Was the auto bailout worth it?

Success has many fathers, said Peter Grier in The Christian Science Monitor. In recent days, President Obama and Republican presidential hopeful Mitt Romney have both claimed credit for the now-completed federal bailouts of General Motors and Chrysler. Obama has been touring auto plants in the Midwest, hailing the rescues. “Today, this industry is growing stronger,” he crowed. That’s because you followed the plan I laid out in a column for The New York Times in 2008, Romney replied. It prescribed a managed bankruptcy that would wipe out shareholders, extract big concessions from bondholders and union members, and guarantee post-bankruptcy financing. Today, both automakers are profitable and have repaid much of their government financing. “The president recognized I was right,” Romney told CBS News. But he was hardly a lone voice in the wilderness. Managed bankruptcy “was an option many experts talked a lot about at the time,” and Romney’s anti-Detroit tone was tougher than he’d like us to recall.

Neither side has anything to brag about here, said David Skeel in The Wall Street Journal. The story goes that the bailouts averted disaster “at remarkably little cost,” but in fact they made a mockery of the bankruptcy process. Each corporation “pretended to ‘sell’ its assets to a new entity that was set up” for that purpose, and Fiat was awarded a large stake in the new Chrysler for an investment of zero dollars. The presence of competing bidders could have lent the process some legitimacy, but they would have had to follow the outlines of the federal plan, including giving favorable treatment to unionized retirees. Speaking as a fan of the bailouts, even I find them troubling, said Daniel Howes in The Detroit News. The car companies survived, but not “without a high cost in principle, contract law, and investor rights.”

Ask several million workers at the car companies and their suppliers if they care, said Rod Meloni in ClickOnDetroit.com. Had the government not waded into “the murky and fetid waters” of the bankruptcies, no one else would have. The auto industry accounts for 5 percent of U.S. output, and the unemployment rate, which at its worst “ticked up past 10 percent,” could have doubled if Chrysler and GM had gone under. Let the president take his “victory lap.” Especially since “unemployment in the auto states” of the Midwest is dropping fast, said Jonathan Cohn in TheNewRepublic.com. Say what you will about the bankruptcy process; “the Obama administration’s intervention put people back to work.” And that’s what people want from their president.

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