Did Mitt Romney really say the US should let Detroit auto firms go bankrupt back in 2008? That was a subject of fierce contention in the town-hall presidential debate last night. But the millions of voters who tuned in to the Hofstra rumble heard little more than “did too” “did not” repartee about Detroit’s bailout. We think the exchange was confusing, so we’ll take a stab at decoding the facts behind this big issue.
First, the baseline: Yes, Mr. Romney did use the “bankrupt” word in conjunction with Detroit’s fate, as President Obama charged near the debate’s beginning. (“When Governor Romney said we should let Detroit go bankrupt, I said, we’re going to bet on American workers and the American auto industry,” were the president’s exact words.)
In fact, Romney published an opinion piece in The New York Times on Nov. 18, 2008, that was titled “Let Detroit Go Bankrupt." He didn’t write the headline, but was given a chance to approve it, according to the Times.
The piece opposed the bailout auto executives were begging for at the time. Better to let the weaker Detroit firms go through a “managed bankruptcy," wrote Romney, so they could emerge leaner on the other side, shed of onerous union contracts, pension obligations, and real estate costs.
“Detroit needs a turnaround, not a check,” wrote Romney back then.
Second, the response: So what? In reply to Obama’s jab, Romney pointed out that, in fact, Chrysler and GM did go bankrupt. The US government provided billions in debtor-in-place financing and pushed the pair through the Chapter 11 bankruptcy process in April 2009. They emerged shed of some workers, auto brands, and dealerships. Fiat ended up with a controlling interest in Chrysler, while the US itself took a big stake in GM. Today the firms are doing pretty well.
To hear Romney tell it, Obama just followed his plan.
“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,” said Romney in Tuesday night’s debate.
Third, the context: Yes, but ... there’s more. While Romney’s op-ed clearly envisioned the auto firms continuing to operate after emerging from bankruptcy, it also implicitly opposed throwing government cash into the process. Yet the reality is that the piece came out during the depths of the financial crisis. Banks were crumbling all around the world; lending for commercial activities was cold as a snowman’s heart. If the auto giants had toppled into bankruptcy at that moment, it would have been bankruptcy bankruptcy, if you know what we mean. Chapter 7. Closed for good. Weeds in the parking lots. Scrap dealers bidding on assembly lines. A managed care/nursing home conglomerate moving into GM’s empty headquarters.
“Many independent analysts have concluded that taking the approach recommended by Romney would not have worked in 2008, simply because the credit markets were so frozen that a bankruptcy was not a viable option at the time,” writes Washington Post fact checker Glenn Kessler in his own analysis of the situation.
That’s why, in the final punch on this subject at Hofstra, Obama said that Romney’s assertion that the bailout had followed his outline wasn’t true.
“He wanted to take them into bankruptcy without providing them any way to stay open,” said Obama.