Romney Wants Reexamination of GM Bankruptcy Process
The Detroit News reports that Mitt Romney wants a reexamination of the General Motors' bankruptcy proceedings. Mr. Romney is quoted as stating, "I think it's important for us to go back and look at what happened and take apart this bankruptcy process. See to what extent the finger of politics was placed on the scales of justice and see if we can't be more fair to the people involved in this process." I agree with the sentiment, but I do have to ask, where were the Republicans on this issue over two years ago?
Three years ago I served with a group called the Main Street Bondholders who went to Washington to present the case of individual bondholders who were discriminated against throughout the GM bankruptcy process. Most members were retired senior citizens who were not amongst the top 1% of income earners in the US and relied upon income from their GM bonds. I can remember one couple, Bill and Evelyn (who were about 80 years old) trying to hustle through various congressional and senatorial halls. Evelyn was near collapse and had to be taken back to her hotel room. The trip was for the most part a bust with neither Republicans nor Democrats seeming to care much about the bondholders' stance. My main memory is that of 23 year old staffers pretending to listen as they sat idly with empty notepads in front of them.
After the bankruptcy process was complete, many prominent minds debated the precedents set in the GM and Chrysler bankruptcies. Two leading experts in the field, Michael Richman from law firm Patton, Boggs and Barry Adler, professor at NY University School of Law, subsequently suggested legislature to improve the 363 process which was utilized in the GM bankruptcy and gave insightful opinions on the subject during an American Bankruptcy Institute Symposium. No congressional member, to my knowledge, pursued the proposed legislative ideas.
The facts are the facts regarding the GM bankruptcy which saw a disproportionate settlement for UAW members compared to other classes of creditors. Winners and losers were chosen based on political popularity. I have written on the topic before and will likely review the facts again in the future. I was disappointed that the ABI symposium did not result in protection against such abuses of contract law in the future, but if a review occurs now as we approach elections, I can only say, "better late than never."
Yes, the GM bankruptcy is a political issue, but if President Obama intends to campaign on the idea that the GM bailout was a wonderful success, opponents have the right to dispute the fairness of the process. The false perception that the only two choices were between a total liquidation of GM and the exact way in which the bailout transpired should be debated. Perhaps it is not too late to have legislation introduced to improve upon the process which gave the executive branch of government too much control of how assets were distributed. While I was left unimpressed by congressional action in the past, there are signs of light that some freshmen members of congress are sincere in there efforts to govern in a fair manner.
Rep. Mike Kelly (Rep., PA) has given sincere input to issues that have evolved after the GM reorganization. Rep. Kelly is best known for having criticized the Chevy Volt for being a political and costly subsidized consequence of the Obama Administrations' involvement with GM. Kelly owns a Chevy dealership and complained that it took months to sell a Volt at his dealership. At the time, he was criticized as proponents of the Volt claimed that there were waiting lists for the vehicle and they were selling like hotcakes. We now discover that Rep. Kelly was correct as over 1,900 dealerships with Volt inventory were only able to sell about 1,000 of the cars in February. For those math-challenged individuals who have trouble calculating how much the gas savings are for a Volt, that equates to about two months for a dealership to sell just one Volt. No matter how many times GM or shill internet sites proclaim the paltry sales figures as a success, two months to sell one Volt is pitiful; particularly considering the billions of dollars taxpayers are paying to subsidize the car.
Rep. Kelly has boldly introduced a bill to kill the $7,500 EV tax credits (which Obama wants to raise to $10,000) and it remains to be seen if his Republican counterparts are on board. Perhaps there are others in congress, like Kelly, who would now consider reviewing the GM bankruptcy process and introduce legislation as appropriate. Prominent experts in the field, like Richman and Adler, should have their voices heard if they are still interested in presenting their views. The fact that a review at this point may appear to have political motivations may dissuade apolitical viewpoints from surfacing; that would be a shame. The precedents set in the GM and Chrysler bankruptcies warrant a second look and the story of how political motivations drove an unfair distribution should be told. The question is, will anyone listen?
Mark Modica is an NLPC Associate Fellow.