The difference between what happened at Delphi and what happened at GM proper is that, unlike GM’s pusillanimous secured creditors, Elliott and the other Delphi creditors refused to roll over and play dead when the Obama administration tried to foist a raw deal on them. Which is to say, they satisfied their moral and legal obligation to look after their investors’ interests. They did so by threatening to go thermonuclear on Government Motors by shutting down the supply of parts critical to the bailed-out firm’s operations. GM and the Obama administration were taught a lesson worth learning: Don’t take a hard-line position against somebody you can’t live without.
The worst that can be said of Elliott is that the firm displayed excellent political instincts and a fruitful understanding of the peculiarities of bankruptcy law. In the end, Delphi was restructured and it had a successful public offering of shares. The 3,000 percent return that King and others attribute to Ann Romney’s investment is also certainly not accurate inasmuch as it does not account for costs involved with such a complex episode — but even if it were, more power to the blind trust.
Nobody should be under any illusions about the strategies of a firm such as Elliott. But that the bailouts produced profits for creditors and investors is an argument against bailouts, not an argument against investing. It is worth repeating: Delphi was broke and bankrupt before Elliott was on the scene. It is now what appears to be a reasonably stable enterprise. (“Appears to be” — I have my doubts about the real health of the automotive industry, and, as they say, this column does not constitute an offer of investment advice.) In the same way, that the pension obligations of Delphi and other insolvent companies have been offloaded onto the Pension Benefit Guarantee Corporation is an argument against the existence of the PBGC, a government boondoggle that is an invitation to moral hazard. It was not Elliott and the other creditors who put Delphi’s pension fund into the hole, and it is hard to blame them for declining to inflict an unnecessary $7 billion hit on their investors.
What is most odd about this episode, though, is that the people most loudly decrying the intersection of finance and politics in this case are those who are most loudly celebrating the bailouts that created that nexus in the first place. Mitt Romney, recall, wanted GM and the other automotive firms restructured in private bankruptcy rather than propped up by the Obama administration. He lost that argument, and now the Democrats are blaming his wife for not losing money on the deal, too — a very strange thing for an administration that is always going on about the “investments” America should make.
— Kevin D. Williamson is roving correspondent for National Review.