Presidential debate 101: Did Mitt Romney want Detroit to go bankrupt?(Read article summary)
Mitt Romney said in the presidential debate that, in effect, Obama followed his plan in calling for Detroit automakers to go bankrupt. But there's a key difference: At the height of the fiscal crisis In 2008, commercial lending was dead, hence the need for government funding.
Did Mitt Romney really say the US should let Detroit auto firms go bankrupt back in 2008? That was a subject of fierce contention in the town-hall presidential debate last night. But the millions of voters who tuned in to the Hofstra rumble heard little more than âdid tooâ âdid notâ repartee about Detroitâs bailout. We think the exchange was confusing, so weâll take a stab at decoding the facts behind this big issue.
First, the baseline: Yes, Mr. Romney did use the âbankruptâ word in conjunction with Detroitâs fate, as President Obama charged near the debateâs beginning. (âWhen Governor Romney said we should let Detroit go bankrupt, I said, weâre going to bet on American workers and the American auto industry,â were the presidentâs exact words.)
In fact, Romney published an opinion piece in The New York Times on Nov. 18, 2008, that was titled âLet Detroit Go Bankrupt." He didnât write the headline, but was given a chance to approve it, according to the Times.
The piece opposed the bailout auto executives were begging for at the time. Better to let the weaker Detroit firms go through a âmanaged bankruptcy," wrote Romney, so they could emerge leaner on the other side, shed of onerous union contracts, pension obligations, and real estate costs. Â
âDetroit needs a turnaround, not a check,â wrote Romney back then.
Second, the response: So what? In reply to Obamaâs jab, Romney pointed out that, in fact, Chrysler and GM did go bankrupt. The US government provided billions in debtor-in-place financing and pushed the pair through the Chapter 11 bankruptcy process in April 2009. They emerged shed of some workers, auto brands, and dealerships. Fiat ended up with a controlling interest in Chrysler, while the US itself took a big stake in GM. Today the firms are doing pretty well.
To hear Romney tell it, Obama just followed his plan.
âI think itâs important to know that that was a process that was necessary to get those companies back on their feet, so they could start hiring more people. That was precisely what I recommended and ultimately what happened,â said Romney in Tuesday nightâs debate.
Third, the context: Yes, but ... thereâs more. While Romneyâs op-ed clearly envisioned the auto firms continuing to operate after emerging from bankruptcy, it also implicitly opposed throwing government cash into the process. Yet the reality is that the piece came out during the depths of the financial crisis. Banks were crumbling all around the world; lending for commercial activities was cold as a snowmanâs heart. If the auto giants had toppled into bankruptcy at that moment, it would have been bankruptcy bankruptcy, if you know what we mean. Chapter 7. Closed for good. Weeds in the parking lots. Scrap dealers bidding on assembly lines. A managed care/nursing home conglomerate moving into GMâs empty headquarters.
âMany independent analysts have concluded that taking the approach recommended by Romney would not have worked in 2008, simply because the credit markets were so frozen that a bankruptcy was not a viable option at the time,â Â writes Washington Post fact checker Glenn Kessler in his own analysis of the situation.
Thatâs why, in the final punch on this subject at Hofstra, Obama said that Romneyâs assertion that the bailout had followed his outline wasnât true.
âHe wanted to take them into bankruptcy without providing them any way to stay open,â said Obama.