By the time Obama took office, "The Bush administration had given the car companies $13 billion and the money was now gone."
Barack Obama on Thursday, March 15th, 2012 in a campaign video
Obama campaign movie says auto bailout money had run out when he took office
In a new 17-minute campaign movie highlighting President Barack Obama’s accomplishments in office, narrator Tom Hanks walks viewers through the major challenges of the last four years and how the president has handled them.
Osama bin Laden. Iraq. Health care. The collapsing auto industry.
On the subject of Detroit, car company CEOs appear onscreen asking for money in Washington, followed by pictures of empty factories and dire news headlines. The movie talks about the financial pressures on the new president and the unpopularity with the public of more bailouts. But Obama, Hanks says, acted anyway to help American workers.
"He decided to intervene, but in exchange for help the president would demand action. The Bush administration had given the car companies $13 billion, and the money was now gone," Hanks says.
Then President Bill Clinton appears onscreen to lend his voice.
"He didn’t just give the car companies the money, and he didn’t give the UAW the money," Clinton says. "He said you guys gotta work together and come up, and everybody’s gotta have some skin in the game here. You gotta modernize the automobile industry."
Chrysler and GM got their first billions in December 2008 under President George W. Bush and received billions more under Obama. So here, we’re checking the movie’s claim that the first round of loans ran out before the second was extended -- that when Obama took office "the Bush administration had given the car companies $13 billion, and the money was now gone."
In early December 2008, Chrysler and GM were dangerously close to collapsing. With global credit markets frozen, the companies turned to the federal government for an emergency infusion of money. More than a million jobs were at stake.
Bush authorized initial loans to Chrysler and GM (and their respective financing arms) before leaving office, using money from the Troubled Asset Relief Program. Chrysler initially received $4 billion, and GM got $13.4 billion in bridge loans meant to keep the companies afloat for a little longer.
Early in 2009, Obama convened a task force to study the companies’ viability. Both were required to submit plans for getting back to solvency, but both failed, the task force determined. In the meantime, they were running short of money again.
A report from the Congressional Oversight Panel details the chronology of the spending, including an additional $6.36 billion that GM received between March and May 2009.
Both companies ended up going through structured bankruptcies, Chrysler in April and GM in June. The Obama administration was instrumental in the manner in which the reorganizations proceeded. Some debt holders were forced to take losses, while the autoworkers union health care trust, which was owed billions in health benefits, took an equity stake, as did the federal government.
Details on the money
The Obama campaign responded to our inquiry with citations of several news stories about when the first loans were disbursed.
* $5 billion to financing arm GMAC on Dec. 29, 2008
* $4 billion to GM on Dec. 31, 2008
* $4 billion to Chrysler on Jan. 2, 2009
* $884 million to GMAC on Jan. 16, 2009
* $100 million to financing arm Chrysler Financial on Jan. 16, 2009
Obama was inaugurated Jan. 20, 2009. So that adds up to almost $14 billion in auto bailout money before he took office.
Details on the spending
The campaign also sent us reports from early 2009 on where the money was going.
Sean McAlinden, chief economist for the Center for Automotive Research, told the Detroit News in January that "GM and Chrysler are insolvent. Without federal funding they are bankrupt."
He added that Chysler needed $6 billion at the time to pay its suppliers for the previous quarter's auto parts, and he said he suspected the full $4 billion loan went towards those payments, the story said. (We reached out to McAlinden for our story but didn’t hear back.)
A Detroit Free Press story noted that GM was spending $7.5 billion per month on car parts at the time the government bailed it out. The Obama campaign pointed out that just a single month’s expenses exceeded the amount GM received from the Treasury by $3.5 billion.
ABC News published a story in April 2009 quoting Neil Barofsky, the TARP inspector general, saying that Chrysler Financial had asked for more funds because "they had basically used up the $1.5 billion that was lent to them."
We ran this statement by Steven Rattner, who headed Obama’s task force through the bailouts. He said it’s accurate that the funds were exhausted.
"It got used up before we really were in the saddle," he said.
But he also pointed out that none of the parties involved -- not the Bush administration, the incoming Obama administration or the car companies -- thought it would be enough to bring the automakers back to solvency.
"Nobody thought it was going to solve the problem. This was a interim financing," Rattner said. "This was all something we anticipated."
A New York Times story from the time said the Bush loan "gives the companies a few months to get their businesses in order but hands off to President-elect Barack Obama the difficult political task of ruling on their future."
We also think it’s worth mentioning the implication in the video that the Bush administration did not put enough restrictions on the money. "He decided to intervene, but in exchange for help the president would demand action," narrator Hanks says just before mentioning the Bush loans.
Obama himself has previously said the Bush team handed out billions and asked nothing in return, a statement we rated False.
Keith Hennessey, a former Bush administration official, wrote on his blog in June 2009 about the many restrictions tied to the loans, including that the car companies pay down debt, limits on executive compensation and negotiated reductions in wages and benefits for autoworkers. And remember the companies’ viability plans reviewed by Obama’s task force? They were required under the terms of the Bush loans.
The Obama campaign movie says, "the Bush administration had given the car companies $13 billion and the money was now gone."
It's important to note that the $13 billion was provided as loans, not as grants, as the wording might suggest.
Referring to the time Obama took office, January 2009, GM and Chrysler by then had received almost $14 billion in bailout money. News reports also reflect that the money was basically used up. So, that much is correct. But the movie ignores the fact that this was not unexpected. The Bush administration’s loans were always just a temporary lifeline, meant to keep the companies operating so the new president would have time to decide what to do long term.
This is important information left out of the movie’s extensive discussion of the auto bailouts. That the $13 billion was gone when Obama arrived was no surprise. We rate the statement Mostly True.