[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
THE ADMINISTRATION'S AUTO BAILOUTS AND THE DELPHI PENSION DECISIONS:
WHO PICKED THE WINNERS AND LOSERS?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TARP, FINANCIAL SERVICES
AND BAILOUTS OF PUBLIC AND PRIVATE PROGRAMS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
JULY 10, 2012
__________
Serial No. 112-178
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
_____
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on TARP, Financial Services and Bailouts of Public and
Private Programs
PATRICK T. McHENRY, North Carolina, Chairman
FRANK C. GUINTA, New Hampshire, MIKE QUIGLEY, Illinois, Ranking
Vice Chairman Minority Member
ANN MARIE BUERKLE, New York CAROLYN B. MALONEY, New York
JUSTIN AMASH, Michigan PETER WELCH, Vermont
PATRICK MEEHAN, Pennsylvania JOHN A. YARMUTH, Kentucky
JOE WALSH, Illinois JACKIE SPEIER, California
TREY GOWDY, South Carolina JIM COOPER, Tennessee
DENNIS A. ROSS, Florida
C O N T E N T S
----------
Page
Hearing held on July 10, 2012.................................... 1
WITNESSES
The Honorable Christy Romero, Special Inspector General for The
Troubled Assets Relief Program, United States Treasury
Department
Oral Statement............................................... 6
Written Statement............................................ 9
Mr. Ron Bloom, Former Member of the Automotive Task Force, United
States Treasury Department
Oral Statement............................................... 27
Written Statement............................................ 29
Mr. Matthew Feldman, Chief Legal Advisor, United States Treasury
Department's Auto Team
Oral Statement............................................... 33
Written Statement............................................ 35
Mr. Harry Wilson, Former Member of the Automotive Task Force,
United States Treasury Department
Oral Statement............................................... 38
Written Statement............................................ 40
Mr. Todd Zywicki, Professor of Law, George Mason University
Oral Statement............................................... 65
Written Statement............................................ 67
APPENDIX
Report on GM Agreements With Unions Give Rise to Unique
Differences in Participant Benefits............................ 109
Timeline of Interview Requests................................... 163
Follow up questions from Delphi Audit Interviews................. 165
A prepared statement from The Honorable Elijah E. Cumings, a
Member of Congress from the State of Md to The Honorable
Darrell E. Issa, a Member from Congress from the State of
California, Prepared Statement................................. 166
Harry Wilson Tapped By Teamsters To Rescue Ailing Trucking
Company And Union Jobs......................................... 175
The Honorable Patrick McHenry, a Member of Congress from the
State of North Carolina, Opening Statement..................... 177
The Heritage Foundation Backgrounder, Auto Bailout or UAW
Bailout?....................................................... 179
The Honorable Paul Ryan, a Member of Congress from the State of
Wisconsin, Prepared Statement.................................. 193
CAR Research Memorandum.......................................... 194
THE ADMINISTRATION'S AUTO BAILOUTS AND THE DELPHI PENSION DECISIONS:
WHO PICKED THE WINNERS AND LOSERS?
----------
Tuesday, July 10, 2012,
House of Representatives,
Subcommittee on TARP, Financial Services, and
Bailouts of Public and Private Programs,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 10:03 a.m., in
Room 2247, Rayburn House Office Building, Hon. Patrick T.
McHenry [chairman of the subcommittee] presiding.
Present: Representatives McHenry, Guinta, Ross, Quigley,
Maloney, and Speier.
Also Present: Representatives Turner, Kelly, Johnson, and
Cummings.
Staff Present: Will L. Boyington, Majority Staff Assistant;
Molly Boyl, Majority Parliamentarian; Drew Colliatie, Majority
Staff Assistant; John Cuaderes, Majority Deputy Staff Director;
Adam P. Fromm, Majority Director of Member Services and
Committee Operations; Linda Good, Majority Chief Clerk; Tyler
Grimm, Majority Professional Staff Member; Christopher Hixon,
Majority Deputy Chief Counsel, Oversight; Jaron Bourke,
Minority Director of Administration; Kevin Corbin, Minority
Deputy Clerk; Ashley Etienne, Minority Director of
Communications; Devon Hill, Minority Staff Assistant; Jason
Powell, Minority Senior Counsel; Brian Quinn, Minority Counsel;
Safiya Simmons, Minority Press Secretary; and Davida Walsh,
Minority Counsel.
Mr. McHenry. The Committee will come to order.
This hearing is entitled The Administration's Auto Bailouts
and the Delphi Pension Decisions: Who Picked the Winners and
the Losers?
We have a distinguished panel before us today, but it is
always the order of this Subcommittee by reading the Oversight
and Government Reform Committee's mission statement. The
Oversight Committee mission statement: We exist to secure two
fundamental principles: first, Americans have a right to know
that the money Washington takes from them is well spent and,
second, Americans deserve an efficient, effective government
that works for them.
Our duty on the Oversight and Government Reform Committee
is to protect these rights. Our solemn responsibility is to
hold government accountable to taxpayers, because taxpayers
have a right to know what they get from their government. We
will work tirelessly in partnership with citizen watchdogs to
deliver the facts to the American people and bring genuine
reform to the Federal bureaucracy.
And that is what this hearing is about, the auto bailout
decision and the winners and the losers that resulted from
this.
We have a distinguished panel here today, and I will begin
by recognizing myself for five minutes.
Today's hearing is about the transparency in government and
fulfilling this Committee's commitment to provide the American
people with answers and accountability. When Congress passed
the Troubled Asset Relief Program, known as TARP or the
bailouts, in October of 2008, at the height of the financial
crisis, it was designed with a specific purpose: to take toxic
assets off the books of large banks and financial institutions.
While today's intention is not to re-litigate TARP or the
bailouts, it is important to discuss their consequences and,
indeed, there are consequences. When the Government
orchestrates a bailout, it is clear that there will be both
winners and losers.
While some of my colleagues will spend a great deal of time
talking about bailout winners, it is unlikely that you will
hear them spend much time talking about the bailout losers.
Although their losses were significant, we are not here to
discuss bond holders, who took a haircut in the auto bailout.
We are here today to focus on non-unionized retirees at Delphi,
who watched part of their pensions disappear while some of
their coworkers were made whole. Those coworkers whose pensions
were left intact were members of the United Auto Workers Union
and they are clear winners of the auto bailouts.
A recent study from one of today's witnesses, George Mason
University law professor Todd Zywicki, calculated that United
Auto workers received approximately $26 billion from taxpayers
via the auto bailouts that they would not have received had
they been treated according to standard bankruptcy principles.
Mr. Zywicki is a witness here today and we look forward to
hearing from him.
When the Pension Benefit Guaranty Corporation terminated
the pensions of all Delphi retirees, General Motors agreed to
top-up, or make whole, their obligations to unionized workers.
At the same time, the non-unionized workers took significant
cuts in their pensions.
Despite the fact that GM's promise to the Union could have
been thrown out in bankruptcy, like so many of GM's other non-
unionized commitments were, the Union agreement was kept in
place. That was a decision made by the Government.
The Special Inspector General for the Troubled Asset Relief
Program has been seeking answers to questions about the
irregularities of the Delphi pension decisions. Ms. Romero is a
witness here today as the Special Inspector General for TARP.
We are here today because for over a year three of the key
figures involved in the GM and Chrysler bailouts have refused
to meet with the Special Inspector General. I am grateful that
they showed today, and we are very interested in hearing their
testimony and the reasons for not meeting with the Special
Inspector General.
On May 9th, the Special Inspector General notified the
Committee that three former Obama Administration officials
before us today, Mr. Bloom, Mr. Feldman, and Mr. Wilson, had
been uncooperative with the Special Inspector General's audit.
These three individuals come from diverse backgrounds and
possess different expertise, but together represent leading
figures from President Obama's Auto Task Force. All three of
these individuals made pivotal decisions which are projected to
cost taxpayers $23 billion and have left many Delphi retirees
with drastically reduced pensions, while preserving full
pensions for Delphi's unionized retirees.
These are the consequences of the bailouts.
So, with that, I would recognize the Ranking Member, Mr.
Quigley of Illinois, for five minutes, and following that I
will recognize Mr. Turner from Ohio for five minutes for an
opening statement, and if the gentleman would like five
additional minutes, we would be willing to grant that.
Mr. Quigley. Thank you, Mr. Chairman. I appreciate that. I
am sure it won't be necessary in today's hearing. I want to
thank the Chairman for holding this hearing.
No one understands or appreciates the importance of
transparency and strong oversight in government more than
members of this Committee. Congress created the Office of
Special Inspector General for the Troubled Asset Relief
Program, SIGTARP, and members of Congress asked SIGTARP to
perform its Delphi audit.
Unfortunately, SIGTARP's audit has been stalled because
they have not been able to interview three of the witnesses
here today, Ron Bloom, Matt Feldman, and Harry Wilson, who are
all former members of the Administration's Auto Task Force.
In preparation for this hearing, the Democratic staff spoke
with all three individuals and discovered they are willing to
be interviewed by SIGTARP. This is a positive development and I
am glad that SIGTARP will now be able to complete its audit.
SIGTARP's audit should complement the thorough work GAO has
already completed on the Delphi pension issue. GAO published
its findings on Delphi pensions in December of 2011. The GAO
concluded that ``Treasury deferred to GM's business judgment
and that Treasury did not explicitly approve or disapprove of
GM providing top-ups.'' Those are conclusions supported by the
evidence gathered by GAO.
Today I am looking forward to hearing an update from
SIGTARP on the progress of its audit, and I will be eager to
read its final report upon completion.
But the most important conclusion that should be drawn from
the Auto Task Force actions is that they helped save more than
a million American jobs. As President Obama recently said, I
was betting on the American worker and I was betting on
American industry, and three years later the American auto
industry is coming roaring back.
Thank you, Mr. Chairman. One second.
[Pause.]
Thank you, and I yield back.
Mr. McHenry. I thank the Ranking Member. In the Ranking
Member's opening statement he suggested what we received in an
email at 5:46 yesterday from the Minority staff, that you have
a commitment from the three Auto Bailout Task Force members
today that they will meet with SIGTARP and fulfill that request
that has been longstanding with them, and I thank the Ranking
Member for getting those commitments and I thank the Minority
staff for getting those commitments because it has been well
over a year in the works of SIGTARP trying to get Mr. Bloom,
Mr. Feldman, and Mr. Wilson to submit themselves for
depositions.
With that, I would like to enter into the record the time
line of interview requests from SIGTARP, beginning on May 5th
of 2011 and going through May 16th of 2012, including an email
we received last night at 9:40 p.m. from SIGTARP explaining
that the three witnesses in question had no communications of
any sort, indicating that they will make themselves available
for the requested interviews in conjunction with our audit.
So without objection, those two documents will be entered
into the record.
Mr. McHenry. Again, this is bipartisan work and I
appreciate the willingness, Mr. Quigley, of you and Minority
staff and counsel to get those commitments, so we are hopeful
that transparency is served from that, and I know the gentleman
has been very active on those issues of transparency and
government. So thank you.
With that, I will recognize Mr. Turner of Ohio, who has
been a leader on the subject matter of this hearing, for five
minutes for the purposes of an opening statement.
Mr. Turner. Thank you, Mr. Chairman. I would like to thank
you and Chairman Issa and, of course, Chairman Jordan for the
work that has been done on this issue and for holding this
important hearing today.
Today's hearing continues our efforts to uncover why the
Treasury Department, the Auto Task Force, and the Pension
Benefit Guaranty Corporation chose to terminate the hard-earned
pensions of Delphi salaried retirees in the course of its
multibillion dollar taxpayer-funded bailout of General Motors.
