“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. )
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.
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.