Writing at Newsbusters.org, Tom Blumer says:
Even if they ultimately lose their last-minute court battle, the Indiana pension funds defending their rights as secured first-lien creditors of Chrysler have done a valuable deed.
We have learned, among many other things, how at least one government lawyer characterized the funds’ lawyer, Thomas Lauria.
As a result of Lauria’s legal efforts, we have also learned of e-mails showing that the government drove the Chrysler-Fiat deal over Chrysler management concerns, and did so despite more than likely knowing very little about shotgun marriage partner Fiat.
All of this and more is in a report published last night in the Wall Street Journal by Neil King Jr. and Jeffrey McCracken.
The Wall Street Journal report is fully accessible to WSJ subscribers only, but excerpts from the article paint a disturbing picture of the Federal government pushing a Chrysler/Fiat merger over the objections of Chrysler’s senior managers, and not over trivial matters either — “off balance-sheet investments” by Fiat in projects around the world were a major concern (as well as the fact that Fiat apparently offered little in the way of substantive information about its finances), and another was the fact that Fiat was not required to offer up any cash stake during the merger.
Although Mr. Lauria, the attorney representing the Indiana State Pension Fund, is not expected to win his case, the simple fact that he has challenged the merger ruling in a Federal appellate court means that many of the internal Treasury Department and White House documents regarding the Chrysler/Fiat merger and Chrysler bankruptcy will now be public record. For his noble efforts, Mr. Lauria was smeared as a “terrorist” in an email by government lawyers.
Funny, the word “patriot” is what keeps popping into my mind. After all, dissent is the highest form of patriotism, isn’t it?
Tom Blumer thinks that Fiat’s “off balance-sheet investments” might have a whiff of Enron about them. And it’s also worth remembering that government officials (specifically Ben Bernanke and Hank Paulson) essentially forced last December’s Bank of America/Merrill Lynch merger, by threatening to dismiss Bank of America’s managers if they reneged on the deal — even after it was apparent that it was going to be a disaster. And we all know how well that brilliant government plan turned out.
Ironically, by moving so quickly to overtake major industries, the Obama Administration had neither the resources, nor the time frame, to eliminate the possibility of embarrassing judicial document drops like this one. Such an effort would have required the emasculation of our civil courts. That’s the kind of effort that political strongmen of the past century, who carefully plotted their rise to power over the course of decades, saw fit to embark upon well before they attempted to seize control of their nations’ economies. We can only be thankful that the Obama Administration’s blitzkrieg power grab has still left us with the means to shine a little sunlight on their questionable plans.
These revelations about the Chrysler/Fiat merger, combined with the “Dealergate” allegations, ought to serve as a fair warning to everyone involved in the upcoming GM bankruptcy negotiations.
On Fox News Sunday this past weekend, senior Obama advisor Austan Goolsbee accused the Bush administration of deliberately authorizing insufficient loans for GM and Chrysler (“how many dollars do they need to stay alive until January 20th, 2009?”) with “no commitment to restructuring.” He also alleged that the Bush administration made no serious effort to assist the incoming Obama administration team with the situation at GM and Chrysler.
In an incredible smack-down of Goolsbee’s lies, senior Bush administration economic adviser Keith Hennessey has explicitly detailed what happened in November and December 2008:
We proposed to work together with the incoming Administration in a way that we thought minimized these risks and would have positioned the new President as well as possible on January 20th. GM and Chrysler would not be in liquidation, and there would be a strict, tight, and enforceable deadline (of about March 1) and process for GM and Chrysler to become viable or to have time to prepare for an orderly Chapter 11 process. We would have a cushion in case another major financial institution failed in the last eight weeks, and the next President would not have to be bothered with having to ask Congress for the last $350 B from the TARP.
The Obama team were polite and professional. They listened carefully and gave little reaction in the meeting. We concluded based on their questions in that meeting that they were leaning against the proposal, because they did not want to be bound by the judgment of a Financial Viability Advisor – they wanted the ability to make decisions in the White House. They also appeared to want to avoid being bound by our strict definition of viability. (We defined a viable firm as one that would, under reasonable assumptions, have a positive net present value without additional taxpayer assistance.)
Dr. Goolsbee was not in this meeting. I do not know if he was aware of it, either back in November or this morning.
Despite multiple efforts to get the Obama team on board, they did not take up our proposal, nor did they suggest any modifications. At the end of that week we gave up on that approach and began to negotiate a bill with Speaker Pelosi, Chairman Barney Frank, and Chairman Chris Dodd that would provide bridge loans from previously appropriated non-TARP funds. Senate Republicans blocked that bill. Congress adjourned for the year and went home. In the last week of December, GM and Chrysler told us they would file under Chapter 11 in early January if they did not get loans from the TARP. They also told us, as did countless outside experts, that they were not ready for such a filing, and that Chapter 11 would lead to near-immediate liquidation. We estimated that about 1.1 million jobs would be lost if this happened.
Confronted with a choice between loaning TARP funds to GM and Chrysler, and allowing both to liquidate in the weeks before his successor took office, President Bush authorized loans from the TARP to GM and Chrysler. We had warned Senate Republicans earlier that month that the President would face this choice if legislation failed. This was (and still is) a politically unpopular decision, and was the least worst of two bad options. Based both on his public comments and what I saw privately, President Bush wanted to give the firms a limited amount of time and a hard back end to prepare for and, if necessary, to force an orderly Chapter 11 process. He also knew that President-elect Obama would be facing tremendous challenges in his first days in office. Despite their different political parties and policy perspectives, President Bush stressed that we needed to provide his successor with the time and space he would need in the opening weeks of his Presidency. (emphasis added)
The spelling of Dr. Goolsbee’s name has also been corrected.