Treasury: GM Bailout Suit Would Hinder Future Actions

Cameron Aubernon
by Cameron Aubernon

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.

Cameron Aubernon
Cameron Aubernon

Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.

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  • Duaney Duaney on Oct 31, 2014

    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.

  • Pch101 Pch101 on Oct 31, 2014

    "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.

  • Stevelovescars Stevelovescars on Oct 31, 2014

    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?

    • S2k Chris S2k Chris on Oct 31, 2014

      Generally speaking, bankers who got big bonuses after the bailouts were on a defined bonus plan and oversaw parts of the business that had succeeded even in the face of the overall market decline. If you're Joe Banker in charge of, say, the junk bond portfolio, and your bonus plan says "if you grow your business 10% this year your bonus payout is 100%" and you do just that, even as the rest of the company is imploding around you, wouldn't you be ticked if you got screwed? In very few (if any, I caveat it only because someone will come up with a gotcha) cases did anyone involved in a failing business unit get a bonus. The much-publicized AIG bonuses were on parts of the business unrelated to the failed CDO-backing division. If they DIDN'T pay out, they would've gotten the pants sued off of them. Bad "optics", sure, but generally the right thing to do.

  • 50merc 50merc on Nov 01, 2014

    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: I remain amazed that investment managers and expert advisers failed up to the collapse to admit GM's and Chrysler's awful problems.

    • Pch101 Pch101 on Nov 01, 2014

      We're making progress. It took you only five years to understand that the GM bondholders were unsecured creditors. At this rate, I suppose that it will take you another five years to realize that the union VEBA was also an unsecured creditor. And it will take an additional five years after that to figure out that the cramdown statute in the bankruptcy code allows the court to not follow the absolute priority rule (which is obviously not absolute.) Check back in 2024. You'll get to the truth eventually, I hope.