Here’s a letter to the Washington Post:
Matt Miller asserts that “Obama’s restructuring of the auto industry displayed, on a much grander scale, precisely the kind of tough-minded business calls Romney says are private equity’s specialty…. Obama fired management, shed workers, slashed costs, revamped operations, restructured the balance sheet and fashioned new strategies. When the dust cleared, Obama had positioned General Motors and Chrysler to move forward as viable firms” (“Barack Obama, private equity king,” May 23).
Ludicrous. Unlike any actions that could be taken by Bain Capital and other private-sector investors, Pres. Obama
- arbitrarily suspended established bankruptcy procedures;
- flipped the priority of creditors so that secured creditors were forced to accept fewer cents on the dollar than were received by lower-priority (but politically more useful) creditors;
- staked none of his own wealth on this restructuring;
- strengthened the morally hazardous precedent of “too big to fail.”
Uncle Sam’s auto bailout is to privately financed restructurings as, say, Debbie Does Dallas is to Citizen Kane: in both cases, only the most facile observers focus on the superficial similarities between the two while missing the many, hulking, and fundamental differences.
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030