Contrary to what the Vice President said recently on one of
his campaign stops, that these retirees are doing fine, they
are not doing fine. Thousands of retirees lost their pensions,
many of which are in my community in Dayton, Ohio, as a result
of the Administration's decisions during the auto bailout.
Appearing on CNN this Sunday, White House Chief of Staff
Jack Lew proclaimed that this Administration is the most
transparent ever. Well, not on this issue, and we are going to
find out why today.
Understandably, I have serious concerns about how this
Administration, including the three members of the Auto Task
Force we have before us, have continued to stonewall, provided
silence on these issues, and repeated failures to disclose
information that are critical to the issues that have affected
almost 20,000 people across the Country and that was done with
taxpayers' dollars. This is not a venture that was undertaken
with your own money, it was undertaken with taxpayers' money.
And the openness that this Administration promised needs to be
enforced.
In part, we are here today because the three former Auto
Task Force members refused to meet with, speak to, or testify
before the Special Inspector General for the TARP program. It
is my hope that we will shed light on who within the
Administration made the decision to cut the hard-earned
retirement benefits of these Delphi salaried retirees and that
perhaps the Administration's policy of denying access to this
information, hiding behind backroom deals stops.
I want to thank Christy Romero and SIGTARP for being here
today and for your honesty in your letter. You wrote us a
letter that said that SIGTARP believes that the Auto Task Force
played a role in the pension decision and these individuals'
failure to speak to SIGTARP on this issue poses a significant
obstacle to SIGTARP's ability to complete this audit. And then
you acknowledged that you didn't have an ability to subpoena
these three gentlemen to make them testify.
You also acknowledge in your written testimony that you
commenced this as a result of several members of Congress,
including myself, asking you to undertake the audit to get
questions answered about how this process went forward.
Mr. Bloom, Mr. Feldman, and Mr. Wilson, the happy train of
silence and refusing to answer questions ends today. You have
been summoned before Congress because of your refusal to answer
SIGTARP's questions because they didn't have the ability to
compel you. You are here today because you know we do. You
didn't come here because you believed you wanted to share
information with Congress; you were brought here because of
your refusal to share the information that the American public
is entitled to hear as a result of taxpayers' dollars that were
used in the auto bailout of General Motors and thousands of
people that lost their pensions. There is an accountability
here.
Now, you are going to take an oath when you testify today.
This is not a political proceeding; this is a legal proceeding.
You will be testifying; you will not be giving speeches. That
is why you are sworn in. It is called testifying before
Congress. And in that I want you to rise to the level of
understanding what the obligation is. It means that if you
don't speak truthfully in front of us, that obviously you can
be subject to perjury or disbarment or other types of
consequences, because Congress takes people appearing before us
seriously.
Now, we are hearing and we are looking forward to hearing
from you, that you are now willing to cooperate, and I want you
to also be aware that during that process of supposedly
cooperating with SIGTARP, we have the ability to continue to
enforce it. We have the ability to bring you in for depositions
under oath, bring you back before Congress again. If the
information you provide is not complete and is not thorough,
you will continue to have your happy train of silence met here
with Congress, where the American people require answers,
because you served in a public position with public dollars and
public obligations, and today we are going to have public
questions.
Thank you, Mr. Chairman.
Mr. McHenry. I thank the gentleman from Ohio.
Members will have seven days to submit opening statements
for the record.
We will now recognize our panel of witnesses today.
The Honorable Christy Romero is the Special Inspector
General for the Troubled Asset Relief Program, United States
Department of Treasury; Mr. Ron Bloom, Mr. Matthew Feldman, and
Mr. Harry Wilson are all former members of the Automotive Task
Force at the United States Department of Treasury; Ms. Nikki
Clowers is the Director of Financial Markets and Community
Investment at the Government Accountability Office. Thank you
for your service. Mr. Todd Zywicki is a professor of law at
George Mason University School of Law and a senior scholar at
the Mercatus Center.
As you all well know, this Committee swears in witnesses
before their testimony, so if you would all please rise and
raise your right hands, you will be sworn before your
testimony. Raise your right hand.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
[Witnesses respond in the affirmative.]
Mr. McHenry. You may be seated.
Let the record reflect that the witnesses answered in the
affirmative.
You all are well practiced at testifying before Congress.
As you well know, we have the light system here. Green means,
as we know from traffic schools or, if you have tickets,
repeated traffic schools, green means go; yellow means hurry
up; and red means stop. You have five minutes to summarize your
testimony in order to allow for discussion and questions
afterwards.
We will begin with Ms. Christy Romero for five minutes.
WITNESS STATEMENTS
STATEMENT OF THE HONORABLE CHRISTY ROMERO
Ms. Romero. Chairman McHenry, Ranking Member Quigley, and
members of the Committee, I am very honored to appear before
you today and very much want to thank you for holding this
hearing.
SIGTARP was created to protect the interest of those who
funded TARP, and that is the American taxpayers, and an
important part of SIGTARP's mission is to bring transparency to
decisions that were made by the Government in the wake of the
financial crisis. By examining the past, we can take advantage
of lessons learned so that we can better protect taxpayers in
the future. In addition, taxpayers have an absolute right to
know the decisions that went into how TARP dollars were spent.
The Government provided approximately $80 billion in TARP
funds in the auto bailout, and SIGTARP has brought transparency
to decisions made by Treasury and the Auto Task Force in the
auto bailout. We seek to bring greater transparency to GM's
decisions to provide funds to top-up the pensions of certain
hourly workers who were at Delphi Corporation, who were
formerly employed by GM, and who were represented by one of
three unions.
We are conducting an audit review of Treasury's role in
that decision and whether the Auto Task Force pressured GM to
provide additional funding for those pensions. We have closely
coordinated with GAO, who conducted similar, but not
duplicative, reviews.
We have experienced significant delay by the refusal to be
interviewed by the three former Treasury officials who served
on the Auto Team: Mr. Bloom, Mr. Wilson, and Mr. Feldman. The
former co-head of the Auto Team, Mr. Rattner, only agreed to be
interviewed this May. These individuals were heavily involved
in the TARP assistance to GM and GM's restructuring, and have
knowledge about the pension issues.
We first requested from Treasury interviews of these former
Treasury officials in May 2011. Months later Treasury told us
that the individuals would not meet with SIGTARP, while other
members of the Auto Team would. We contacted these individuals
directly while reviewing documents and interviewing other
witnesses. We asked Treasury to speak to these former Treasury
officials about the importance of cooperating with SIGTARP.
When it became clear that the individuals would not agree to be
interviewed, we informed this Committee.
The lack of cooperation by these former Treasury officials
has significantly protracted SIGTARP's review. We were forced
to look elsewhere for the information. While we continued to
request their cooperation, we reviewed more than 100,000 pages
of documents, but those documents do not provide a complete
picture. We often find in our audits a lack of detailed and
complete documentation of decision-making related to TARP. Many
discussions and decisions are made in meetings and telephone
calls; interviews of government officials are essential to gain
a complete picture. Documents such as emails simply do not tell
the whole story.
We interviewed others who might have information. We
interviewed 43 current and former officials from GM, Delphi,
three unions, PBGC, the Auto Team, and DSRA, which represents
certain Delphi salaried workers whose pensions GM did not top-
up. Information from these witnesses and documents led SIGTARP
to determine that Mr. Wilson, Mr. Feldman, and Mr. Bloom were
the government officials who were involved in the Delphi
pension decision and discussions.
SIGTARP does not have the ability to compel witness
testimony. There is no valid reason for these former Treasury
officials to refuse to be interviewed. Treasury suggested that
SIGTARP's interviews are unnecessary because GAO already
determined Treasury's role and because Mr. Wilson and Mr.
Feldman were deposed in GM and Delphi's bankruptcies. GAO did
not conduct interviews of Treasury's role or whether there was
any pressure by the Auto Team, instead deferring to SIGTARP.
Also, we have read the depositions and still find it necessary
to conduct the interviews.
The refusal by these former Treasury officials to speak to
SIGTARP poses a significant obstacle to our ability to complete
the audit and to taxpayers gaining a full understanding of the
discussions and considerations in GM's decision. Our need to
speak with them is significant. That is balanced with the fact
that there is no hardship for these individuals to come talk
with us. Other important and very busy government officials
have been interviewed by SIGTARP, including Secretary Geithner,
former Secretary Paulson, Chairman Bernanke, and former
Chairman Bair.
Also, and this is very important, it sets a dangerous
precedent if former Treasury officials who worked on TARP
programs are allowed to evade SIGTARP's oversight and refuse to
be interviewed. Such a precedent could potentially impact all
of our ongoing and future audits. Most of the government
officials who worked on TARP have since left government
service.
I want to thank the Committee for always supporting
SIGTARP, and I am available to answer any questions that you
have.
[Prepared statement of Ms. Romero follows:]
Mr. McHenry. Thank you, Ms. Romero, and thank you for your
service to our Government.
Mr. Bloom, you are recognized for five minutes.
STATEMENT OF RON BLOOM
Mr. Bloom. Mr. Chairman and members of the Committee, good
morning. While I am here today at your request in my capacity
as a former Treasury official, I left the Treasury Department
in February of 2011 and left government service in September of
2011. I am, therefore, not in a position to discuss events
since February 2011 or anything concerning possible future
actions.
During the period of my government service, I testified
regarding the Treasury's automotive investments in front of the
Senate Banking Committee on June 10th, 2009; the House
Judiciary Commercial and Administrative Law Subcommittee on
July 21st, 2009; the Congressional Oversight Panel on July
27th, 2009, and February 25th, 2010; and the House Subcommittee
on Regulatory Affairs, Stimulus Oversight, and Government
Spending on June 22nd, 2011. In addition, I participated in
numerous meetings and discussions, and helped prepare and
deliver written and oral responses to countless inquiries of
SIGTARP, GAO, Congressional Oversight Panel, and individual
elected officials and staff from both the House of
Representatives and the Senate.
I understand that the Committee has taken an interest in
issues regarding the pensions of certain former employees of
the Delphi Corporation. As you may know, I was named as a
defendant in a lawsuit in federal court regarding that issue.
On September 2nd, 2011, I was dismissed from the case, as was
Treasury and the President's Auto Task Force.
When President Obama took office, the American automobile
industry was on the verge of collapse. In the year prior, the
industry lost over 400,000 jobs and, as 2008 came to a close,
both GM and Chrysler were running out of cash and faced the
imminent prospects of uncontrolled liquidations. The collapse
of the U.S. auto industry posed a substantial risk to financial
market stability and the economy as a whole. Therefore, the
previous Administration provided $24.8 billion to the auto
industry.
After studying the restructuring plan submitted by GM and
Chrysler, President Obama decided that he would not commit any
additional taxpayer resources to these companies without
fundamental change and accountability. He rejected their
initial plans and demanded that they develop more ambitious
strategies to reduce cost and increase efficiencies.
However, President Obama also recognized that failing to
stand behind these companies would have far-reaching
consequences. GM and Chrysler were supported by a vast network
of auto suppliers which employed three times as many workers
and depended on the automaker's business to survive. An
uncontrolled liquidation of a major automaker would have had a
cascading effect throughout the supply chain, causing failures
and job losses on a much larger scale. Because Ford and other
auto companies depended on those same suppliers, the failure of
the suppliers could have caused those auto companies to fail as
well. Also at risk were the thousands of auto dealers across
the Country, as well as small businesses in communities with
concentrations of auto workers.
