Roses are red
Violets are blue
Treasury says about those deadly GM switches
It had not a clue.
Ok. Sorry. I'm not quitting my day job to write poetry any time soon. But one of the dirty little secrets of the General
Motors bailout that came to light in the wake of its ongoing recall scandal was the liability shield that the company received from Treasury. The shield, as I wrote in a USA Today piece last week, theoretically means that the new and allegedly more responsible GM is legally off-the-hook for compensating the victims of its 2.6 million Cobalts and other recalled vehicles whose faulty ignition switch is linked to 13 deaths and 31 crashes.
A liability shield is not unusual in bankruptcy. But what is unusual is that GM was not required to create a special trust fund for prospective victims. Instead, they'll have to fight other unsecured creditors for the pennies recovered from the sale of closed GM plants being held in a shell corporation.
Even more unusual is that GM got the shield when NHTSA (the National Highway Transportation Safety Agency) was already investigating the link between the faulty ignition and the crashes. So the question was what did Treasury officials who were negotiating the bailout know? Were they knowingly screwing over the victims of the Cobalt crashes or were they ignorant?
They are pleading ignorance, as per a Bloomberg story yesterday:
The task force President Barack Obama set up to manage General Motors Co. (GM)'s bailout and bankruptcy in 2009 wasn't aware of the faulty ignition switches linked to 13 deaths in small cars, said people familiar with the matter.
Had it come up, the task force would have considered setting aside more money for the GM estate left behind after the Detroit-based automaker filed for bankruptcy in June 2009, said the people, who asked not to be named because their meetings were confidential. At the time, GM's board and the task force based their projections for product-liability claims on a report that the GM estate would face about $414 million for pre-bankruptcy crashes, according to court papers.
While members of the task force met frequently in early 2009 with GM executives to discuss product-liability claims and determine how they should be handled in bankruptcy, the ignition switches or safety problems with the Chevrolet Cobalt weren't brought up, said the people.
But of course!
Unless GM can prove that Treasury is lying, it will have a hard time hanging on to its shield in court. But the word on the street is that regardless of what the courts rule, bad publicity will force GM to voluntarily forego its shield, as I note in my morning column in the Washington Examiner.
In other words, market forces are more effective regulators than government officials. Can we fire some NHTSA bureaucrats now please?