How the Obama Auto Bailout Screwed Taxpayers and Paid Off Unions

James Sherk of the Heritage Foundation and Todd Zywicki of the Mercatus Center have a fascinating analysis in the Wall Street Journal today demonstrating that Obama administration’s claims that the auto bailout is a “success” is mendacious bullshit. They note that had the administration given auto unions the same treatment as other equivalent creditors, as it would have been required to do in a standard bankruptcy court, taxpayers right now would have been  $3.5 billion in the black instead of $23 billion in the red.

They note:

 A bedrock principle of bankruptcy law is that creditors with similar claims priority receive equal treatment. If you owe $1,000 each on two credit cards, in bankruptcy you cannot choose to pay $900 to Citi and only $200 to Chase. Each of the creditors is entitled to an equal percentage recovery.

In the auto bankruptcies, however, the administration gave the unsecured claims of VEBA [union pension fund] much higher priority than those of other unsecured creditors, such as suppliers and unsecured bondholders.

What’s more:

 The same thing happened at Chrysler, only to a greater degree. Chrysler's junior creditors recovered none of their $7 billion in claims. In normal bankruptcy proceedings, the UAW would have also collected nothing. Instead it walked away owning almost half of new Chrysler and a $4.6 billion promissory note earning 9% interest.

And:

The UAW did accept sharp pay cuts for new hires. But they only made modest concessions for their existing members, like eliminating the much-maligned Jobs Bank that paid workers even when they were laid off.

As a result, GM still has higher labor costs ($56 an hour) than any of its competitors. Indeed, Steven Rattner, the Obama administration's former "car czar," told the Detroit Economic Club last December, "We should have asked the UAW to do a bit more. We did not ask any UAW member to take a cut in their pay."

Had bankruptcy brought GM compensation in line with its competitors' (approximately $47 an hour), we estimate the resulting savings would have increased the value of the taxpayers' stake in GM by $4.1 billion. This would still leave UAW members making 40% more than the average American manufacturing worker.

Their bottomline?

The funds diverted to the UAW account for the taxpayers' entire net loss.

Read and weep!

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  • Dovahkiin||

    Fuck.

  • o3||

    the horror that the rank n file got money instead of the execs like in the wall st bailout. hard to drive a car lookin in the rearview shikha

  • Heroic Mulatto||

    So? Taking food from my kid's mouth to support some Detroit baby-momma is somehow makes it better than subsidizing Wall St. cronies?

  • SugarFree||

    I assume that you will go out later and attempt to argue a parking meter into no longer running out of time.

  • ||

    When, oh when, will people stop responding to it? It's not. Fucking. Hard.

  • o3||

    and yet epi does, again und again

    lead by example clown

  • T||

    A ball peen hammer works well for that, as long as there are no security cams.

    The application of a ball peen hammer to other things is left as an exercise for the reader.

  • Pi Guy||

    I've found that if you hit just the right spot on a speed camera...

  • Brandybuck||

    I've always preferred the garlic press for that application

  • ||

    the horror that the rank n file got money instead of the execs like in the wall st bailout.

    The junior creditors were most likely pension funds....ie Teachers, Firemen and Cops.

    The rank and file got their money taken from them and given to GM executives and the UAW.

  • carol||

    Exactly. The sweet irony is that labor pension funds, IBEW, etc., got screwed by the UAW.

  • Paul.||

    Right, because Chrysler's creditors didn't have employees trying to make ends meet, single moms, single dads, janitors. They were just fat cats smoking cigars made of $100 bills.

    You do realize that Chryslers creditors included, you know, auto-parts manufacturers, right? Guys with dirt under their fingernails.

  • Xenocles||

    "hard to drive a car lookin in the rearview shikha"

    If he can do it...

  • plu1959||

    May they drown in bottomless vats of jenkem.

  • Heroic Mulatto||

    OT: Humanzee/Chuman: Possible or Unpossible?

    Discuss.

  • plu1959||

    "Chu eat yet?"

  • ||

    Wait, I thought that's what you were, thereby proving it possible.

  • Heroic Mulatto||

    I also have donkey blood in me from the Tijuana side of the family, so that's a different discussion.

  • Sudden||

    Considering this was a response to heroic mulatto, allow me to point out the obvious RACIST!1!11!!!!!eleve!nt!!yone!!!.

    Now, proceed over to the dutch practice grounds and continue making monkey noises at the players.

  • AlmightyJB||

    That's STEVE SMITH'S Brood.

  • mr simple||

    Yes, let's make things that are 10 times stronger than us also as smart as us. That should turn out well.

  • Dr. Zaius||

    Works for me.

  • Hugh Akston||

    So the bailouts paid off the unions, who will now continue to throw their support behind Obama and other Democrats.

    Sounds lie a success to me. If you're Obama, anyway.

  • ||

    who will now continue to throw their support behind Obama and other Democrats.

    Note the new hires don't get a cent of it.

    It is interesting that the UAW seems to have no problem cannibalizing themselves and that democrats made a terrible choice in who they 'invest' in for buying votes/Support.

    They did the same thing with Solyndra....and Solyndra went fucking broke.

    How hard is it to find voters/contributors to buy that are not on a suicide mission?

  • Paul.||

    Biden 2016!

  • ||

    How is this a surprise to anyone? As soon as they conducted the bankruptcy against established bankruptcy law/rules, you knew the fix was in. Shit, you knew the fix was in as soon as you saw "union" and "Obama" in the same sentence.

  • Tulpa the White||

    The question is why the fuck the courts approved the "creative bankruptcy".

  • AlmightyJB||

    If the Democrats don't give the Unions a bunch of taxpayer money, then how are the Unions supposed to turn around and donate that money to the democrat coffers? Can't be kickbacks with the kick.