It was this interdependence that led some experts at the
time to estimate that at least one million jobs could have been
lost if GM and Chrysler went under. Widely respected economist
Mark Zandi recently stated that 2.5 million jobs were at risk.
These were grave risks at a time when our economy was losing
750,000 jobs per month; credit markets were still not
functioning properly; bank lending had contracted substantially
and there was no chance of securing private lending on a scale
sufficient to save GM and Chrysler.
To avoid uncontrolled liquidations, the President decided
to give GM and Chrysler a chance to show that they could take
the tough and painful steps to become viable companies. Working
with their stakeholders and the President's Auto Task Force,
both GM and Chrysler underwent fair and open bankruptcies. This
process required deep and painful sacrifices from all
stakeholders, including workers, retirees, suppliers, dealers,
creditors, and the countless communities that rely on a vibrant
American auto industry. The steps that the President took
avoided a catastrophic collapse of the entire auto industry and
kept hundreds of thousands of Americans working.
Today the American automobile industry is mounting a
comeback. In 2011, GM, Chrysler, and Ford increased their U.S.
market share for the second year in a row. Exports of motor
vehicles in 2011 increased by 21 percent over 2010. This
increase in market share and exports has translated into more
American jobs. Since 2009, the auto industry has added over
233,000 jobs, the fastest pace of job growth in the auto
industry since 1997. In addition, since 2009, GM and Chrysler
have announced investments totaling over $11.5 billion.
In a better world, the choice to intervene in GM and
Chrysler would not have had to be made. But amidst the worst
economic crisis in a generation, the Administration's decisions
avoided devastating liquidations and provided the American auto
industry a new lease on life and a real chance to succeed.
I am prepared to do my best to answer your questions.
[Prepared statement of Mr. Bloom follows:]
Mr. McHenry. Mr. Feldman, you are recognized for five
minutes.
STATEMENT OF MATTHEW FELDMAN
Mr. Feldman. Thank you.
Mr. Chairman and members of the Committee, I understand
that I have been requested to appear today before you to
discuss my role with the Treasury Department's Auto Team, which
I joined in March of 2009 as chief legal advisor and on which I
served until August of 2009.
The Treasury Department recruited me to join the Auto Team
from my career as an attorney in private practice, where I
specialized in reorganizing and restructuring large businesses,
not unlike the American automobile manufacturers that were in
significant financial distress at that time in 2009.
I believe that the work of the Auto Team contributed to a
successful effort to avert disastrous consequences to both the
American automobile industry and the American economy as a
whole. I am fiercely proud of my service and I am prepared
today to assist the Committee in reaching a complete
understanding of the Auto Team's work during what was a
difficult time and an unprecedented challenge for all involved.
Although it is wonderful to see the dramatic recovery of
the automobile manufacturers and the thousands of American jobs
that were saved as a result of our work, I am mindful that the
restructurings that the Auto Team worked on required many
Americans to make great personal sacrifices. As a result of the
Delphi Corporation bankruptcy, for example, Delphi and the
Pension Benefit Guaranty Corporation were forced to terminate
Delphi's pension plans, which means that there are Delphi
retirees who, unfortunately, will collect less than their full
pension benefits.
Delphi had underfunded its hourly pension plan and, later,
its salaried pension plan well prior to filing for bankruptcy
protection, a situation that ultimately threatened General
Motors' future success as it exited from its own bankruptcy.
Because General Motors viewed a well-motivated workforce at its
largest supplier as critical to ensuring an uninterrupted
supply chain, General Motors made the commercially reasonable
and necessary decision to honor certain top-up agreements it
entered into in 1999 with the United Auto Workers and certain
other unions when Delphi was first spun off from General
Motors. Sadly, many of Delphi's employees did not have top-up
agreements with General Motors, and some of those employees
will face a shortfall in their pension payments as the PBGC
assumes responsibility for their plans.
The Auto Team agreed that honoring the top-up agreements
was a prudent business decision, and we believed that doing so
would protect both General Motors and the American taxpayers'
collective investment in the company. We supported General
Motors' business decision and I remain convinced today that it
was the best course of action available at that time.
While I am pleased that General Motors and other American
automobile manufacturers have become successful, profitable
contributors to our economy, I recognize that the restructuring
process imposed painful, but necessary, sacrifices on many of
Delphi's stakeholders. As a bankruptcy practitioner and a
restructuring specialist, I have seen similar circumstances all
too often. It is, without a doubt, one of the most difficult,
disheartening aspects of my job, and I have only the deepest
sympathy for everyone affected.
Prior to my invitation to testify here today, I received a
request from the Office of the Special Inspector for Troubled
Asset Relief Program that I participate in an interview. I
attempted to determine what further information SIGTARP
believed it required to complete its audit because my memory
concerning specific details was considerably better in July
2009, when I gave a lengthy deposition in connection with the
Delphi Chapter 11 proceedings that covered many of the topics
concerning my role on the Auto Team.
It was my hope that the transcript of that deposition,
along with the extensive documentary record SIGTARP has
undoubtedly assembled, would be sufficient to meet SIGTARP's
needs. After several requests, SIGTARP provided a list of six
topics on which it desired further information, but it appears
that SIGTARP contacted the Subcommittee before I had an
opportunity to respond. In any event, I am here today prepared
to answer any questions the Subcommittee has concerning my role
on the Auto Team, which I will do to the best of my ability.
[Prepared statement of Mr. Feldman follows:]
Mr. McHenry. Thank you.
Mr. Wilson.
STATEMENT OF HARRY WILSON
Mr. Wilson. Chairman McHenry, Ranking Member Quigley, and
members of the Subcommittee, thank you for the opportunity to
testify before you today.
I am here to report, at your request, on the Government's
efforts in 2009 to avoid a catastrophic collapse of the U.S.
automotive industry and specifically regarding its investments
in General Motors. My testimony today is in my capacity as a
former Treasury official, which I left in early August 2009, so
that is the limit of my direct knowledge.
First, some brief background on myself. I have spent the
vast majority of my career in the private sector, working at
some of the best financial firms in the Country with a focus on
fixing troubled businesses. As the late 2008 financial crisis
deepened and the Bush, and then Obama, Administrations began to
intervene through TARP, I felt it was critical that Treasury
officials had the restructuring skills that I had in order to
minimize the cost to taxpayers. So although I am a lifelong
Republican, due to my desire to serve my Country, I joined the
Auto Team in early March 2009 and focused primarily on General
Motors. After General Motors exited bankruptcy, I wrapped up my
work and left Treasury.
I have continued my turnaround work both in the private
sector and the public sector since then. For example, in 2010 I
was Republican nominee for New York State comptroller. I ran on
a platform of seeking to fix New York State's broken
government, and though I lost in a very close race with nearly
2.1 million votes, I was the top Republican vote-getter in New
York in 2010.
Shortly after that I founded my firm, The MAEVA Group, LLC,
which is focused on fixing problem companies.
Now let me turn to the auto rescue. In late 2008, early
2009, GM and Chrysler were on the verge of collapse due to
years of mismanagement and the financial crisis. Unfortunately,
the capital markets were in the middle of an unprecedented
shutdown, obliterating any possibility of private financing.
This lack of private financing and the substantial
interdependency of the American automotive industry meant the
following: one, that absent tens of billions of dollars, GM and
Chrysler would liquidate; two, their liquidation would have
meant the failure of many of their suppliers; and, three, the
widespread failure of suppliers would have threatened Ford,
which is why Ford never opposed our work.
It is only because of this unique confluence of events,
this once in a lifetime storm that threatened to destroy an
essential American industry that I, a staunch fiscal
conservative, reluctantly came to accept that the only
alternative, the least bad option, was emergency financial
support, the path initiated by the Bush Administration.
The Obama Administration's decision to pursue this work in
a commercial manner, as they defined, meant that we would seek
the best outcome with the minimum potential cost to the
taxpayer.
The results of that work speak for themselves. GM had its
most profitable year ever in 2011, even though auto sales have
still not fully recovered to pre-crisis levels; it has grown
market share and now has a fortress balance sheet.
Tragically, the human cost to these massive restructurings
were significant, and that is the sad part of any
restructuring. But absent the Auto Team's work, the human cost
and the cost to the American taxpayer would have been far, far
greater.
While Treasury was closely involved in pressing GM
management for the major changes needed to make the company
profitable, we were very careful to never get involved in the
specific decisions on plant closures, dealer closures, or the
like. We would agree with GM on the broad strokes, which was to
create a world-class auto business, and the key components of
that, and they would make the detailed decisions that needed to
be made to implement those broad strokes.
This approach applied to the same sad story of Delphi. When
Delphi came to the Auto Team's attention, Delphi was bleeding
approximately $150 million in cash per month. GM was supporting
Delphi because Delphi was the sole supplier for certain
critical GM parts, so a Delphi liquidation would have shut down
all of General Motors. This was an unsustainable proposition
both for GM and for the American taxpayer.
To resolve Delphi's loan bankruptcy, GM management agreed
to various measures, including providing capital and honoring
the top-up agreements GM had made in 1999. Other commitments,
including pensions for salaried employees or other unionized
employees not covered by top-up agreements, were not accorded
additional consideration.
Consistent with the rest of our work, Treasury provided
general input, but not specific decisions to these matters, as
was recognized in the GAO finding in December 2011.
So, in closing, the restructuring world is a difficult one,
filled with painful choices to minimize the human and financial
costs, while maximizing the probability of a company's long-
term success. The human costs of the GM rescue were deep,
significant, and tragic, and those who have suffered losses of
any kind have my deepest sympathies. But as great as those
costs were, they paled in comparison to the costs of inaction.
As a fiscal conservative, I wish our work had not been
necessary. As an American citizen, I wish that more companies
operated with better management so that these tragic situations
would not happen as frequently as they do. But amidst the worst
financial crisis in the past 75 years, the actions of the Bush
and Obama Administrations avoided devastating liquidations and
provided the American auto industry a second chance.
And then one last point on testifying. I would disagree
with the characterization of my particular willingness to
testify. Because I believe as SIGTARP now knows, I have
committed to both the Majority staff last Thursday, the
Minority staff on Sunday, and through Treasury to SIGTARP
officials themselves to testify and would be happy to do so.
With that, I look forward to your questions.
[Prepared statement of Mr. Wilson follows:]
Mr. McHenry. We certainly appreciate that willingness that
has been just over a year in the making. But we are grateful
for it nonetheless, as well as the other two members of the
Task Force, even if it is at the eleventh hour. And we are
grateful, as I said, for the Ranking Member and his good work
and the Minority staff's good work in securing those
commitments the day before this important hearing. We are
simply just trying--and thank you for submitting that for the
record; that is going to be one of my records.
If we could submit for the record whether or not the three
members of the Task Force represented today will submit
themselves for that interview with SIGTARP. The outline that I
have of extensive requests from SIGTARP to you three gentlemen,
Mr. Bloom, Mr. Feldman, and Mr. Wilson, is extensive. So pardon
me for not relieving you of the burden of testifying before
Congress when we get that commitment at 5:46 the day before a
10 a.m. hearing. But I think we are going to continue with this
and expect some questions on that, as I am sure you do.
Mr. Wilson, Mr. Feldman, thank you for your willingness to
testify on the particular issue of this hearing. And, Mr.
Bloom, we will direct some questions to you to see if you will
be willing to submit some testimony for that.
With that, Ms. Clowers, from the Government Accountability
Office, you are recognized for five minutes.
