AP’s Debate Fact Checker gets it wrong Tuesday night on the auto bailout:
ROMNEY: “I know he keeps saying, ‘You want to take Detroit bankrupt.’ Well, the president took Detroit bankrupt. You took General Motors bankrupt. You took Chrysler bankrupt. So when you say that I wanted to take the auto industry bankrupt, you actually did. And I think it’s important to know that that was a process that was necessary to get those companies back on their feet, so they could start hiring more people. That was precisely what I recommended and ultimately what happened.”
THE FACTS: What Romney recommended did not happen, and his proposed path probably would have forced General Motors and Chrysler out of business. He opposed using government money to bail out the automakers, instead favoring privately financed bankruptcy restructuring. But the automakers were bleeding cash and were poor credit risks. The banking system was in crisis. So private loans weren’t available. Without government aid, both companies probably would have gone under and their assets sold in pieces.
AP is editorializing. Its facts are in error.
Romney is correct that “the president took Detroit bankrupt.” The administration took both GM and Chrysler into Chapter 363 bankruptcy — a politicized bankruptcy criticized as “end-running the legal process” by at least one prominent legal expert – in order to benefit Big Labor special interests at the expense of bondholders, teacher and firefighter pensions, Delphi salaried employees, and so on. Under Romney’s proposed reorganizations, the companies and creditors would have gone into Chapter 11 bankruptcy court — but, in a crucial point ignored by AP, with federal financial help in order to secure the supply chain.
AP’s claim that Romney’s “proposed path probably would have forced General Motors and Chrysler out of business” is not only contradicted by repeated statements by the candidate, but also by many industry experts. “Without government aid, both companies probably would have gone under and their assets sold in pieces,” writes AP, getting its facts wrong about what Romney proposed.
“The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk,” wrote Romney in the 2008 New York Times op-ed that Obama & AP caricature as a call for Detroit to die. Furthermore, in numerous queries by this reporter, Romney has consistently hewed to a flexible line, saying that the federal government would have done what was necessary to keep GM and Chrysler — and its suppliers — alive while they worked through bankruptcy.
“I would never have allowed the auto industry to disappear,” the GOP candidate said in an interview with the Detroit News editorial board in February. He added that — at a time when capital markets were frozen — “if government financing was needed, fine. In a managed bankruptcy process, government could have provided guarantees, financing, and DIP financing.”
So much for AP’s “facts.” Romney’s nuanced position has made him no friends on the libertarian Right. Fair enough. But AP’s caricature of Romney as a Darwinian advocate of bankruptcy is bad journalism.