Treasury: GM Bailout Suit Would Hinder Future Actions
Should companies in the future need to be bailed-out by the federal government, they may not be so forthcoming with the necessary information if General Motors’ confidential documents linked to its own bailout see the light of day.
Bloomberg reports the U.S. Treasury is doing all it can to protect the information submitted by GM prior to investing $49.5 billion into the automaker during the early days of the Great Recession:
Disclosure of the disputed information would also impair Treasury’s ability to obtain necessary information from companies in the future. [The] Treasury’s ability to act as a lender would be hampered.
The information is at the heart of a lawsuit filed by the Center for Auto Safety in 2011. Over 50,000 records were obtained thus far, but the advocacy group wants information on how much of a role the Treasury played in preventing pre-bankruptcy claims made against GM over vehicles linked to the February 2014 ignition switch recall from moving forward.
Clarence Ditlow, head of the Center for Auto Safety, disputed the idea that future companies in need of help would be dissuaded from “begging for billion in taxpayer dollars” were the desired documents revealed.
The great recession was largely caused by poor government policies, such as the Clinton administration promoting home loans to unqualified buyers, so it's just and fair that the government bailed out GM. Not that GM was blameless, but the crash was like a tornado that blew through. The Center for Auto Safety is not concerned at all about "Auto Safety", but their own political agenda, they are pretty much at war with the auto industry.
"the advocacy group wants information on how much of a role the Treasury played in preventing pre-bankruptcy claims" This is what is called a "fishing expedition." I'm sure that the plaintiff's counsel is well aware that the liability for pre-BK claims goes to the old company, which is now called Motors Liquidation. Which is a serious bummer, since Motors Liquidation is in liquidation and doesn't have any money to speak of. Because of the government, the new GM contractually agreed to accept liability for claims on cars made prior to the bankruptcy for incidents that occurred since the bankruptcy. That's actually more generous that what would normally be required under the law. I don't blame Ditlow for trying, but those documents are irrelevant to his case. Funny how the "tort reform" crowd doesn't see that.
I understand some of the ire over the GM bailout... but if they had gone bankrupt there wouldn't be anyone to sue over the ignition switch issues either, right? Frankly, I believe they were too panicked and desparate to not sink the entire economy to worry about a few filed reports about ignition switch issues at the time. Personally, I am a lot more upset about the Bush bailouts of the big banks than about the car companies, who at least produce something. The big bankers paid themselves outrageously because they were supposed to be both smarter than the rest of us and were taking risks. Turns out both were false. They were taking risks with everyone else's money but went ahead and gave themselves huge bonuses post-bailout. They were smart, about siphoning money out of the market for themselves, but not about much else. Why are the right wingers so mad about saving hundreds of thousands of manufacturing jobs vs. giving nearly a trillion dollars in handouts to overpaid, oversexed, and overconfident bankers?
Thank you, PCH, for pointing out I erred in thinking those little GM bondholders were "secured". They just had "priority" that was disregarded. It was Chrysler's secured bondholders that lost that advantage. I found on the internet a critique that goes into the different treatment of creditors: http://www.nationalaffairs.com/publications/detail/the-auto-bailout-and-the-rule-of-law I remain amazed that investment managers and expert advisers failed up to the collapse to admit GM's and Chrysler's awful problems.