GM Bankruptcy - Where Is Congress?

This article on Wall Street Journal questioning the authority of the Auto Task Force was written by a person whom I didn't imagine writing anything to question the wisdom of bankrupting GM: Ralph Nader, of Corvair fame. Mr. Nader wrote the article with Robert Weissman (editor of Multinational Monitor magazine).

Obama's GM Plan Looks Like a Raw Deal, Congress, not a secret task force, should decide the company's fate (Wall Street Journal, May 29, 2009)

Messrs. Nader and Weissman's contention is very well summarized in the article's subtitle.

[emphasis is mine]
"Millions of people in communities across the country depend on the government getting the GM rescue right. That's why it is startling -- and mistaken -- for the future of GM to rest with a small, largely unaccountable, ad hoc task force made up of a handful of Wall Street expats."

I'm not sure at all about why the government has to be in the so-called rescue to begin with, but I totally agree with the second sentence.

"A congressional abdication of authority of historic proportions has left the executive branch with nearly complete discretion over how to handle GM and Chrysler's restructuring. President Barack Obama has further delegated authority, giving effective control to this task force, which operates under the titular authority of a top-level interagency group headed by National Economic Council Director Larry Summers and Treasury Secretary Tim Geithner."

Titular is such an appropriate word here. Please take a look at my previous post below ("Who Is In This Auto Task Force?"). This "titular" authority of interagency heads is further delegated to "official designees" of the "members", who in turn depend on "the staff" who do the real job. The leader of the staff is Mr. Steven Rattner, who reports to Messrs. Geithner and Summers (and who defaulted on the debt owed to Cerberus, soon-to-be-kicked-out owner of Chrysler). The staff include whiz kids on finance, economist, ex-Obama campain advisors.

"In the days before an avoidable June 1 bankruptcy filing, it is imperative that Congress honor its constitutional duties and demand that the GM restructuring deal be sent to it for deliberative review -- before any irreversible measures, such as a voluntary bankruptcy declaration, are taken. This means delaying any precipitous decisions until after Congress returns from its Memorial Day recess.

"The case for congressional involvement would be solid enough on constitutional and procedural grounds alone. But the secretive task force's plan raises red flags and requires Congressional examination in open hearings. With the government set to take a 70% ownership stake in GM, there are too many unanswered, troubling questions to proceed with a risky bankruptcy declaration."

Messrs. Nader and Weissman go on to list their 10 reasons for objection. But missing from these reason is the biggest one, I think.

Who gave the authority to the president of the United States to form this Task Force that's been dictating the two auto companies how they should go bankrupt and how they should reorganize?

The money that Chrysler and GM have received comes from the Treasury, not some spare change from the White House. Where is the Congress, indeed, as Mr. Nader asks? Why should Chrysler and GM even listen to the Task Force?

It's the authority by default.

It all seems too late now. Despite the righteous protests from some members of Congress (here's one from Alabama Senator Shelby), it's too late. Fait accompli. Chrysler is kaput, GM is dutifully preparing the bankruptcy statement. GM's European operation is already sold to a Canadian entity with Russian money (see my post). Dealerships will be forced to close, the American consumers can expect a flood of GM cars made in China. So much for saving American jobs.

In case you haven't noticed, it's been a "shock and awe" ever since September 2008, economic version. And it's been accelerating, in case you're shell-shocked.

Tweet