  • JW||

    Read and weep!

    I assure you, I've been weeping at the political wreckage for a couple decades now, in between bouts of impotent, shaking rage.

  • SugarFree||

  • ||

    Refused? It was merely an obstacle to be overcome and denied. Look, if you're going to get on your knees for the unions every fucking time, you have to be dedicated and disciplined. At lying.

  • John||

    God MNG was a Joe from Lowell level prick. Brother Ben was a saint, quite literally in some ways. He was a total prick to him.

  • ||

    God MNG was a Joe from Lowell level prick.

    True...but MNG leaned more libertarian then Joe did.

  • John||

    True. But MNG could be just as nasty of a prick.

  • Chupacabra||

    At least MNG wasn't a sock puppet, like the current versions of Tony, Urine, and shrike. Although MNG was a complete idiot, you could see his simpleton mind trying to make sense of things.

    Also, wow - unthreaded comments.

  • R C Dean||

    Thanks for the flashback.

    MNG comes off as borderline retarded in that thread.

    "I don't understand why everybody shouldn't get everything they're owed."

    [facepalm]

  • Tulpa the White||

    BUT THEY PROMISED!!!!!!

    :::stomps feet:::

  • albo||

    Democratic administration negotiated a union-friendly deal with unions.

    That's like two dingoes negotiating over the disposition of a soft, delicious baby.

  • ||

    That's like two dingoes negotiating over the disposition of a soft, delicious baby.

    By two dingos do you mean some guy spotted a dingo dropped a baby on the dirt as close as he could to the dingo without scaring it then walked away?

  • R C Dean||

    taxpayers right now would have been $3.5 billion in the black instead of $23 billion in the red.

    The funds diverted to the UAW account for the taxpayers' entire net loss.

    The taxpayers are not the government. The government is not the taxpayers. When the government spends/loses/wastes/"invests" money, the taxpayers (individually or collectively) have not spent/lost/wasted/"invested" a single fucking cent.

    Just. Stop. It.

    In fact "the taxpayers'" money and the "government's" money are mutually exclusive. Money the taxpayers still have is, by definition, not the government's money, and vice versa.

    /pet peeve rant OFF

  • Paul.||

    That which is not taken is a gift.

  • fried wylie||

    Money the taxpayers still have is, by definition, not the government's money

    Ha. Oh, you were serious?

    BWAHAHAHAHAHAHAHAHAHAHA!!1

  • The Other Kevin||

    Yes, but I'm sure those UAW members went out and bought all kinds of cars, and big screen tv's, and vacations and stuff, thereby stimulating the economy. Which is somehow supposed to make my life better I guess.

  • T||

    I posted a link to the in yesterday's PM links. No hat tip for me, but then Shikha doesn't come into the comments to listen to us groundlings.

  • ||

    I am confused as to how this is even remotely legal.

    Did the Obama TARP modification law somehow change liability?

    How are the creditors not able to sue?

  • fried wylie||

    In answer to all your questions: "Fuck You, Pay Me. That's Why/How."

  • GILMORE||

    The principal creditors were in most cases the same banks/investment banks etc. that received TARP funds. There is a rumor that the gov required them behind closed doors to shut up about their 'Secured lender' status, and suck it up since they were already receiving mucho-moola in bailouts themselves.

    The individual investor who got assfucked by Government bypassing securities laws? left in cold.

  • John||

    And lets not forget the non preferred retirees at Delphi got fucked. So this wasn't even a case of looking out for little guy. This was a case of steeling for Democratic supporters.

  • o3||

    GM jettisoned Delphi years ago

  • John||

    So what? They were part of the bailout

    http://campaign2012.washington.....ocs/592711

  • ||

    Don't. Fucking. Respond. To. It.

  • Loki||

    How much did those other creditors to Obama's campaign? If only they had been smart enough to buy themselves a president.

  • Raston Bot||

    So is this supposed to make me want to buy a Chrysler or Chevy? Because it's not working.

  • fried wylie||

    Like you'll have a choice in the matter.

    Hey, at least you won't be forced to actually drive the piece of shit you'll be forced to buy.

  • Pi Guy||

    Just wait for the Individual GM Mandate.

    It is, after all, economic activity between the states - no?

  • GILMORE||

    had the administration given auto unions the same treatment as other equivalent creditors, as it would have been required to do in a standard bankruptcy court, taxpayers right now would have been $3.5 billion in the black instead of $23 billion in the red.

    Progressive Liberal = "But the capitalisms... they failed!"

    I don't remember the exact details (and the article doesn't mention it) - but there was significant hanky panky with the lenders of chrysler as well (not just 'unsecured' obligations, which they focus on) - with senior bondholders forced to accept $0.30 on the dollar, despite holding debt *secured by law* guaranteeing them priority.

    Details here

    http://www.nationalaffairs.com.....ule-of-law

    What they suggest is that the extraordinarily unusual deal was related to the fact that the selfsame creditors of chrysler were recipient of billions in TARP funds, and so expected to shut up about their legal rights in the case of a 'bailout' of a company they'd been lending to. The dangerous precedent it set was basically, "in certain situations, the government will simply ignore its own securities laws to achieve whatever ends".

  • R C Dean||

    That's my recollection. A big chunk of the secured debt was owned/controlled by the bailout banks, who dutifully voted to fuck themselves (and, not that anybody cared, the other secured creditors) for the UAW's benefit.

  • Keith3D||

    "in certain situations, the government will simply ignore its own securities laws to achieve whatever ends"

    Nothing new really. Remove the word "securities" from the sentence. Don't need the "certain situations" part either.

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