One of the most contentious moments from last night’s foreign policy debate had nothing to do with a foreign country; it concerned the auto industry bailout (though Detroit does like to pretend it's another country). While, as we noted last night, both Obama and Romney have skewed the facts a bit to fit their narrative, we thought it was worth taking a closer look at Romney’s position on the rescue.
First the common ground: Both Obama and Romney agree that the car companies needed to make deep cuts, shed costs, write down debts and fundamentally restructure themselves in the way that can be achieved only through bankruptcy. When Mitt Romney wrote his infamous November 2008 New York Times Op-Ed “Let Detroit Go Bankrupt,” this is what he meant -- he did not mean let the companies go belly up, as Obama falsely suggested last night. And indeed, that’s what happened. Chrysler filed for Chapter 11 in April 2009, and GM followed in June.
But Obama and Romney diverge over the most critical question of the auto rescue: Whether or not to use taxpayer dollars or private financing to prop up the car companies. Obama supported using taxpayer dollars, Romney didn't. “Detroit needs a turnaround, not a check,” he wrote in the Times Op-Ed. His line was of course in keeping with Republican ideology, which opposes government spending and government intervention in private industry.
The problem for Romney is that his idea of using private capital is a pipe dream. Remember, this was in late 2008 and early 2009 when the entire financial industry was going down in flames and no bank had the tens of billions of dollars needed to prop up the car companies, let alone the willingness to gamble it on what then seemed a very risky bet.
Steven Rattner, the former Wall Street executive who headed the administration’s rescue effort, wrote in a New York Times Op-Ed in February that Romney’s idea of using private financing was “utter fantasy.” “If Mr. Romney disagrees, he should come forward with specific names of willing investors in place of empty rhetoric. I predict that he won’t be able to, because there aren’t any,” Rattner wrote. Romney has not since come forward with any names.
The bipartisan Congressional Oversight Panel, the official watchdog of the Troubled Asset Relief Program, which financed the bailout, agreed, writing in a report: “The circumstances in the global credit markets in November and December 2008 were unlike any the financial markets had seen in decades. U.S. domestic credit markets were frozen in the wake of the Lehman bankruptcy, and international sources of funding were extremely limited.”
Former GM Vice Chairman Bob Lutz told the Detroit Free Press in February that the taxpayer bailout was “necessary." “The banks were even more broke than we were. Who had the money?"
Now, faced with the undisputed success of the bailout, Romney is trying to equivocate. He said last night that he didn’t oppose government help for the companies, pointing to the mention of federal guarantees in his Times Op-Ed. But this is disingenuous since, again, there were no private loans available for the government to guarantee. And earlier, he suggested that the government guarantee warranties, not loans, which would have done even almost nothing to help the car companies. "Without government financing -- initiated by President George W. Bush in December 2008 -- the two companies would not have been able to pursue Chapter 11 reorganization. Instead they would have been forced to cease production, close their doors and lay off virtually all workers once their coffers ran dry," Rattner wrote.
In a 2011 interview with CNN’s Piers Morgan, Romney made his position clear: “What I said was, as the auto executives flew to Washington asking for money, don’t give them money ... Don’t just write them checks. And unfortunately, what President Bush and President Obama did was write them checks.” He continued: “The bailouts were a mistake.”