WASHINGTON – Dozens of lawmakers are challenging the authority of President Barack Obama’s auto task force, saying its swift restructuring of General Motors and Chrysler is unjust to investors, dealers and others.
In a letter to Treasury Secretary Timothy Geithner on Friday, Rep. Jeb Hensarling, R-Texas, said the auto task force is waging a “war on capital” by favoring the United Auto Workers, who are being offered a 39 percent equity stake in the new GM, over bondholders, many of them small investors and retirees, who are being offered 10 percent.
“Choosing sides between equal classes of creditors sets a terrible precedent – one that could cause serious long term challenges to the financing marketplace by eroding investor confidence at the worst time in our recessionary period,” Hensarling wrote in a letter signed by 20 other House members.
On Friday another concerned group of lawmakers, wary of the job losses stemming from the shuttered plants and dealerships, appealed to White House officials.
“We are asking President Obama to call ‘time out’ on his automobile task force,” said Rep. Steven LaTourette, R-Ohio.
LaTourette was one of 36 lawmakers, mostly Republican, who reminded Obama in a letter a day earlier that Chrysler’s bailout in 1979 was executed by Congress, not the White House. The lawmakers called for the return of Congress’ “legislative prerogatives before it further disrupts the lives of people who work at Chrysler or live in communities that depend on it.”
“We recognize this is a Hail Mary,” LaTourette said at a press conference Friday.
The Obama administration inherited the auto crisis from former President George W. Bush after Congress last December failed to enact legislation to aid the automakers. Some of the lawmakers now crying foul have opposed government intervention from the very beginning.
The Treasury and the White House said the task force’s actions have been fair and reasonable.
“We are focused on helping these companies find a path to viability, strengthen the auto industry and in turn save tens of thousands of jobs,” said White House spokeswoman Amy Brundage. “Saving the auto industry is an urgent priority for our nation and our workers.”
The Obama administration is preparing to pull Chrysler out of Chapter 11 protection as soon as next week. It is arranging to place GM into bankruptcy to help the automaker shed debt and cut costs. An out-of-court reorganization looked even less likely Friday as GM bondholders continued to balk at the company’s debt-for-equity offer. Time is running out to reach a settlement: The administration has set a June 1 deadline for GM to get all of its restructuring agreement in place.
GM borrowed an additional $4 billion from the Treasury on Friday, bringing the troubled automaker’s total government assistance to $19.4 billion. GM estimated it will need another $7.6 billion in loans following the government’s June 1 deadline, according to documents filed with the Securities and Exchange Commission.
The time crunch has sent some members of Congress scrambling.
On short notice, Rep. John Conyers, D-Mich., pulled together a Judiciary Committee hearing on Thursday, exploring the downsides of bankruptcy. Experts, auto dealers and lawmakers accused the Obama administration of wrongly closing auto dealerships, endangering consumer safety and manipulating the bankruptcy courts.
In early June, when Congress returns from recess, Sens. John Rockefeller, D-W.Va., and Kay Bailey Hutchison, R-Texas, plan to hold a Commerce Committee hearing on dealership reductions. The committee, which is seeking a smoother transition for jettisoned dealers, is requesting the presence of GM’s and Chrysler’s chief executives.
Consumer activist Ralph Nader has been trying to goad members of Congress to take action. Earlier this week Nader began chiding Congress for standing on the sidelines, and he urged members to take back power from the “small, informal group of appointed nonexperts who are charged with rescuing the auto industry.”
“At the very least, the Congress must exercise its oversight powers,” he said.
Subscribe to the Coronavirus newsletter
Get the day’s latest Coronavirus news delivered to your inbox by subscribing to our newsletter.