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I turned on the TV this morning and watched a news report that for some reason really frosted me: White House and Chrysler officials practically playing kissy-face over Chrysler paying back $7.6 billion of money the government used to rescue the company.
Then I remembered and understood why I was so bothered: The nation has heard this story before.
Back in the 1980s, Chrysler and government officials lauded themselves over the company’s early repayment of a government bailout loan. Television commercials and newspaper ads featuring Lee Iacocca, who then ran Chrysler, crowed about Chrysler’s turnaround and early payback.
So should we really be excited about Chrysler doing today what it did 20-some years ago? How many lives does a failed automaker get to live? And how many times will Americans allow themselves to be scammed by our government and politically connected businesses like Chrysler? Here’s what I mean:
A little research shows that Chrysler has used essentially the same . . . creative accounting? bookkeeping devices? . . . that General Motors used in 2009 when that company announced with great fanfare that it was paying back government rescue money.
Edward Niedermeyer of TheTruthAboutCars.com reports:
Back in November of 2009, when GM announced that it would repay its government loans, it didn’t take much investigation to realize that The General was simply shuffling government money from one pocket to the other and that true “payback” was still a ways off. . . . And now that our government finds itself “contemplating a runaway deficit and getting rid of its 8 percent of Chrysler’s equity,” would you believe that a similar federal money-shuffle is under way? Believe it.
The Obama administration has already forgiven $4 billion of the money that was used to rescue Chrysler. That’s money taxpayers will never get back. No mention was made of this in the news reports.
Nor was there any mention of the money the government effectively stole from Chrysler’s first-secured bondholders, who received pennies on the dollar when the Obama administration shredded bankruptcy law to hand part of the company to Fiat.
The Obama administration’s deal allows Fiat to buy a bigger ownership stake in Chrysler. But to do this Fiat must pay back $3.5 billion of its Treasury Department loan. Fiat has been unable to do this. Is it just coincidence that Energy Secretary Steven Chu last week announced his department is considering a $3.5 billion loan for Chrysler to build fuel-efficient cars?
Now, technically the DOE loan program is supposed to be used for specific, qualifying retooling projects, so Fiat can’t literally take the DOE money and use it to pay back the government loans. But freeing up $3.5b in capital that would otherwise be spent on retooling with low-cost loans will make it infinitely easier for Chrysler to secure the $3.5b in debt refinancing it needs. And, in light of the GAO’s pointed criticisms of the DOE loan program’s fairness and transparency, it’s hard to overlook the coincidental nature of Chrysler’s need for $3.5b and the government’s allocation of extra funds to apparently guarantee a low cost loan to Chrysler for precisely the same amount. After all, we’ve seen this movie before …
We have indeed, Mr. Niedermeyer. First in the 1980s. Now in 2011. Don’t be surprised if Chrysler we see another Chrysler bailout 20-some years from now.