STATEMENT OF NIKKI CLOWERS
Ms. Clowers. Thank you, Chairman McHenry, Ranking Member
Quigley, and members of the Subcommittee.
I appreciate your having me here today to speak about the
termination of Delphi's pension plans. In my comments today I
will discuss two issues: first, the key events leading to the
termination of Delphi's pension plans and, two, the role of the
Department of Treasury in those events. My comments are based
on our recent reports on these issues.
First, the termination of Delphi's pension plans and the
provision of retirement benefit supplements, also called top-
ups, to some Delphi employees, but not others, culminated from
a complex series of events involving Delphi, GM, various
unions, Treasury, PBGC that stretched back to 1999. In that
year, GM spun off Delphi as an independent company. At that
time, GM agreed to provide top-ups to collectively bargain
hourly employees, meaning that if something went wrong with
these pension plans for these employees after Delphi became a
separate company, GM would ensure these employees received
their promised benefits.
No such agreement was negotiated for salaried employees.
When these agreements were negotiated, Delphi's pension plan
for the hourly workers was not fully funded. In contrast, the
plan for the salaried workers was fully funded.
Delphi filed for bankruptcy in 2005 and, as part of its
initial reorganizational plan made public in 2007, the company
planned to maintain its pension plans. But by this time both
the salaried and union pension plans were underfunded. As part
of Delphi's exit from bankruptcy, GM agreed to take on some
liabilities from Delphi's hourly pension plans in two phases.
However, by the time GM declared bankruptcy in June 2009, it
had only taken on the first phase of the plan's liabilities.
GM did agree with the UAW, however, as part of its
restructuring, that GM would honor the previously negotiated
top-ups. Salaried Delphi employees and Delphi employees who
belong to other unions were not included in this agreement.
Employees of these other unions, along with Delphi salaried
employees, protested this outcome in bankruptcy court. To
maintain its supply chain, GM agreed to top-up the pensions of
two other unions, as their consent was needed to resolve
Delphi's bankruptcy. However, they did not agree to do so for
the salaried workers, and this is where the situation stands
today.
I would now like to discuss Treasury's role in these
events. Treasury's role stemmed from its position as the
primary lender to GM in its bankruptcy. As the primary lender,
GM played a significant role in helping GM resolve the Delphi
bankruptcy in terms of GM's interest. However, with regard to
GM decisions about Delphi pension plans, court filings and
statements from GM and Treasury officials suggest that Treasury
deferred to GM's business judgment.
Nevertheless, according to the records and Treasury
officials, Treasury agreed with GM's assessment that the
company could not afford the potential cost of sponsoring the
Delphi hourly plan itself upon emerging from bankruptcy.
Treasury also agreed with GM's rationale not to assume the
Delphi salaried plan since that plan had been fully funded when
GM transferred it to Delphi in 1999.
As for the top-ups, Treasury officials said that while
Treasury did not explicitly approve or disapprove of GM's
agreement to honor previously negotiated top-up agreements with
some unions, it agreed with GM's conclusion that it had solid
commercial reasons to enter into such agreement. In particular,
Treasury stated that its aim was to ensure that new GM would
only assume the liabilities of old GM that were commercially
necessary, and that due to new GM's continued dependency on the
UAW workforce and the workforce of other unions, Treasury
officials felt GM had solid commercial reasons to agree to the
top-ups for these retirees. Also, Treasury stated that GM was
never obligated to provide top-ups to the salaried or other
retirees.
In conclusion, Mr. Chairman, when companies go bankrupt and
leave their plans with large, unfunded liabilities, some
participants will not get their full benefits promised to them
by their employer. This, unfortunately, is not unusual. What
makes this case more unusual is the series of events that
unfolded over the last decade that lead us here today and the
number of players, including Delphi, PBGC, the unions, GM and
Treasury, and the roles they played.
Mr. Chairman, Mr. Ranking Member, and members of the
Subcommittee, this completes my prepared statement. I would be
happy to answer any questions that you may have at the
appropriate time. My colleague, Charles Jeszeck, is also
available to answer any specific questions regarding PBGC.
[Prepared statement of Ms. Clowers follows:]
Mr. McHenry. Thank you, and thank you for your testimony.
Professor Zywicki, you are recognized for five minutes.
STATEMENT OF TODD ZYWICKI
Mr. Zywicki. Thank you, Chairman McHenry, Ranking Member
Quigley, members of the Subcommittee.
It is my pleasure to testify today on matters related to
the Obama Administration's Automotive Task Force and the
refusal of former Automotive Task Force members to cooperate in
efforts to understand the Task Force's controversial decision
to top-up Delphi Corporation's pension plan for Delphi
employees who were members of the United Auto Workers Labor
Union.
General Motors' decision to guarantee the obligations of a
completely separate company, Delphi, was completely unjustified
under current established principles of bankruptcy law, and it
increased the cost to the taxpayer bail out the automotive
industry by more than $1 billion, with no reciprocal benefit to
General Motors.
I commend this Committee for seeking answers to this
unexplained behavior by the Automotive Task Force, and
SIGTARP's Christy Romero for insisting on answers to these
questions.
Altogether, the Government pumped $80 billion of TARP funds
into the bailouts of General Motors and Chrysler, and related
entities, with, as Chairman McHenry suggested, not a shred of
statutory basis for allocating funds in that manner. According
to the United States Department of Treasury, it is estimated
that, at current share prices, the loss to the American
taxpayers will be about $23 billion from this investment in the
automotive bailouts.
Now, it would be one thing to lose billions of dollars if
it was necessary to facilitate the bankruptcy reorganization of
these companies. But according to a recent paper by James Sherk
and me, the entire loss to the taxpayers from the automotive
bailouts is attributable to the unjustified preferential
treatment of the UAW in bankruptcy, to the tune of $26.5
billion.
To give you a sense of the size of those losses, that is
larger than NASA's annual budget; that is larger than the
entire foreign aid budget; and that is larger than the annual
budget of the State of Missouri. It would be much more accurate
to refer to this as a UAW bailout, rather than an automotive
bailout.
We have heard a lot of talk about shared sacrifice today,
but I think Steven Rattner, the Obama Administration's former
car czar, said it best when he said we should have asked the
UAW to do more. We did not ask any UAW member to take a cut in
their pay.
James Sherk and I document three different ways in which
the UAW was given preferential treatment here that resulted in
this massive loss to the taxpayers.
First, the UAW VEBAs were given far better treatment as
unsecured creditors than any other unsecured creditors in
either the General Motors or Chrysler bankruptcy cases.
Second, UAW employees were given preferential treatment as
employees. Usually, in bankruptcy cases, when confronted with
above-market, uncompetitive wage scale, bankruptcies use to
reduce them to competitive levels. What it is going on right
now as we see in the airline bankruptcies, for instance, in
which bankruptcy has been used to bring airline bankruptcy wage
scales to competitive rates.
In General Motors, the UAW did make wage concessions, but
on behalf of future hires, not on behalf of any current
employees, as Steven Rattner admitted. And very few other
concessions were made. As a result, the wages for General
Motors, in particular, still remain above that of any foreign
transplants and in any other States.
Third brings us to the issue that we are here today, the $1
billion that was given by General Motors to top-up the pensions
of certain Delphi employees, the United Auto Workers, the IUE,
and the USWA union members, but not other hourly employees or
salaried workers. How can this be?
Delphi was spun off in 1999, a full 10 years before the
General Motors bankruptcy. They were a completely separate
company. There was no continuing legal obligation for General
Motors to pay for the retirement of the employees of a
completely separate company. Instead, all we have heard, as far
as I can tell, is a farfetched rationalization that we needed
to squander $1 billion for some theoretical fear related to
this. It is hard to see any explanation other than political
clout.
What I would like to know is whether any rational investor
would spend $1 billion of their own money to pay for the
retirement of employees of a completely separate company, or
whether they would be only willing to do it with our money, the
money of the taxpayers.
And perhaps it was necessary to have a targeted
intervention in order to deal with the frozen credit markets at
the time. That could be. Firms like this reorganize all the
time, and I take any claims like that with a grain of salt.
But, by and large, this is a smokescreen for what we are
talking about today.
The question is, today, whether or not it was worth
throwing away $26.5 billion worth of taxpayer dollars purely to
preserve the benefits and the wages and everything else of the
UAW. Was it worth it to go through bankruptcy and go through a
process in which the Indiana Teachers and Police Fighters lost
some of their secured bonds in order to enrich the UAW?
I look forward to questions.
[Prepared statement of Mr. Zywicki follows:]
Mr. McHenry. Thank you, and thank you for your testimony.
We have two current federal folks that are in federal
service on this panel. I want to thank you for your current
service to our Government and to our people.
I want to thank the three previous members that were in
government service for your service to our Government and to
our people. Public service should be just that.
Now, there are also consequences for the decisions we make,
given the public trust, and, in conjunction with that thought,
that is what this hearing is about.
I ask unanimous consent that our colleague from Ohio, Mr.
Johnson, be allowed to participate in today's hearing. Without
objection, that is ordered.
I will recognize myself for five minutes.
For more than a year SIGTARP has been trying to secure
interviews to complete their work on this subject matter of the
Delphi pension decisions, and I want to ask Mr. Bloom why were
you not willing to cooperate.
Mr. Bloom. I was very involved in personal matters at the
time. I spent a long time in government service and I didn't
believe I had anything that I could usefully contribute. But as
I have said, if it is important to the Committee, I am prepared
to sit with them now.
Mr. McHenry. Mr. Feldman, same question. Why were you
simply not willing to cooperate?
Mr. Feldman. In 2009, when I was deposed with respect to
these issues, I had felt at that time that I had answered and
given all the information that I had available to me. I also,
frankly, have left public life and have an active and busy
private life, and my response to SIGTARP was I think you have
everything I can give you. Having said that, if an interview
would be helpful, as I have said to the staffers, I am prepared
to cooperate.
Mr. McHenry. Well, Mr. Feldman, to that matter, your
attorney, Mr. Shatter, was contacted. SIGTARP was actually in
New York and was willing to meet with you in August to
September of last year, and you wouldn't participate.
Mr. Wilson, same question. Why were you not willing to
cooperate?
Mr. Wilson. Mr. Chairman, I will give you the same answer I
gave to Treasury at the time they approached me about it, which
was I gave a lengthy deposition. I think I sat for 10 or 12
hours of testimony in the summer of 2009 related to the GM
bankruptcy, testified on anything under the sun, as you can
imagine, during that long period of time.
I had the experience of being interviewed for Mr. Rattner's
book on these activities in early or the summer of 2010 and,
frankly, I knew then that I could barely recall a lot of the
facts from a year before and this was a year later, two years
after the fact, and I said to Treasury I don't remember a lot
of what we went through; I could refresh my memory, it would
take me probably a couple days of reading through public
documents to do that, and I am extremely busy, and I don't know
how much I can add.
And that was the exact response I gave to Treasury.
Mr. McHenry. Gotcha, you're busy. I hear you. Not too busy
to meet with Mr. Rattner about his book.
I would be happy to yield to my colleague.
Mr. Quigley. Thank you.
Gentlemen, I respect your service, but let me just say
this. The percentage of the American public that thinks that we
do the right thing or will do the right thing is in single
digits. The real cost of the problems that we faced here, and
in my community, of the public's perception of us and the
public's perception of corruption is the loss of the ability to
lead. The President characterized it as a deficit of trust.
Now, I am not suggesting for a second that you all did
anything wrong, but you have to appreciate this lost year, for
whatever the personal reasons, whether you are in public
service or not, really doesn't matter. It is the perception of
how things are done. It is the ability to have transparency to
appreciate how you made the decisions.
