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Entries in Government Bailout (3)

Thursday
May102012

Obama Calls Romney's Auto Bailout Claim an ‘Etch-a-Sketch Moment’

Richard Ellis/Getty Images(WASHINGTON) -- President Obama on Wednesday roundly dismissed GOP rival Mitt Romney’s claim to credit for the resurgence of the U.S. auto industry as “one of his Etch-A-Sketch moments,” in an exclusive interview with ABC News’ Robin Roberts.

During a visit to Lansing, Mich., on Tuesday, Romney said the idea of a managed bankruptcy for GM and Chrysler had been his idea at the height of the economic crisis in 2009.

“So I’ll take a lot of credit for the fact that this industry’s come back,” Romney said.

Obama has argued that the managed bankruptcy could not have been possible without his decision to authorize a multi-billion dollar infusion of taxpayer cash to keep the companies afloat.  Romney opposed federal government aid.

“I don’t think anybody takes that seriously,” Obama told Roberts of Romney’s claim.  “People remember his position, which was, ‘Let’s let Detroit go bankrupt’ and his opposition to government involvement in making sure that GM and Chrysler didn’t go under.”

“And I -- every businessperson and economist out there understands that at the time I had to make the decision, there was no private sector option.  Nobody was opening up their wallets to lend money to GM and Chrysler,” the president said.

While a few conservative economists have rejected the notion that government funds were required, the consensus of leading economists is that the situation was so dire that the companies could not alone acquire necessary funds to proceed through the process.

“The companies would have shut down and the bondholders would have been wiped out,” said Mark Zandi, chief economist at Moody’s Analytics.  “Nearly all analysts at the time felt at the time that without government bailout -- GM and Chrysler would have been liquidated.”

Obama, who has made the revival of the auto industry a cornerstone of his re-election campaign, said a President Romney would have allowed the companies to succumb.

“We would have lost probably a million jobs throughout the Midwest,” he told Roberts.  “So the people who are in the Midwest -- you know, you go take a poll of folks in Detroit who buy that argument -- I don’t think they’re going to be persuaded.”

Romney has argued that had the companies been pushed into managed bankruptcy without government assistance, they would have restructured and returned to profitability more quickly than they have.

Copyright 2012 ABC News Radio

Tuesday
May082012

Romney Takes Credit for Auto Industry Turnaround

Joe Raedle/Getty Images(LANSING, Mich.) -- Just hours before making his return to his native state of Michigan where he will deliver a speech at a local university here, Mitt Romney reiterated his claim that he should be given credit for the resurgence of the auto industry, reigniting the debate over how the auto industry should have been helped and inviting criticism from Democrats dubbing the remark a “new low in dishonesty.”

“My own view, by the way, was that the auto companies needed to go through bankruptcy before government help, and frankly that’s finally what the President did,” Romney said during an interview with ABC News’ Cleveland affiliate WEWS on Monday.  “He took them through bankruptcy. That was the right course I argued for from the very beginning. It was the AW and the President that delayed the idea of bankruptcy.”

“I pushed the idea of a managed bankruptcy, and finally when that was done and help was given, the companies got back on their feet, so I’ll take a lot of credit for the fact that this industry’s come back,” Romney told WEWS.

President’ Obama’s National Campaign Co-Chair – and member of the “Obama for America Truth Team” – former Ohio Gov. Ted Strickland responded to Romney’s claim, writing in a statement, “Mitt Romney may think he can fool the American people by hiding his belief that we should ‘let Detroit go bankrupt,’ but the American people won’t let him. His comments today that he will ‘take a lot of credit that the [auto] industry has come back’ are a new low in dishonesty, even for him.”

“At the time the loan was extended, auto industry leaders were saying that they couldn’t keep the industry alive without a lifeline from the federal government,” said Strickland. “And so, the President did something politically unpopular at the time and he gave them a lifeline to restructure and because of his decision to do so, the industry is prospering and spurring growth across the nation.”

Romney has suggested before that the managed bankruptcy that the auto giants went through was his own idea, and did so explicitly in his controversial 2008 New York Times op-ed titled, “Let Detroit Go Bankrupt,” in which he argued that a so-called “managed bankruptcy” would have resulted in a faster turnaround.

The auto bailout was funded with Wall Street bailout funds and begun under the Bush administration. Romney’s 2008 op-ed opposing it hasn’t always played well with Michigan residents, many of whom were relieved to see the industry saved, regardless of the means in which it was done.

But Romney has not backed down from his 2008 position. Just a few days prior to the Michigan primary earlier this year, he wrote another op-ed in the Detroit News that echoed many of those same messages.

Copyright 2012 ABC News Radio

Monday
May072012

US Will Unload More AIG Shares

STAN HONDA/AFP/Getty Images(WASHINGTON) -- The U.S. government said Monday that it will sell $5 billion in AIG shares, one of a series of offerings since the insurance giant received the biggest bailout in history.

The Government Accounting Office said as of March 22, the government still had a $46.3 billion stake in AIG, including unpaid dividends and accrued interest. That’s down from $92.5 billion in March 2011 and $154.7 billion in December 2010. In all, the taxpayers’ ownership in AIG has been cut to 70 percent and this latest sale will bring it to 63 percent.

“Based on the $30.83 closing share price of AIG common stock on March 30, 2012, Treasury could recoup the total value of assistance extended to AIG and take in an additional $2.7 billion including dividends,” the GAO said.

However, it’s not clear how the government could take such a large amount from the insurer any time soon without damaging the value of the shares. The stock fell as much as 7 percent Monday after the government announced the new share sale.

In 2011, AIG had profit of $18.5 billion, but that was mainly because of an income tax benefit. In other words, AIG made a profit because it didn’t have to pony up taxes to the Treasury.

“The indicator on AIG’s quarterly insurance operating performance shows that AIG was profitable in most quarters and that investment income contributed considerably to that profitability, including several quarters when insurance underwriting by itself was not profitable,” the GAO said. “The sustainability of any positive trends in AIG’s operations will depend on how well it manages its business in the current economic environment.”

AIG bought and guaranteed billions of dollars' worth of mortgages that turned sour in the 2008 financial meltdown. The U.S. acted to bail out the firm after top officials said the entire financial system might collapse if no action was taken.

Copyright 2012 ABC News Radio