“The only assurance the taxpayer has is that these companies will be back for more money soon.”
Senator Richard Shelby (R-Alabama), December, 2008
(Translated: They’ll be back for more taxpayer money when it runs out. )
When researching my conservative counterpart’s review of this PolitiFact (PF) ruling on a statement made in a pro-Obama video about the auto company bailout money being all “gone” as Obama took office, I came across what FactCheck.Org had to say about the status of the $13.4 billion: (emphasis added)
It also suggests that Bush gave away $13 billion to auto companies without demanding action on their part, when, in fact, Bush required them to come up with the so-called economic viability plans by March 31, 2009. Obama then used the plans to force the companies into bankruptcy and force the restructuring of the companies.■The film leaves the false impression that President Bush had “given” away $13 billion to automakers without demanding anything in return. In fact, Bush required the automakers to produce a viable long-term business plan by March 31, 2009, as well as reduce unsecured debt by two-thirds and open their financial records to the government, among other loan conditions.■The film claims the Bush bailout money was “gone” before Obama could “intervene,” but it was designed to be short-term bridge loans to help automakers pay suppliers and workers and give them — and the incoming Obama administration — time to develop long-term reorganization plans. The decision not to recoup some of the money loaned by the Bush administration was made by the Obama administration as part of the restructuring of the companies.
Writer Molly Moorhead was careful to detail how the $13.4 billion was divided up: of what General Motors received, over half went to GMAC, GM’s financing arm. She then went to the expense side, and noted that “GM was spending $7.5 billion per month on car parts at the time the government bailed it out” which exceeds the $4 billion loan by $3.5 billion.
Grading PolitiFact also makes a big deal out of the $4 billion GM got in February, mentioning it four times in its post. But it never mentions that in December, the loan of that money was contingent on congressional action in the new year. From the Detroit Free Press:
The loans offered by President George W. Bush — $9.4 billion for GM through January with an additional $4 billion contingent on congressional action next year and $4 billion for Chrysler…
Under those terms, GM may seek an additional $4 billion in February if Congress releases the second half of a $700-billion Troubled Asset Relief Program that was originally intended to help financial companies.
As was mentioned by Grading PolitiFact, writer Molly Moorhead narrows the scope of the fact-check to whether the $13.4 billion was gone. As for FactCheck’s summary which says the video “suggests that Bush gave away $13 billion to auto companies without demanding action on their part” this had already been previously found False by PolitiFact, and was cited in the ruling.
The documents show, and press reports from the time confirm, that the Bush administration put specific requirements on the auto companies that included paying down debt, limits on executive compensation and negotiated reductions in wages and benefits for autoworkers. It also required the companies to submit detailed restructuring plans by Feb. 17, 2009, to show how the companies planned to achieve and sustain "long-term viability, international competitiveness and energy efficiency."
But the fact that, despite the infusions of cash, GM and Chrysler were forced into Chapter 11 re-organization, says that whatever the amount of money it was they received, wasn’t enough. It was a bridge loan until they would have to tell the creditors and the bondholders that they would not be paid (when the re-organization started).
One of my conservative counterpart’s chief complaints seems to be an argument from ignorance—ignorance in that he doesn’t think or understand that the money could have been “spent” that fast:
Apparently the math amounts to $4 billion plus $13.4 billion equals $13 billion. And that $13 billion was gone by Jan. 20 even though $884 million was loaned to GMAC on Jan. 16. It lasted only four days by PolitiFact's account.
Of course the excess $4 billion was loaned in February as described above. You just don't get to learn that from the PolitiFact version of events.
(On that excess $4 billion: doesn’t the fact that GM had to get more money in February tell you the $9.4 Billion they received before was gone?)
The $884 million to GMAC was used to “increase available funding for consumer auto financing and consumer loans” according to a letter from a GMAC Executive Vice President to TARP lawyer Neil Barofsky. In late 2008 it had limited lending because it could not get financing in the global markets. Because of this lack of funds it severely curtailed leasing, and would only grant car loans to those with credit scores over 700. This resulted in a serious downturn in car sales, which in turn, of course, adversely affected the cash flows of GM the manufacturer. While it could be claimed the money was not “spent” it was, as the letter explained, spent indirectly, to bolster GMAC's capital.
As for the $4 billion draws made by GM, I’d venture to say it was probably used up within a couple days, that’s how dire I know the situation was at GM. It was used to pay off one big promissory note of delayed payments to suppliers and those creditors who would accept a delay. Corporations (and all businesses) have to keep a minimum amount of cash on hand as operational capital , and I know GM was below this minimum amount, which as I recall was $6-7 billion. Unless GM was going to liquidate, which it wasn’t, there was always going to be a certain “minimum” amount of money in reserve.
In summary Grading PolitiFact exhorts its readers that “[t]he point of the film is the contrast between the president who demands accountability and Bush who simply gives money away to big corporations.” I watched the film and yes, it’s definitely an Obama fluff piece. Yet I heard no other mention of Bush in the auto bailout segment except for the statement PolitiFact chose to analyze. PolitiFact had addressed these points on Bush in the September, 2010, ruling as quoted above. It could have done it again, but instead chose to address the funding claim that the money was gone.
FactCheck.Org also addressed this as two separate issues noted in the beginning of this post: (1) the false impression given that Bush just gave the money away (while Obama demanded accountability) and (2) that the money was gone—because it was short-term bridge loans to sustain the companies until they could come up with reorganization plans. FactCheck.Org gives the impression that yes, the money was gone, but it was only enough to buy time. This was all the auto companies would get.
It’s interesting that both FactCheck.Org made this into two “judgments” like PolitiFact. Apparently they saw something to be separated, while Grading PolitiFact thinks it sees the big picture that they are conjoined to each other as context. While it can make the case that they are tied together, I tend to be of the same mind as the fact-checkers that it is reasonable to separate the “funds” from the “terms.”
I’ve also made several posts to the effect that Grading PolitiFact often doesn’t chose to examine statements it disagrees with in terms of the context if that suits its purposes, and parses instead. Here, we’re going from how good a job Obama has done to how bad, or the context of Marco Rubio’s statement that the majority of Americans are conservative, coming out of a CPAC speech peppered with one false assertion after the other about how America is headed for ruin because of Obama (despite all those conservatives).
To paraphrase Grading PolitiFact, Rubio’s account of how everything’s gotten worse in America under Obama is thorough spin. Fact checking isolated statements, such as “the majority of Americans are conservative” in the fabric of this fiction will never fully reveal the misleading nature of the narrative.
Side note: It seems author Bryan White’s wording is getting even stronger and harsher in terms of condemning PolitiFact: “The incompetence is overpowering”…”PolitiFact disgraces itself again.” Good grief. He’s getting as bad as Glenn Beck.
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