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Heritage Foundation’s James Sherk argues the government could have saved the automakers with loans that would have been paid back rather than the ba...
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And to a conclusion meanwhile in focus tonight the US auto bail out the new report out shows the billions of dollars the auto bailouts are costing the taxpayer.
Are completely unnecessary.
The president says it went to keep the factory doors open but this new analysis follows the money showing the administration spend it somewhere else.
The author of that report James -- a senior labor analysts at The Heritage Foundation joins me now hi James amazing -- amazing report.
An amazing lead work -- the government do with the money.
What we found is that the president could have kept -- -- -- running with simple bankruptcy loans that would have been -- store order it's -- repaid in their entirety.
The reason the taxpayers have lost 23 billion dollars on the bailout.
This because -- -- president decided to subsidize the compensation of the United Auto Workers.
So we put money into -- benefit funds that they were not in any way shape or form legally entitled to receive you just decided to do it.
Any projected the existing members of the union from taking pay cuts and the bankruptcy.
That decision is the reason the taxpayers lost so much money.
You say in fact that the auto -- cost 23 billion dollars but instead we -- actually recouped three billion if we had not picked up this tab.
For the you labor unions correct.
That's right the United Auto Workers got an extra 26 billion dollars.
More than no they wouldn't be entitled to and a normal bankruptcy just the standard bankruptcy laws have been followed.
Where are the creditors so with the equal the priority of their planes get repaid at the same right.
Then we would've had to put in 26 billion dollars last.
Added I think that's an enormous amount of money it's more than -- foreign -- budget went to subsidize the pay and benefits of workers who weren't twice what the average American does.
You say more than spent on all foreign aid last year you also said your report its 50% more than NASA's budget.
I mean if you make choices in these -- about how -- gonna spend the government was this a Smart choice.
I think it was a it was a horrible choice.
They -- a took a look at the nonunion workers and said it -- done this they took a look at the members of smaller less influential unions.
Like international union of electrical workers and said okay you guys don't get any special treatment.
But for the large politically influential United Auto Workers Union they got special treatment the cost taxpayers 26 billion dollars.
You're not required to have any significant wage cuts either not for existing workers and I think that's something that sticks on the crop a lot of people who have had to swallow wage cuts over the over these last few years.
That's exactly right in bankruptcy normally what happens when you have a company like General Motors and Chrysler.
Whose labor costs are much are than their competitors.
The courts bring those costs down to go competitive -- -- happened at the airlines.
It didn't happen here and the only reason it didn't happen here is because of the administration decided it wasn't going to happen.
And even -- Steven Rattner the president's former carts are admitted that that happened and that it was a mistake.
Well it we just showed -- the numbers here that -- GM workers getting about ten bucks an hour more than other auto maker workers.
The -- of the day she we have bailed out this company's -- -- -- shall we have stayed away.
I think that there could be an argument made for if a government intervention provide bankruptcy financing and there's there's there's arguments that can be -- of all sides whether or not.
They could've obtained a bankruptcy financing from private sector.
But if you won't want to provide the bankruptcy financing he should've followed the standard bankruptcy rules and not given special preferences and special treatments.
21 well paid very influential -- -- union that they should have been the addition of were covered exactly what they would have gotten.
If the government hadn't gotten involved but they shouldn't have been protected at the expense of the tax dollars -- -- -- Well let's talk about another class that was treated badly here and that's bondholders.
You've really got -- Well that's exactly right.
Look at Chrysler.
If you are secured bondholders like someone new who -- a -- if they the company goes under you're entitled to collect recovery on the company's assets.
And because of that you collect a lower interest rate -- just like a credit card which is unsecured there's a higher rate than on -- mortgage debt.
But -- Chrysler to secured bond holders only got about 29 cents on the dollar.
Or the United Auto Workers for their unsecured debt recovered pretty much the entire value of their clients -- that's how they walk away on behalf of Chrysler.
That the administration completely ignore bankruptcy law to benefit one particular influential union.
Was a special interest handout that turned the bankruptcy -- upside down.
James thanks for that fascinating stuff really interesting report and lots -- details there thank -- Thank you.