And if your answers, with all due respect, are I don't
remember, I get that, or you just give the best answers you
possibly can. But when you do, when you put things off in this
manner, you don't help us and you don't help the decisions you
made. Frankly, I think we made the right decision, and we are
going to discuss that later, about the bailout, because I
thought the industry mattered.
But I think the Chairman is correct. This was a mistake.
And I appreciate your willingness to testify here and to
cooperate and to be interviewed by SIGTARP, but it is hard to
add anything to what Ms. Romero said, except for the fact that
it isn't that you have done anything wrong, it is that the
American public has a right to know how those decisions were
made when so much money was being spent, even if they agree
with the decisions. So I mean no disrespect. I just wanted to
add, to an extent complement what the Chairman was trying to
say.
Mr. McHenry. I thank the Ranking Member.
So the question I have, Mr. Bloom, is are you willing to
submit yourself to an interview with SIGTARP within the next,
let's say, two months?
Mr. Bloom. Yes.
Mr. McHenry. Mr. Feldman?
Mr. Feldman. Yes.
Mr. McHenry. Mr. Wilson?
Mr. Wilson. Yes. I offered up for this afternoon. I haven't
gotten a response yet, but I would be happy to do that.
Mr. McHenry. Excellent.
Well, Ms. Romero, next time you don't have people willing
to sit down with you for an interview, let me know; we will be
happy to have a hearing.
Ms. Romero. I can't say how grateful I am to the Committee,
to the Chairman, to the Ranking Member of the full Committee,
Cummings, to Ranking Member Quigley. This is all we wanted.
We also have not reached any conclusion in our audit. How
can we reach a conclusion? I can't characterize the role these
gentlemen played without giving them an opportunity to speak to
that role. This is all we have wanted and I am grateful, very
grateful for that.
It also goes beyond just these three witnesses and this
audit, as I talked about in my opening statement. It will be a
very, very dangerous precedent if former Treasury officials or
other government officials who worked on TARP matters and then
leave refuse to be interviewed by SIGTARP, that that goes on
and it is allowed. So thank you very much.
Mr. McHenry. Thank you.
I thank you for your willingness to submit yourself to
this. Mr. Rattner, who testified about this matter, the
interview took approximately two hours with SIGTARP. I know you
have busy lives. I also know this was a very important matter
in your life, in both your public service and now in your
private sector experience. This is something major for our
Nation and I think we need to have an accurate portrayal of
what actually happened and why you made the decisions that you
made. Books have been written about this. There are going to be
generations that talk about this excessive amount of government
intervention, whether justified or unjustified, and the results
of those bailouts.
I also will submit for the record that currently the GM
stock price today is under $21. At the IPO it was $33. For the
Government to break even, for the taxpayer to break even, that
number had to be $53. With that, we have had $16 billion in
direct losses to the taxpayer based on the bailout of just GM.
I just want to submit that for the record.
I do have other questions, but in the interest of other
members' time, we will now recognize Mr. Quigley for five
minutes, after which we will recognize Mr. Ross for five
minutes. Mr. Quigley.
Mr. Quigley. Thank you, Mr. Chairman. I yield to the
Ranking Member of the full Committee, Mr. Cummings.
Mr. Cummings. Thank you very much.
Mr. Chairman, I want to associate myself with your words
and those of Mr. Quigley and Ms. Romero with regard to the
necessity and the importance of witnesses cooperating in these
investigations. And I want to thank the witnesses for being
here and for their service to the Country.
The former members of the Auto Task Force were part of the
Obama Administration's successful rescue of the American
automotive industry. In December 2008, an analysis by the
Economic Policy Institute projected that ``the bankruptcy of
U.S. automakers and the collapse of the domestic auto assembly
industry could eliminate up to 3.3 million U.S. jobs within the
next year.'' The collapse of General Motors alone would lead to
an estimated loss of 900,000 jobs. That calamity was averted by
the actions of you, our former members of the Government and
the Obama Administration's Auto Task Force, and you deserve our
thanks and we do appreciate what you have done.
Today's hearing is not focused on these successes, but on
why these three individuals have not yet been interviewed by
the Special Inspector General for the Troubled Asset Relief
Program, which is conducting a review of the Auto Task Force's
work, and I am very pleased to know that you all are willing to
submit yourself to being interviewed.
I recognize that you all are private citizens now and are
under no obligation to speak with the Inspector General, but we
support the Inspector General's Office and want them to
complete their work. As I understood it, this was the principal
reason we were holding today's hearing.
However, in preparing for the hearing, my staff contacted
each of these three former officials and all three of them said
what they said today, that they are now willing to be
interviewed.
The Chairman has apparently decided to go forward with
today's hearing, and that is his right. But, as a result, we do
not have the benefit of the Inspector General's final report,
which I anxiously look forward to. I think this could have been
handled with a few phone calls rather than a hearing, but that
is not my call to make.
Mr. Chairman, if you are going to proceed, and I know you
are, I ask that you do so on an evenhanded basis. There is
another issue almost exactly like this one, in which an
inspector general has conducted a review, has sought to
interview a former official, and has been refused. Unlike the
present case, however, there is substantial evidence of serious
abuses, as well as unethical and potentially illegal conduct in
that case.
On two occasions I have written to Chairman Issa about
findings by the Inspector General of the National Labor
Relations Board that a former Board member, Mr. Peter
Schaumber, was regularly receiving deliberative, pre-
decisional, and inside information from another Board member,
Mr. Peter Flynn. The Inspector General warned that Mr.
Schaumber had received copies of draft Board decisions and
other deliberative information on pending Board actions. Yet,
the Inspector General was never able to conduct an interview of
Mr. Schaumber, who was a former employee.
It seems to me that the only difference with that case is
that it involved a Republican. Mr. Schaumber served as a senior
advisor and co-chair of the Labor Policy Advisory Group to
presidential candidate Mitt Romney when he was engaged in these
activities.
As I stated from the outset, I strongly support our
inspectors general and I believe our Committee should help them
when they cannot obtain access to information. So, Mr.
Chairman, I know how diligent you are, and I would like to ask
you now will you support my request for a hearing with Mr.
Schaumber to obtain his testimony? Will you join me in
requesting that the Committee call him before us, like you
called these three gentlemen before us today? And will you
commit to conducting the operations of this Committee on an
evenhanded basis?
Mr. McHenry. Well, Mr. Cummings, I want to thank the
Ranking Member. At the beginning of this hearing I went through
a significant amount of this time line. I will be happy to look
at the letter that you have presented this morning. I recognize
that I was not on that exchange. I am not familiar with the
subject matter you are bringing up, but I trust the gentleman
has a deep and abiding interest in government transparency; he
has been diligent in a tough, but fair Ranking Member in my
dealings with the gentleman, having served on his subcommittee
in my first term in Congress. I thank you for bringing this
subject matter up and I will be happy to look at this issue.
Mr. Cummings. May I have another 20 seconds, please?
Mr. McHenry. Absolutely.
Mr. Cummings. I just ask unanimous consent that my two
previous letters on this topic be entered into the record. We
have been asking for this since March, Mr. Chairman, and I see
no difference between these cases other than that the gentlemen
here today have all agreed to be interviewed by the Inspector
General, and Mr. Schaumber has not.
Mr. McHenry. Without objection.
Mr. Cummings. I want to thank you for your patience. Thank
you.
Mr. McHenry. I thank the Ranking Member for bringing that
subject matter up.
Ms. Romero, to that end, have you contacted the Committee
about this subject matter and this witness?
Ms. Romero. As regards to these three witnesses----
Mr. McHenry. Oh, it is a different IG. I am sorry.
Ms. Romero. Oh.
Mr. McHenry. I am sorry, I was just informed of that.
Well, thank you, Mr. Cummings, and we certainly will follow
up with you on that. You have my commitment on that.
With that, we will now proceed to Mr. Ross of Florida for
five minutes.
Mr. Ross. Thank you, Mr. Chairman. You are to be commended
for holding this hearing.
As a practicing lawyer, I find that justice doesn't always
move at the rate we would like it to move, and the collection
of facts is absolutely necessary for the rule of law to be
applied and justice to prevail.
While we are here on the eleventh hour and now getting
cooperation from the witnesses, I am grateful for their
cooperation. But, Mr. Feldman, when you say that it should have
been done back in July of 2009, when your deposition was taken
and you had a better recollection of the events, I also think
back to the witnesses that I would have in my cases and am
grateful for discovery depositions because it allows for a
person, allows for a witness to recollect their thoughts and
remember their testimony.
So again I am grateful for you all to agree now, but let me
go into some questions.
Mr. Bloom, you indicated in your opening that the
bankruptcy proceeding was fair and open. My question to you is
was it any different than any other normal bankruptcy
proceeding? I mean, was this not one of the most expedited
bankruptcy proceedings in the history of the U.S.?
Mr. Bloom. In my experience, it was faster than average,
but there are other 363 sales----
Mr. Ross. Are you familiar with any other bankruptcies that
were expedited in such a summary fashion?
Mr. Bloom. Well, the sale of the parts of Lehman Brothers
to Barclays in the Lehman bankruptcy, that portion of it, which
was a 363 sale, which is what this was, was actually done more
quickly.
Mr. Ross. And, Mr. Feldman, are you familiar with, in your
experience, any company independent through a bankruptcy
proceeding giving $1 billion to another company, as was done in
this particular situation?
Mr. Feldman. Certainly, they honored a contract and they
made the decision to honor the contract based on their business
judgment, and I frankly think you see that all the time in
many, many bankruptcies.
Mr. Ross. Mr. Zywicki, how do you respond to that?
Mr. Zywicki. Well, first, I would say I have never seen a
bankruptcy like this at all. I have taught bankruptcy for 15
years; I practiced bankruptcy. I have never seen a bankruptcy
case in which secured creditors received $0.29 on the dollar
and unsecured creditors received $0.44 on the dollar, which is
what happened here; and, again, some of those secured creditors
were other retirees, the Indiana policemen and teachers
retirement unions.
I have never seen, under the guise of a 363 sale, what
really amounted to or what is effectively a sub rosa plan,
which is not just selling the company, but dictating how the
assets are going to be distributed. What we also saw in this
case was an auction that was anything but a fair auction of the
assets; there were strings attached to it that basically
required that anybody----
Mr. Ross. And why was that? Was the UAW that effective?
Mr. Zywicki. Well, anybody else who wanted to bid on the
company was required to give preferential treatment to the UAW
in the same sort of way that the Government did with respect to
honoring the VEBAs. Once the company went into bankruptcy, of
course, we saw a lot of other shenanigans. But I have never
seen any bankruptcy case that resembled this in terms of the
impact on the rule of law, the way in which it scrambled around
priorities, and the speed at which they essentially sold the
company and distributed the assets.
Mr. Ross. Thank you.
Mr. Bloom, what role did the Auto Task Force or other
administration officials play in the negotiations between GM
and the UAW in this bankruptcy?
Mr. Bloom. I think the role we played in that generally was
the same role we played with most of the issues, which is to
say that we deferred to General Motors in terms of their
business judgment about how to handle a particular matter, and
I think the UAW negotiation would fall into that category. But
we reviewed that decision to see if we agreed that it was
commercially reasonable.
Mr. Ross. And did the UAW have a great deal of leverage in
these negotiations?
Mr. Bloom. I think it would be fair to say they had a
degree of leverage. I wouldn't describe----
Mr. Ross. Do think they would have derailed the entire deal
over the salaries of a few?
