A current top recommended diary deals with Rachel Maddow's attempt to correct David Letterman's statement that President Obama was not telling the truth about Romney's position on the auto-bailout. Since Letterman apparently got this idea from Factcheck.org, I went to their site to check on this. As the fact checkers frequently do, Factcheck.org accepted a statement at face value (Romney would have provided loan guaranties) without going further (that would have been futile because there were no possible loans to guaranty).
As a bankruptcy lawyer, I can evaluate this issue with some expertise. Therefore, I wrote the letter below to factcheck.org in the (probably very limited) hope that they would change their analysis.
I am a bankruptcy attorney and would like to comment on the factcheck.org analysis of the Third Debate, titled "Bankruptcy Back and Forth."
This analysis rests on President Obama's claim that Governor Romney did not advocate "help" or "government assistance" for automakers in a bankruptcy. Based on Romney's NY Times Op-ed stating "The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk," the analysis claims that Obama "got it wrong."
This is "true" only in the most literal and misleading sense. In November 2008, advocating "federal guarantees for post-bankruptcy financing" was advocating an impossibility. A guarantee can only exist if there is a loan to be guarantied, and in November 2008 there was no possibility of private lending. In fact, the lenders were themselves in the process of being bailed out by the government, and there were no private sources of funding available. Accordingly, there were no loans available for the federal government to guarantee.
Let's say that Governor Romney's plan was adopted in November 2008:
1. GM would have filed a Chapter 11 Bankruptcy, seeking reorganization.
2. A Chapter 11 Bankruptcy would have required post-bankruptcy-petition financing by lenders to keep GM going. As stated above, there was no private post-petition financing (and therefore nothing for the government to guarantee).
3. In the absence of post-petition financing, GM would have stopped functioning and the company would have been liquidated -- either under a Trustee under Chapter 7 of the Bankruptcy Code or by its management under Chapter 11 of the Bankruptcy Code.
4. As a result, GM would have gone out of business, with all of the attendant consequences.
The Obama plan provided government financing, and therefore the automakers were able to successfully reorganize in Chapter 11.
At the debate, Governor Romney said, "And the idea that has been suggested that I would liquidate the industry — of course not. Of course not. …" Again, to say this is literally "true" is misleading. As the analysis above shows, taking Romney's advice in the Times Op-ed would unquestionably have led to liquidation. Therefore to "suggest" that Romney would liquidate the industry is true.
In other fact checks of the same debate, the factcheck.org analysis does go beyond the literal. For example, the analysis of Romney's Navy claim goes beyond the literal comparison of the number of ships in 1917 and today and quotes Naval Secretary Mabus stating " comparing today’s ships to those of years past is “like comparing the telegraph to the smartphone.” Similarly, the analysis of education goes beyond Romney's "true" claim that students tested first in the nation when he left office, by noting that they also tested that high when he entered office.
Based on the above, It is clear that Romney's position in November 2008 would have led to the liquidation of GM (and Chrysler) and the only form of government assistance he advocated (guarantees) was meaningless because there was nothing that could be guaranteed. President Obama should be scored as correct on this issue.
Thank you for considering this letter.
So don't blame Dave, blame the usual suspects at Factcheck.org.
Update: The other "fact-checker,' Politifact apparently questioned some of Obama's statement by saying that "some have said" that there was private funding available (of course, without naming who). However, several commenters, including Sabarte, have noted that very authoritative sources have confirmed that no funding was available. These included a Congressional oversight panel ("in December 2008, Chrysler and GM faced a crippling lack of access to credit due to the global financial crisis").the GM presiding Bankruptcy Judge Arthur Gonzalez (“The record before the Court was clear that there were no other sources of lending") and President Bush! ("Additionally, the financial crisis brought the auto companies to the brink of bankruptcy much faster than they could have anticipated -- and they have not made the legal and financial preparations necessary to carry out an orderly bankruptcy proceeding that could lead to a successful restructuring.")