do. But, all things considered, companies in the private sector should be judged in the marketplace. Having the government intervene was not, in my opinion, a good idea.”
Curiously, the new Cheney book seems to sidestep comments made by former Pres. Bush in his own memoir, “Decision Points.”
Bush defended his role in the automotive bailout by suggesting, “The immediate bankruptcy of the Big Three could cost more than a million jobs, decrease tax revenues by $150 billion and set back America’s GDP by hundreds of billions of dollars.”
Nonetheless, Bush also wrote that, “It was frustrating to have the automakers’ rescue be my last major economic decision.”
Once he was in office, new Pres. Obama took a similar position to defend his decision to extend the use of the TARP funds to cover Detroit.
“The President of the United States had a particularly tough call with Chrysler but he weighed the evidence and he showed what type of president he is,” proclaimed Ron Bloom, former White House “car czar,” during an appearance in suburban Detroit, on May 24, marking the payback of its outstanding loans by Chrysler.
“We were encouraged by the fact that someone believed in us,” said Marchionne during that news conference, adding “it happens rarely in life you’re given a second chance.”
Chrysler actually paid back only the portion of its bailout approved during the Obama Administration, writing off the earlier Bush loan. While General Motors has paid back all of the loan portion of its bailout it is not expected to cover the full Treasury investment in the company unless there is a massive increase in the share price it gets during a second public offering. The November 2010 IPO strike price of $33 a share would result in billions in losses.
Overall, the latest Treasury Dept. estimate forecasts a $14.33 billion loss on the automotive bailout – which includes both GM and Chrysler, as well as GMAC and Chrysler Financial. But that is down from earlier estimates of more than $19 billion. The overall TARP program is expected to lose the government $36.7 billion, a figure recently upped because of anticipated losses on AIG shares.
Cheney’s new book is likely to toss fuel on the fire, many still vehemently opposed to the rescue of Detroit despite recent signs of recovery by the two makers – a number of conservatives, such as Rush Limbaugh deriding them as “Government Motors.”
But the Cheney memoir, which hit bookstores last Thursday, is kicking off plenty of other debates. Among the other controversies: comments by the former chairman of Haliburton that the Iraq war has not hurt America’s image abroad.