Mr. Bloom. I can't speculate as to what they might have
done.
Mr. Ross. Mr. Feldman, what do you think?
Mr. Bloom. I think our judgment at the time was that the
judgments that GM made were reasonable.
Mr. Ross. Mr. Feldman, your opinion? The UAW exerted a
great deal of leverage in this negotiation?
Mr. Feldman. I think everybody in the case who had leverage
exerted that leverage. The UAW was really no different than any
other participant.
Mr. Ross. Do you think they would have derailed the
negotiations over----
Mr. Feldman. I truly don't know. General Motors----
Mr. Ross. But you would have to speculate. I mean, this is
your forte.
Mr. Feldman. I don't think speculating is my forte. My
forte is how to move companies through Chapter 11, include
these two companies, Chrysler and General Motors.
Mr. Ross. And never on speculation?
Mr. Feldman. I try not to.
Mr. Ross. Thank you.
With regard to the payback, let's say that under the Bush
Administration we give GM $10, under the Obama Administration
we give $20 to GM; GM pays back $20. In this particular
example, it hasn't all been paid back. Was that something that
was never intended to come to fruition or was it just that we
wanted to make sure that we paid back what was given under the
Obama Administration? Mr. Feldman, I will go to you for that.
Mr. Feldman. I don't think that was the intention. The
intention was to get paid back. Unfortunately, in the case of
General Motors, the stock price has not performed as I think
people hoped it would. But one of the reasons that General
Motors was de-levered to the extent it was de-levered was to
hopefully help the stock price.
Mr. Ross. I see my time has expired, so I will yield back.
Thank you.
Mr. McHenry. I thank my colleague.
We will now recognize Ms. Speier from California for five
minutes.
Ms. Speier. Mr. Chairman, thank you.
I want to thank Mr. Feldman, Mr. Wilson, and Mr. Bloom for
being here as private citizens today and for recognizing that
there is a responsibility as private citizens to support one's
Country.
Professor, you referenced shenanigans, which I thought was
an interesting term, because I could think of a lot of
shenanigans that went on with Wall Street, and particularly
Goldman Sachs, among many other. Would you call those
shenanigans?
Mr. Zywicki. I don't know those in detail. If I looked at
it, I would be willing to call them shenanigans, a lot of them.
It would be possible. I have not looked at those in as much
detail as I have with respect to these auto bankruptcies.
Ms. Speier. Well, with Goldman Sachs, they actually created
a product for a specific individual who wanted to short them,
and then sold those products as if they were good, outstanding
products. Those, to me, are--that kind of conduct is
shenanigans. I think a company going bankrupt is not
necessarily shenanigans, or trying to keep it alive is not
necessarily shenanigans.
Let me ask you, Mr. Wilson, as you noted in your testimony,
you are a lifelong Republican, and proud of it, I have no
doubt, and you were the Republican conservative and Independent
party nominee for New York State's comptroller, is that true?
Mr. Wilson. Yes.
Ms. Speier. The work you did to rescue the U.S. auto
industry was about doing what was best for the Country, was it
not?
Mr. Wilson. Yes.
Ms. Speier. At any time did you detect that persons on your
team were pursuing a political agenda?
Mr. Wilson. No.
Ms. Speier. Were you attempting to push a particular
political agenda?
Mr. Wilson. Only to save as much taxpayer money as
possible.
Ms. Speier. Oh, what a novel idea, to save taxpayer money.
Is that what you were engaged in doing?
Mr. Wilson. Yes.
Ms. Speier. Okay. Is it true that you were working to stave
off a potential collapse of a very large and interdependent
U.S. automotive industry, and you were deferring to the
company's business judgment regarding many of these detailed
decisions?
Mr. Wilson. Yes.
Ms. Speier. So, as you look back at your time, would you
say that you regret having done anything as a member of that
Task Force?
Mr. Wilson. I wouldn't say that. I mean, we could always do
a better job. You always have second thoughts and wish you did
better than anything you do in life, but I certainly feel that
we did the best we could given the circumstances and the
timing, and I think it was the right thing for the Country.
Ms. Speier. So are you proud with what happened?
Mr. Wilson. Yes.
Ms. Speier. How about you, Mr. Feldman?
Mr. Feldman. I think I said in my opening remarks that I
remain fiercely proud. I think what we did was, with a lot of
help from a lot of other people in the Government and at the
companies, pretty spectacular for these companies, frankly.
Ms. Speier. Mr. Bloom?
Mr. Bloom. I would just echo my former colleagues'
comments, and I would emphasize Mr. Feldman's point; there were
a lot of people who worked extremely hard on this matter, but I
think collectively a very good result was achieved compared to
the alternative.
Ms. Speier. Now, each of you is going to now provide a
deposition to SIGTARP on your activities, and we also have a
GAO report that has been completed that suggests that there was
nothing underhanded. Have you read the GAO reports? Do you have
any comments on that GAO report? Any of you.
Mr. Feldman. I have read the GAO report. I suspect my
colleagues have as well. I didn't take issue with anything in
the GAO report; I thought it was, overall, a very good job.
Ms. Speier. Anyone else have any comments? Mr. Bloom?
Mr. Bloom. I wouldn't disagree.
Ms. Speier. All right, I yield back, Mr. Chairman.
Mr. Turner. [Presiding.] Thank you. I want to thank the
Chairman for yielding the gavel to me during this period of
asking questions, and I want to thank the Ranking Member, Mr.
Quigley.
This is a bipartisan issue. If you noticed, the topic of
this hearing is not the auto bailout, the questions of whether
or not it should have been doing or shouldn't have been done.
The topic is the Delphi pensions, those who did not receive the
top-up or their pensions being whole, in fact, had their
pensions reduced, and the involvement of the Auto Task Force
and these three gentlemen and their refusal to participate in
that. The GAO report did not have information for determining
their role or their responsibilities.
Mr. Bloom, you have said that you have testified a number
of times, but, as you acknowledge in your own testimony, you
did not testify concerning this topic because you claim that
there was ongoing litigation that would prevent you to stand in
front of Congress and tell the truth.
Mr. Feldman, do you have a medical condition that affects
your memory?
Mr. Feldman. I do not.
Mr. Turner. Great. Thank you. Because in your testimony you
have, like, foreshadowed that you might claim that you don't
remember this stuff when you go before SIGTARP or when the
other questions are asked of you in this Committee, and I would
want to invite you to have a refreshed memory because of two
things. One, when we pull up your law firm's advertisement of
what you do, not only do they recognize that you have a
practice that is complex litigation, clearly, you recall it.
But the very first thing it tells is that in March 2009 you
were recruited to serve as the chief legal advisor for the
strategy to restructure and recapitalize General Motors
Corporation. It is the first item. So if your clients can avail
themselves of the knowledge you had, we want to also.
Mr. Bloom, you testified before this Committee, on the
Regulatory Affairs Subcommittee on June 22nd, 2011. At that
hearing I handed you three pages of questions. My staffer,
Andy, who is going to hand them to you again, handed them to
you at that hearing. Do you recall receiving these questions?
Mr. Bloom. Yes.
Mr. Turner. Okay. I asked you if you would answer those
questions, and let me refresh your memory as to what you said.
Here is the video of you at that hearing.
[Video played.]
Mr. Turner. Mr. Bloom, your answer to me on June 22nd,
2011, was absolutely. I have not received one answer from you.
Why haven't you answered me?
Mr. Bloom. Subsequent to the time before I had a chance to
answer, I left government service.
Mr. Turner. So your answer changed because you left
government service?
Mr. Bloom. I did not feel it was appropriate that I
continue to involve myself in this matter after I left
government service.
Mr. Turner. Well, clearly, this Committee views that
otherwise, as do the taxpayers. You had great responsibility,
as also your current firm indicates and advertises you as the
senior advisor at the U.S. Department of Treasury where he
helped lead the restructuring of General Motors. Is your
accountability to the taxpayers. Will you commit, as you did in
that hearing, to answer these questions now?
Mr. Bloom. I am here today, and if there are questions I
can answer, I will do it.
Mr. Turner. Will you commit in writing to answer these
questions, as you did under oath in that hearing on June 22nd?
Mr. Bloom. I will answer the questions I can answer today.
Mr. Turner. So we will just keep you here and I will just
orally ask you the questions, with the Chairman's approval,
then.
Mr. Feldman, we have a number of your coworkers' emails
that also can help you refresh your recollection. When we get
to the SIGTARP's reason for wanting to speak to you, Ms. Romero
states, SIGTARP believes that the Auto Task Force played a role
in the pension decision, and these individuals' failure to
speak on this issue poses a significant obstacle.
Mr. Feldman, do you agree that you played a role in the
pension decisions?
Mr. Feldman. I don't think I agree that I played a role in
the pension decisions. I certainly spoke regularly to the PBGC
and to General Motors regarding the Delphi pension issues.
Mr. Turner. Did you ever speak to people at the White House
concerning this issue?
Mr. Feldman. Brian Deese, who was, at that time, at the
White House, was a regular member of our team and the team
reported to Larry Summers and Tim Geithner, and obviously Mr.
Summers or Dr. Summers was at the White House at that time.
Mr. Turner. Can you please put up slide 6?
[Slide.]
Mr. Turner. This is Joseph House of PBGC, his email
following his conversation with you, where he says that you
reported that you made progress discussing our proposal with a
number of key folks at Treasury and at the White House, but he
has not yet wrapped up his coordination. This would be the
issue of the pensions. PBGC's emails indicating that we have
several, including this one, that indicate your role on the
Auto Task Force of coordinating the issue of the pensions. Do
you disagree with this email?
Mr. Feldman. I don't disagree that I was the coordinator or
facilitator of those issues. I think that is accurate to say.
Mr. Turner. What was your role? You just said a minute ago
you didn't have one.
Mr. Feldman. I think you asked whether I was a decision
maker, and I was not a decision maker.
Mr. Turner. I asked you to describe what your role was.
Would you describe that role for us, please?
Mr. Feldman. Sure. I was the facilitator, coordinator of
issues between General Motors and the PBGC, among other roles,
regarding the Delphi pension issues.
Mr. Turner. And how does that role assist or affect PBGC
and its participation in the bankruptcy process and in the
decision affecting the pensions?
Mr. Feldman. Well, the decision that the PBGC made with
respect to the pensions was independent of anything that
Treasury or I had to say to the PBGC. The issue vis-a-vis the
PBGC and Delphi was what claims the PBGC would have in the
Delphi case; what liens they would purport to have over assets
of Delphi, particularly the foreign assets of Delphi, and that
had a large impact on Delphi's future and obviously on GM's
future.
Mr. Turner. So, Mr. Feldman, you played a role in
determining the either claiming or releasing of PBGC liens on
General Motors-Delphi assets in the bankruptcy process with
respect to these pensions.
Mr. Feldman. That is not correct.
Mr. Turner. That is what I heard you say. Please clarify.
Mr. Feldman. Let me be very clear. I urged the PBGC to come
to decisions in a rapid manner because it had the potential to
hold up General Motors' emergence. But I did not advocate for
positions vis-a-vis the PBGC; I played the role of a
facilitator or mediator, if you will, between the PBGC and
General Motors.
Mr. Turner. My time has expired.
Mr. Quigley?
Mr. Quigley. Thank you, Mr. Chairman.
Good morning, Ms. Clowers.
Ms. Clowers. Good morning.
Mr. Quigley. Your audit tried to identify some of the
factors that went into GM's decisions to top-up some pensions
and not others. That is correct, right?
Ms. Clowers. It did.
