Economist Paul Krugman noted how difficult it was to obtain credit when Obama assumed office.
“If the economy as a whole were in reasonably good shape and the credit markets were functioning, Chapter 11 [structured bankruptcy] would be the way to go. Under current circumstances, however, a default by GM would probably mean loss of ability to pay suppliers, which would mean liquidation – and that, in turn, would mean wiping out probably well over a million jobs at the worst possible moment.”
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., agreed.
He said in 2009, “Had General Motors and Chrysler been allowed to go into bankruptcy last fall, it would have quickly led to a chain of bankruptcies by a whole set of parts suppliers, all of whom are owed large amounts of money by these two companies. It is virtually certain that these companies and their suppliers would have been forced to shut down, because no one would have stepped forward to provide credit to operate through bankruptcy without a government guarantee. Because Ford shares many of these suppliers with GM and Chrysler, the disruption to the supply chain almost certainly would have been enough to push Ford over the line as well.”
GM and Chrysler received about $80 million from the Troubled Assets Relief Program (TARP), about half of which has already been repaid. Ford had a line of credit that allowed it to operate without emergency federal assistance.
In his “Let Detroit Go Bankrupt” op-ed, Romney said, “Detroit needs a turnaround, not a check.”
Largely because of President Obama, Detroit received a check that paved the way for the turnaround. Now, we need Romney and his Republican opponents to do a turnaround and stop misrepresenting the role President Obama played in saving the auto industry.
George E. Curry, former editor-in-chief of Emerge magazine and the NNPA News Service, is a keynote speaker, moderator, and media coach. He can be reached through his website, http://www.georgecurry.com You can also follow him at http://www.twitter.com/currygeorge.