by Paul Gregory
Chris Wallace: We wish to welcome Steve Rattner to this virtual edition of Fox News Sunday.
Steve Rattner: Pleased to be here Chris.
Chris Wallace: Tell us what your position in the Obama administration was.
Steve Rattner: Well, the Times lists me as Obama’s lead advisor on his automotive task force. I was really his “Car Czar.” As with his other Czars, I had all the power and no need for Senate confirmation. Boy, was that a rush.
Chris Wallace: In your Delusions About the Detroit Bailout, you claim there was no alternative to the government bailout of Detroit, which your critics characterize as a corrupt, cronyist, and inefficient payoff to organized labor and the green energy lobby.
Steve Rattner: Yes, I wrote that no conceivable providers of funds had the slightest interest in financing those companies on any terms. Let me say thisChris: I recognize the risks of government intervention, particularly rewarding failure and the scary prospect of politics entering private sector decision-making. But when markets fail, government should have the ability — in fact, the obligation — to step in.
Chris Wallace: But your critics argue that you should have only provided a bridge loan, secured by GM and Chrysler assets, and then stepped aside for an experienced bankruptcy judge. Instead, as the GAO reports, you put in $62 billion of taxpayer funds to control the process from start to finish. Your critics argue that GM and Chrysler would have emerged leaner and more competitive at no taxpayer cost from a regular bankruptcy, and all stakeholders would have shared sacrifice. You could have avoided the “scary political” charge that the Detroit bailout was a corrupt payoff to Obama’s labor and green-energy contributors.
Steve Rattner: (Changing the subject). What critics conveniently ignore is that the president’s plan was litigated throughout the federal court system — all the way to the Supreme Court, in the case of Chrysler — without so much as a nod to the opponents from a single judge.
Chris Wallace: Your critics would say “Hogwash.” Bankruptcy courts and superior courts regularly accept “voluntary” agreements among stakeholders. GM and Chrysler’s TARP lenders could scarcely resist Obama’s demand for their “shared sacrifice.” The secured Chrysler lenders were strong-armed into accepting 29 cents on the dollar after the President of the United States publicly accused them of being “speculators” who hold out when everyone else is making sacrifice.
Steve Rattner: (Becoming angry). Chris, you should refrain from inflammatory language like “strong armed.”
Chris Wallace: Wait a minute, Sir. The Director of the Indiana State Pension Fund – scarcely a speculator — complained that Indiana retirees ended up with pennies while non-secured UAW funds got 55 percent of the “new” GM, and senior union members still earn $116,480 in wages and benefits. You have to admit that is pretty good pay for high-school graduates. UAW members currently pay only 7 percent of their health-care costs.The UAW’s own website brags that Obama’s bankruptcy saved the UAW’s gold-plated pension fund from being reduced 65 percent to pension rates in other industries. Do you agree that the UAW did not sacrifice and the Indiana Fund is, as it claims, a victim of the abuse of power by the Executive Branch to further its political agenda?
Steve Rattner: (At a loss for words). No. There was shared sacrifice all around!
Chris Wallace: Excuse me sir, but did not you recently say: The members of President Obama’s Auto Task Force did not work as hard as we did in order for workers to see their pay slashed.
Steve Rattner: Well, I had to backtrack from unguarded remarks before a Detroit business group, where I admitted that the UAW members should have taken a pay cut.
Chris Wallace: Well, does not that….
Steve Rattner (Interrupting to change the subject): Don’t forget that the Bush administration approved the first loan to Detroit in its last two weeks in office.
Chris Wallace: Excuse me, sir. You, not the Bush administration, handled the bankruptcy. Did you inform the Bush administration that you were going to use the bankruptcy to reward political supporters?
Steve Rattner (Weakly): But we saved a million automotive jobs.
Chris Wallace: Excuse me sir, but other industries that have gone through regular bankruptcies have saved as many or more jobs. Top legal minds also say GM could easily have found a private buyer or private investor once the bankruptcy proceeding was underway. Instead, the reorganization was structured as a sale that excluded private capital and that preserved a very large flow of union and environmental contributions.
Steve Rattner: (Reaches for a handkerchief to wipe the sweat from his brow). But GM is prospering. It is ready to regain control of the world automotive market.
Chris Wallace: Well, I see that GM has halted production of its Volt. What does that tell us? Also we know that GM makes its money from SUVs and trucks. How will they fare with the new mileage standards of the Obama administration?
Steve Rattner: I am out of here! This is the last Fox News will see of me. David Gregory, George Stephanopoulos, and Wolf Blitzer would not subject me to such abuse.
Chris Wallace: We’ll go to an unplanned station break. Our next guest, Mitt Romney, will tell us how The Times changed his editorial from “Let’s Save Detroit With a Managed Bankruptcy” to Let Detroit Go Bankrupt.
Steve Rattner: (Heard shouting off camera). Imagine a professional politician, like Romney, falling for such an old trick. We’ll now win Michigan for sure.
In his Delusions About the Detroit Bailout, Rattner is careful to refer to shutting the doors of GM and Chrysler only in the context of their being unable to get private bridge financing “to pursue bankruptcy reorganization.” With Rattner’s Wall Street experience, he, of all people, understood that private equity capital would have been available in a regular bankruptcy reorganization. He never defends what he consistently refers to as “Obama’s plan” on its merits, appealing instead to its narrow legality. He defends himself with ferocity and even outrage in hopes that the real issues will remain undercover and unaddressed. In my virtual interview, Chris Wallace sees through the smoke screen and goes after the real issues.
Paul R. Gregory is a Research Fellow, Hoover Institution Cullen Professor of Economics, University of Houston. Gregory has a regular blog //blogs.forbes.com/paulroderickgregory/at Forbes.com