Mr. Quigley. Your December 2011 report states, ``Treasury
deferred to GM's business judgment and Treasury did not
explicitly approve or disapprove of GM providing top-ups.'' So
it would appear from your report that the Delphi pension matter
was decided by GM without Treasury influence?
Ms. Clowers. Yes. We reported that while Treasury played a
significant role in resolving the Delphi bankruptcy, as they
wanted that resolved as quickly as possible, as new GM emerged
from bankruptcy, they played an advisory role with regard to
the pension plan issues as laid out in court filings and
interviews with GM, PBGC officials, and Treasury officials. I
think an example of that is in a court filing that shows that
Treasury assumed GM would be honoring the hourly plans, up
until it was informed by GM in June that it could no longer do
so because of the financial burden.
Mr. Quigley. Okay. And in your mind and in what you wrote,
what were the factors driving GM's decisions?
Ms. Clowers. According to GM officials that we spoke to and
the public records that we reviewed, GM considered the
dependency on the UAW for the workforce; they were heavily
reliant on the workforce, so, emerging from bankruptcy, they
wanted to make sure they had a motivated and intact workforce.
They also considered other costs and risk factors, and weighed
that against emerging from bankruptcy in terms of what type of
costs and risks they wanted to take on.
Mr. Quigley. And did you find any evidence that Delphi's
pension decisions were anything other than GM's private
business decisions?
Ms. Clowers. Again, the court filings, Treasury officials,
PBGC officials, GM officials stated that Treasury only played
an advisory role. I would note, however, in conducting our
work, we coordinated with SIGTARP, and our report focused on a
broad range of things, including PBGC issues, the events
leading to the termination in Treasury's role. But we did not
conduct an investigation, as SIGTARP is doing, and we did not
interview the former officials here today.
Mr. Quigley. Is there anything else you want to add related
to the GM decision-making process and the questions I have
asked?
Ms. Clowers. No, sir.
Mr. Quigley. All right. Thank you.
I yield back.
Mr. McHenry. [Presiding.] I thank the Ranking Member and
certainly appreciate his line of questioning as well.
We will now recognize Mr. Kelly of Pennsylvania for five
minutes.
Mr. Kelly. Thank you, Mr. Chairman. Thank you for holding
the hearing and allowing me to participate.
I do have a question. Mr. Bloom, I have been with you
before at other hearings. When we talk about the boards and we
talk about GM making decisions, is the consensus is these are
GM board decisions that were made involving the UAW?
Mr. Bloom. I think it would depend on the decision.
Mr. Kelly. But specifically with this one, when it comes to
pensions and picking and choosing who would get bailed out and
who would not get bailed out.
Mr. Bloom. I couldn't say whether General Motors management
specifically brought this issue to their board of directors or
not; I wouldn't know.
Mr. Kelly. Did you sit on the board of directors of General
Motors?
Mr. Bloom. No.
Mr. Kelly. No. You were part of the Auto Task Force?
Mr. Bloom. Yes.
Mr. Kelly. Okay. And the board of directors, again, the old
GM versus the new GM, because there are two completely
different entities there, as we know. A lot of the new General
Motors were appointees by the Administration.
So as we move on, let me ask you this, Mr. Wilson, in your
testimony, I think this really makes a lot of sense, you talked
about what happened with this and you say, on page 2, the
results of the work speak for themselves. General Motors had
its most profitable year ever in 2011, even though auto sales
have still not fully recovered.
I know we talk about the auto industry coming roaring back.
Do you know what GM made in 2011?
Mr. Wilson. I think it was just under $8 billion net
income.
Mr. Kelly. How much taxes did they pay?
Mr. Wilson. Well, they had some NOLs from the transaction.
Mr. Kelly. Well, how much did they pay in taxes?
Mr. Wilson. I don't know.
Mr. Kelly. I will tell you what it is. It is zero. Zero.
And maybe, professor, you can tell us why they paid zero
taxes on almost $8 billion in profits.
Mr. Zywicki. Sure, yes. This is another anomaly about these
cases that are very irregular, which is that the Treasury
Department issued essentially a special ruling for TARP
recipients that allowed them preferential treatment under the
tax code in order to carry forward net operating----
Mr. Kelly. Wait, wait. Can I just say, so preferential
treatment? Can we just say on the street we call that picking
winners and losers, and who gets to take advantage of things
that weren't available to others in bankruptcy?
Mr. Zywicki. I think that would be a very accurate
description, yes.
Mr. Kelly. So $7.1 billion. I am a General Motors dealer,
by the way, so I am really happy when they make money. But I
always like the fact, and the President always talks about the
99 percent and the 1 percent, and how the 1 percent is not
paying their fair share. An almost $8 billion profit and they
didn't try to put anything back in? That is offensive to me as
a taxpayer.
I know that during the bailout, as a dealer, I didn't get
one cent. In fact, I was at risk of losing my dealership, and
the answer was, you know what, good luck; you guys can probably
make it if you really work hard, we made it. I understand that.
But when we talk about this auto industry roaring back, we
are talking about an industry that had 16.5 million sales every
year. It fell to 9.5 million sales. So the roaring back comes
as a result of the fact that cars, like people, age; cars, like
people, can't perform at the same level they had when they were
newer. There is a thing called the scrapping rate that is
taking place.
So the roaring back really is a result of a diminished
market the last three or four years. So, yes, it is going to
come roaring back. It is going to come roaring back, but I
think right now they are projecting somewhere some people say
13.5 million units a year, some 14.5 million units a year. But
I am telling you, from a guy who is actually on the lot,
talking to people, what is keeping it from really roaring back
is people just aren't sure what the future holds. They are not
willing to go into a 48-month or 60-month commitment, not
knowing if they are going to have a job in that time period.
So I think it is important that we really take a look at
what did happen in the auto industry, and I have to tell you,
Mr. Wilson, I know you are a good Republican and I know that
you are very heralded for what you do.
Without objection, I would like to enter the testimony from
City and State, an article that talked about Harry Wilson
tapped by the Teamsters to rescue an ailing trucking company
and union jobs.
Mr. Kelly. You do a good job at what you do. I don't think
there is any question about that, and I think people in the
private sector, it doesn't really matter what political
affiliation you have. I mean, I sell cars. The prerequisite is
they have to be a Republican to buy a car from me. I just want
everybody to come in and avail themselves of the fine products
that General Motors builds.
Mr. Wilson. But you are in Florida, not New York.
Mr. Kelly. So you do have close ties and you are going to
try and help the trucking association too, because they are
also in a very bad shape right now, are they not?
Mr. Wilson. Yes. In that particular deal, sir, we completed
that restructuring in July of 2011.
Mr. Kelly. Okay. So they are back on their feet and
recovering.
Mr. Wilson. Yes.
Mr. Kelly. But my real question, I guess it comes down to
how do we pick those we bail out and those we don't?
Mr. Wilson. As a government or as a private sector?
Mr. Kelly. As a government, knowing that the private sector
funds all these decisions that we make.
Mr. Wilson. Sure. Well, philosophically, the way I look at
it is it is almost never acceptable for the Government to
intervene in the private sector, and I have gotten ribbing from
friends of mine with philosophical similarities about why was
it okay in 2009. And the only reason I personally concluded it
was okay was because we were on the edge of the abyss. No one
knew where the bottom was, sir, as you remember. The S&P was at
66.
Mr. Kelly. Let me ask you one thing. So the bailout was to
keep General Motors from going bankrupt, right?
Mr. Wilson. No, I think the rescue was done to save the
entire American auto industry from going out of business.
Mr. Kelly. All right, all right. So the market would be the
market; the industry fairs on its own.
Professor, the length of the GM bankruptcy, how many days?
Mr. Zywicki. I don't remember exactly, but it was like 30
to 60 days from beginning to end.
Mr. Kelly. So one of the biggest bankruptcy cases ever is
solved in 30 to 60 days?
Mr. Zywicki. That is what we are led to believe, yes.
Mr. Kelly. So if we don't use what was ultimately used and
we let the--I am sorry, my time is up. I just wanted to see if
it had gone through a normal bankruptcy, what would the
recovery time have been also. I apologize.
Mr. McHenry. The gentleman can answer the question. Then we
will move forward.
Mr. Zywicki. If it had gone through normal bankruptcy, it
would have taken somewhat longer, but it would have been a lot
more transparent. We could have a real 363 sale; we could have
not shredded the rule of law in terms of priorities and those
sorts of things. So it may have taken a little bit longer, but
there is no reason why we had to do all the things that we did,
all this other stuff in order to fix the auto companies.
Mr. McHenry. I thank the gentleman for his testimony.
We will now recognize Mrs. Maloney of New York for five
minutes.
Mrs. Maloney. I want to thank the gentleman and I want to
thank all of the panelists for being here.
Actually, I want to thank President Obama for saving the
auto industry in America. I, for one, can't imagine an America
that doesn't build our own cars. Granted, it is not where it
was, but we saved at least a million jobs, and we are now
exporting cars and we seem to be doing a good job. We have to
remember, when President Obama took office, the industry was
shedding jobs by hundreds of thousands, and GM and Chrysler
faced the possibility of being totally liquidated, which would
then have huge ramifications.
Even in New York we had suppliers in New York that were
supplying the auto industry, and they went out of business and
many New Yorkers lost their jobs. We weren't building the cars,
but we weren't building some of the parts. So it had
ramifications across our great Nation.
Yet, when the American auto industry was on the brink of
collapse and we were going to lose, by all estimates, from all
economists, at least a million jobs on the line, that would
have been at least one in eight jobs in Ohio and in jobs across
our Country. And it wasn't just the people in the auto plants.
We have to remember this. This industry affected everyone. It
affected the suppliers hundreds of thousands of miles away and
up and down the chain. It affected the restaurants near the
plant; every store, every school, everyone in the community,
the families that depended on the worker that was at that
plant.
I remember some people said let Detroit go bankrupt, let it
go down the drain. Even a guy running for president said that.
But our President said, no, we are going to save the auto
industry and, quite frankly, I am proud of the auto industry. I
am proud of their comeback and I think it is an American
success story that America bet on the American worker and bet
on American industry. And GM is back. Now it is the number one
company in the world. Ford is on the move, was handled
extremely well during that whole crisis. They did extremely
well. Chrysler is back.
I think supporting with policies the American worker and
American business, I think it is a success story. So I want to
applaud everyone on the panel or everyone who played any role
whatsoever in saving an American industry which is now
exporting cars.
Now, I would like to point out and put in the record the
GAO highlights first page, and I want to quote from it because
there is some confusion about Treasury's role, and I am going
to quote exactly from their report. ``Although acknowledging
the significant role Treasury played in GM's restructuring, GM
and Treasury officials stated that Treasury's role was advisory
concerning GM's decisions not to take on additional Delphi
pension liabilities, but to honor the top-up agreements with
some unions.'' Also, PBGC officials stated that PBGC
independently made the decision to terminate the plans.
So I would like to put that in the record because it
clarifies the independent voice of GAO.
Mr. McHenry. Without objection.
Mrs. Maloney. I know that we have a representative here and
we have some questions for Ms. Clowers, but I first want to ask
Mr. Bloom, Mr. Feldman, and Mr. Wilson, and I want to thank
them, first, for testifying. They are out there, aren't they? I
don't have my glasses, so I can't see. I regret I was at a
hearing in Financial Services that I had to attend and I didn't
hear all of it, but I read your testimony.
