Mitt Romney has plenty of chutzpah. Speaking to the Detroit News this week, he said one of the first orders of business he’d have if elected president would be to sell off the government’s stake in General Motors stock. Wait a minute, the guy who wanted to let GM and Chrysler die is giving advice now that the two companies have recovered thanks to the Obama bailout? Well, his father did helm American Motors for a while.
“There is no reason for the government to continue to hold [the GM stake],” Romney said. “The president is delaying the sale of the shares to try and avoid the story that the taxpayer took another loss. I would get the company independent from government and run for the interests of the consumer and the enterprise and its workers — not for the political considerations of government officials.”
A bit of history is necessary here. If Romney had been president in 2008 and 2009, GM would be a memory today. In "Let Detroit Go Bankrupt," a New York Times opinion piece in November of 2008, he said, “If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.” Oddly enough, both GM and Chrysler are now doing fine.
Romney called for a hugely impractical “managed bankruptcy.” As Steve Rattner, who was Obama’s car czar during the bailouts, has pointed out, GM could never have survived without government capital — private money was deserting the Titanic of the automotive industry. The choice was a federal bailout or closing the doors on GM and Chrysler. Here’s Rattner on MSNBC's "Morning Joe." Note that he praises George W. Bush (and Treasury Secretary Henry Paulson) for seeing both the bank and auto bailouts as bitter but necessary pills:
Publicly the Treasury Department says the government has no timetable for selling its stock. There may well be some political aspects to it, because the Solyndra debacle looms large. Frankly, if the Obama administration sold now, the loss on the stock would become a major GOP campaign theme. But the stock is selling for $21 a share, and a selloff now would result in a $16 billion loss on the $49.5 billion investment.
Sam Jaffe, an analyst at IDC Energy Insights, has a good take on this. He told me, “It’s always tricky when the government owns equity. It’s a bad fit. That said, from my recollection of 2008 and 2009, I don’t remember anybody saying the government should purchase GM stock as a way of making money. It was never branded as a profit-making endeavor. The fact that the bailout lost money doesn’t mean it failed.”
It may be that the Republican firewall opposing all government investment programs, in bailouts or renewable energy programs, is cracking. I learned from a fascinating MNN post by Russell McLendon that Sen. Lisa Murkowski (R-AK), an influential senior member and always friendly to state oil interests (pictured at right), said this week that the loan-guarantee program that begat Solyndra shouldn’t be canceled, just made to work the way Congress intended. “We are focusing right now on the failures instead of also recognizing that we have done good things [with] the loan guarantee program.”
After all, the loan program was created not under Obama but George W. Bush, as part of the Energy Policy Act of 2005. It had bipartisan support then. The Energy Department says its $34 billion investment has created more than 60,000 jobs.
And Murkowski is also right that some of the government aid packages could have been designed better. In 2009, the Energy Department laid out $2.4 billion in funding to locate advanced lithium-ion battery manufacturing in the U.S., and funded nine players. Most of the money went to Michigan, and several companies built plants there. The problem is that the program laid out early deadlines for having the plants up and running, and those deadlines preceded actual demand for electric car batteries. The market is developing, but slowly, and that’s hurt several battery companies, including LG Chem, Johnson Controls, A123 and Ener1.
The government should sell its GM stock, but only when it makes financial sense. And it should absolutely continue to offer loan guarantees to renewable energy startups. For every failed Solyndra, there are five successes.