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Obama defends auto bailout

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Obama defends auto bailout

David Shepardson / Detroit News Washington Bureau

Washington -- President Barack Obama strongly defended the administration's decision to force bondholders and debt holders at General Motors and Chrysler to take billions of dollars in losses as part of the government's bailout of the automakers.

"Some of the folks who made the biggest concessions were actually the workers. They took huge cuts in terms of pay and benefits because they understood their wage structures could no longer support the auto industry in a competitive era," Obama told a town hall meeting sponsored by CNBC today.


Secured lenders at Chrysler got $2 billion in cash for $6.9 billion in debt. Many banks and others argued that the United Auto Workers health care trust fund -- which got a 67 percent initial stake in Chrysler -- was given too sweet a deal by the administration.

While secured lenders at GM were paid off, bondholders at BM who held $30 billion in debt were almost completely wiped out in the bankruptcy -- though they are slated to receive a 10 percent equity stake in new GM.

The UAW health care trust fund received a 17.5 percent stake in GM, warrants for 2.5 percent more, a $2.5 billion promissory note and $6.5 billion in preferred stock.

"If workers are giving up something, if management is giving up something, if the federal government is giving up something, if taxpayers are giving something -- you are not going to get 100 percent of what you bargained for," Obama said, recounting the message to debt and bondholders. "You're going to have to take a haircut, too -- and they got very mad about it."

He said the government didn't impose dramatic losses on investors in GM and Chrysler debt "because we were anti-business. We were doing it because we wanted to make sure that (GM and Chrysler) would continue."

He also reiterated how deeply unpopular the auto bailout has been -- despite the administration's efforts to tout the decision in recent months.

"We knew it wasn't popular. The last thing folks wanted to see was us helping the auto industry," Obama said.

He again said the U.S. economy could have lost more than 1 million jobs if GM and Chrysler were allowed to liquidate.

He reiterated criticism of the Bush administration for bailing out General Motors Co. and Chrysler Group LLC with $17.4 billion and "asking nothing in return."

Former Bush administration officials reject the criticism, noting they required GM and Chrysler to submit detailed restructuring plans soon after the Obama administration took office.

From The Detroit News: http://detnews.com/article/20100920/AUTO01/9200405/1148/auto01/Obama-defends-auto-bailout#ixzz106W04iEc

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duh? it's a bright spot in his tenure so far, what fool (read person with values) wouldn't play it as a trump card when it came up?

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duh? it's a bright spot in his tenure so far, what fool (read person with values) wouldn't play it as a trump card when it came up?

Well, if the right wingers had had their way, no bailout would have happened and GM and Chrysler probably would have gone under w/ catastrophic results and we'd now have 20% unemployment.. and they would be trumpeting the lack of a bailout..

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