Republican presidential candidate Mitt Romney’s claim that he deserves “a lot of credit” for saving the auto industry prompted an immediate reaction from critics — and they have a point. Although Romney is right that the vehicle for Detroit’s ultimate rebound was a “managed bankruptcy” of the car companies — which he called for in his now-famous 2008 New York Times op-ed entitled “Let Detroit Go Bankrupt — it’s hard to see how he can take credit for Detroit’s recovery because he opposed the billions in federal loans that made the industry’s rebirth possible. Most experts believe there simply wasn’t enough private-sector credit available to help the car companies — and without the federal loans, GM and Chrysler could have gone out of business.
Romney sparked the latest debate over Detroit’s renaissance while campaigning in Ohio Monday, one day ahead of a stop in Michigan, where the candidate has deep roots. Romney’s father was governor of that state, as well as the CEO of American Motors, the large auto company that marketed the Jeep brand for many years, and was eventually purchased by Chrysler. Speaking to a local television station, Romney said:
I pushed the idea of a managed bankruptcy, and finally when that was done, and help was given, the companies got back on their feet. So, I’ll take a lot of credit for the fact that this industry has come back.
Romney may have advocated for a managed bankruptcy, but he opposed the billions of dollars in direct emergency loans the government provided to GM and Chrysler — aid that began under President George W. Bush. In his Times op-ed, Romney did advocate for a role for the federal government, writing that it “should provide guarantees for post-bankruptcy financing.” (It’s worth noting that Romney did not write the Times headline, which gives the impression that Romney thought the companies should be allowed to fail completely. He didn’t think that.)
But the idea of government-loan guarantees — as opposed to direct government loans — presupposes that financing was available in the private credit markets, something that seems far-fetched given that the only institutions capable of providing such financing were the largest banks in the country, which themselves were in crisis, and reliant on government aid. That’s why the chief executives of the auto companies — who undoubtedly would have preferred private financing — lobbied Congress for federal help in the first place. Romney’s belief in a private-market-led solution to Detroit’s travails, which he re-iterated in a November 2011 CNBC debate, seems no more realistic now than it did at the height of the crisis. Our sister site CNNMoney cites three sources from across the ideological spectrum who cast doubt on Romney’s position:
- “There was no way they could get financing,” said Van Conway, CEO of Conway MacKenzie, a restructuring firm in Detroit, referring to the auto companies. “They were burning money so fast, with no end in site, that no one but the government was going to give them money.”
- “He thinks we didn’t try to borrow money from the banks,” conservative former GM vice chairman Bob Lutz told the Detroit Free Press, referring to Romney. “The banks were even more broke than we were. Who had the money?”
- Bailout opponent Bill Wilson, the head of Americans for Limited Government, Romney’s suggestion that the auto companies should have found private financing a “fantasy.”
And no less of an authority than Steven Rattner, the experienced financier who served as auto-czar, wrote earlier this year: “In late 2008 and early 2009, when G.M. and Chrysler had exhausted their liquidity, every scrap of private capital had fled to the sidelines.”
I know this because the administration’s auto task force, for which I was the lead adviser, spoke diligently to all conceivable providers of funds, and not one had the slightest interest in financing those companies on any terms. 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.
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.
Democrats pushed back Tuesday on Romney’s claim for credit. “Mitt Romney didn’t have the courage to bet on American workers and instead said that we should ‘let Detroit go bankrupt,’ ” Obama spokeswoman Lis Smith said in a statement. “Despite his best efforts to Etch A Sketch this position, he can’t shake away the fact that if he’d had his way, the American auto industry and the millions of jobs it supports would have been devastated.” And UAW President Bob King issued a statement attacking Romney, and pointing out that he opposed the federal aid that ultimately proved crucial in helping Detroit.
Appearing in Michigan Tuesday, Romney stayed mum on the subject of the auto bailouts, and a campaign spokesperson declined to comment beyond the candidate’s Monday remarks.