I want to know what was your overall mission as members of
the Auto Task Force? Delphi was just one piece of the situation
that you were facing and Delphi was a major parts suppliers to
GM that had been experiencing its own financial troubles for
some time. If you saved GM, but Delphi failed, all of your
efforts would have been for nothing, is that correct? Your
answer?
Mr. Bloom. I think I would echo what Mr. Wilson had said
earlier. Our mission was not to save General Motors; our
mission was to see if there were a way to facilitate the
restructuring of these companies so that the American
automobile industry in its entirety could continue to function
at the least possible cost to the taxpayer. It was General
Motors' judgment, which we did not disagree with, that if
Delphi had liquidated, General Motors' ability to reorganize
would have been put seriously at risk.
Mrs. Maloney. Well, my time is up and I think that says it
all, so I think your judgment was right. We are employing, it
saved over a million jobs, we are exporting. I would call that
an American success story. Congratulations for any role you did
to support it.
Mr. McHenry. The gentlelady's time has expired.
Mr. Guinta, the Vice Chair, is recognized for five minutes.
Mr. Guinta. Thank you, Mr. Chairman. I want to make a
statement and a comment, then I want to yield some additional
time to Mr. Kelly.
What I am hearing from this testimony is that had this
action not taken place, that America would be forever changed;
that the Federal Government had no choice but to act. There are
a lot of people in this Country that disagree with that
assessment. There are a lot of people in this Country that
disagree with that assessment. There are a lot of people in
this Country who believe in America; that a Federal Government
should be limited and effective and efficient. I happen to be
one of those Americans and I find it somewhat offensive that
people in this Committee, in this panel feel that only the
Federal Government could act to save the private sector.
Now, we talk about the size and scope of General Motors.
Fannie Mae is actually larger than General Motors. So under the
auspice of the Federal Government had to act to save this
industry, apparently you are also suggesting and admitting that
we are going to have to act to save Fannie Mae. I am not sure
that people in this Country believe in that either.
There is one question I have for Mr. Wilson. Did unions get
special treatment in this bailout, yes or no?
Mr. Wilson. No.
Mr. Guinta. In your opinion.
Mr. Wilson. No.
Mr. Guinta. Okay.
Mr. Zywicki, in your opinion, did unions get special
treatment in this bailout?
Mr. Zywicki. Yes, absolutely.
Mr. Guinta. Okay. Why do you think that?
Mr. Zywicki. As we document in our paper, first, they were
treated better with respect to their VEBAs in the General
Motors cases than other unsecured creditors were treated;
second, they were treated much better than employees typically
are treated in bankruptcy cases, and they were allowed to
retain wages that, frankly, are above market wages, above any
of their competitors' wages, and were thereby prevented from
having to do what typically happens; and, third, there was
really no justification for giving $1 billion to the retirees
of another company, which is what they did with respect to
Delphi.
Mr. Guinta. So, Mr. Wilson, is Mr. Zywicki telling the
truth or is he lying?
Mr. Wilson. I don't think he is lying; he is just mistaken,
and woefully so.
Mr. Guinta. So you don't think what he said actually
happened?
Mr. Wilson. I think he has the facts completely wrong, and
I would be happy to go through in detail why.
Mr. Guinta. Okay, explain to me in 15 seconds how he is
wrong.
Mr. Wilson. Well, there is no way to explain $26 billion of
mischaracterization in 15 seconds. I would be happy to explain
it----
Mr. Guinta. Twenty-six billion dollars?
Mr. Wilson. That was his claim.
Mr. Guinta. Okay.
Mr. Wilson. But, again, I am happy to go and, of course,
you will cut me off at any time you want to.
But if you look at each of the three pieces, sir, we
negotiated the best possible deal we could with each of the
constituencies, with both UAW and with the bondholders. The
bondholders overwhelmingly approved the General Motors
bankruptcy deal, overwhelmingly.
If they felt they were disadvantaged, there were people who
held $28 billion in claims and they could have voted with their
feet. But they chose not to because they felt the deal was a
fair deal. So that is why his first point is completely wrong.
His second point is also completely wrong. We were governed
in all our actions by the Corker amendments. Senator Corker,
who is an honorable and wonderful Senator, put forward a bunch
of stipulations in the early TARP work that said that GM's wage
rates had to equal--and Chrysler's, but I focused on General
Motors--GM's wage rates had to equal Toyota's, and that was an
aspect of long negotiations in terms of what does that mean----
Mr. Guinta. Let me reclaim my time. The question was, was
there special treatment or preferential treatment given to
union members. It sounds like you are doing a lot of explaining
and telling me why that is not the case.
Mr. Wilson. Right.
Mr. Guinta. I disagree with you. I think it is very clear
that there was special preferential treatment given to one
group over another. Now, you are free to disagree with me----
Mr. Wilson. I do, sir.
Mr. Guinta.--but it is pretty clear that is exactly what
happened. Let me ask about you. Have you gotten any
preferential treatment since your work with unions on this from
unions?
Mr. Wilson. Of course not.
Mr. Guinta. Of course not. You have not done any work since
this with any union?
Mr. Wilson. Yes, I have done----
Mr. Guinta. Oh, you have.
Mr. Wilson. But that is not preferential treatment, sir. I
completely resent the--do you have any evidence to suggest
that, sir?
Mr. Guinta. I am asking the question.
Mr. Wilson. I answered the question----
Mr. Guinta. I would like to know what work are you doing
with unions now.
Mr. Wilson. The Teamsters approached me because I have had
enormous success in restructuring broken businesses in many
walks of life, almost entirely as a private investor, and they
asked for my help in their largest employer, YRC, which we
successfully restructured out of court, the largest out-of-
court restructuring done in many years, in record time. And
because of that success they asked me to work with them in
other situations.
But I have also worked with private investors; I have
worked on my own; I have been on the other side of the table
from unions both before and since. So I am an investor and
restructuring expert, and I work in situations trying to fix
companies before they go away.
Mr. Guinta. Okay. Thank you very much for your testimony.
I will yield back the balance of my time to the Chair.
Mr. McHenry. I thank my colleague for yielding back.
We will now recognize Mr. Johnson of Ohio for five minutes.
Mr. Johnson. Thank you, Mr. Chairman, and to the rest of
the Subcommittee members for granting unanimous consent to
allow me to participate in today's important hearing.
As you may know, I represent Ohio's Sixth Congressional
District, which includes parts of northeastern Ohio and the
southern suburbs of Youngstown. A large number of Delphi
retirees, both salaried and unsalaried, live in the district
that I represent. Since I was elected to Congress in 2010, I
have been looking closely at the reason why one class of
workers, the union retirees, were given preferential treatment
over the non-union salaried retirees.
It has now been almost 20 months and I still have not heard
a compelling reason as to why this was done, and today I hoped
that this hearing would produce answers to those questions that
many of us have been asking.
Mr. Bloom, last year, when you were still employed by the
Obama Administration, I asked you whether or not that all
parties involved were treated fairly and received neither more
nor less than they would have simply because the Government was
involved. Do you still believe, today, that all parties were
treated fairly?
Mr. Bloom. Yes.
Mr. Johnson. Did the newly restructured General Motors have
any contractual obligations to top-up the union retirees'
pensions?
Mr. Bloom. I'm sorry, the newly restructured General
Motors?
Mr. Johnson. Yes. Did the newly restructured General Motors
have any contractual obligations to top-up the union retirees'
pensions?
Mr. Bloom. I believe that the newly restructured General
Motors, as part of their bankruptcy settlement with the UAW,
reaffirmed their commitment to top up the pensions of the
Delphi retirees.
Mr. Johnson. Was it a contractual obligation?
Mr. Bloom. I believe it was part of their contract with the
UAW, yes.
Mr. Johnson. Okay. How can you say that all parties were
treated fairly when the union retirees kept their full
pensions, while you and others raising the pension funding
status 100 percent and the union retirees kept one of the best
health care plans in the U.S.; on the other hand, the salaried
retirees lost up to 70 percent of their pension plans and their
health care? I mean, I learned this principle in kindergarten.
Fair is fair. How can you give one group 100 percent and take
70 percent from another group and call that fair?
Mr. Bloom. First thing, I would say that the union retirees
at General Motors did not retain the health care program they
had before; they received a VEBA, which is going to be
responsible providing the health care. It does not have
sufficient funds to provide the benefits they used to have,
number one.
Number two, when I used the word fair, I did not use the
word equal. In a bankruptcy, all constituents, and Mr. Feldman
made this point earlier, all constituents try to use whatever
leverage they have to try to get the best arrangement they can.
It was General Motors' business judgment that the overall deal
they made with the UAW was fair and the cheapest deal they
could make----
Mr. Johnson. Mr. Bloom, I hate to cut you off. I appreciate
your explanation.
Mr. Bloom. Well, I am trying to answer your question.
Mr. Johnson. Reclaiming my time, Mr. Bloom. I appreciate
your explanation, but I am running out of time. It is an
interesting nuance that now we have changed the definition.
There is a different between fair treatment and equal treatment
under the law. That, I don't understand.
Mr. Zywicki, it is clear to me and many of my colleagues
and the public that the Obama Administration's auto bailout
staff used taxpayer dollars to pick winners and losers, and now
it seems, in an effort to not embarrass the President in a very
contentious re-election campaign, members of the auto bailout
team have refused to be interviewed by the inspector general on
their actions. Now, we know they have agreed to today, but up
until now it hasn't happened.
Tens of thousands of salaried retirees saw their retirement
funds greatly reduced, by up to 70 percent, while the union
retirees were made whole and were even topped up. Do you think
it was fair?
Mr. Zywicki. Equal and fair sound pretty much the same to
me, Congressman. And I would also say, to Mr. Guinta's earlier
question, which was he asked whether or not the unions were
given preferential treatment. What I heard Mr. Wilson say was
that he justified preferential treatment that he thought was
reasonable. But I don't think there is any question the unions
were given preferential treatment.
Mr. Johnson. Mr. Zywicki, thank you for your answer.
I would like to yield my last 20 seconds to my colleague
from Ohio, Mr. Turner, for a follow-up question.
Mr. Turner. Mr. Bloom, you were saying that there was a
contractual obligation with respect to the top-ups. Those don't
survive in bankruptcy, right? So they were free to either
affirm or not affirm them. So you can't say that it was a
contractual obligation, therefore they must. They were in
bankruptcy, correct?
Mr. Bloom. What I think I said was in the General Motors
bankruptcy, General Motors made a contract with the UAW. That
contract included affirming the prior agreement relative to the
Delphi retirees.
Mr. Turner. Because I think you were leaving the impression
with the Committee that there was some obligation within
bankruptcy, and they had no obligation within bankruptcy, it
was one that they affirmed, correct?
Mr. Bloom. That is what I said.
Mr. Turner. Thank you.
Mr. Johnson. I yield back, Mr. Chairman.
Mr. McHenry. I thank my colleague for yielding back.
With that, I will begin a second round of questions for the
panel.
Now, Mr. Wilson, I just want to make sure this is for the
record. My colleague from Pennsylvania, Mr. Kelly, submitted
for the record a newspaper article called City and State--I'm
sorry, Mr. Guinta submitted that for the record. There is a
quote in here, and I think this is the implication of Mr.
Guinta. It is not to impugn your character in any way. I
understand you took great offense to that, but simply saying,
this is a quote from Mr. Gold, the Teamsters Director of
Strategic Research and Campaigns: ``We are not at liberty to
discuss any details, but we approached Harry, Mr. Harry Wilson,
after closely following the work on the Obama Administration's
Auto Task Force, and given the similarities that GM faces and
YRCW faces, we believe he would be a tremendous help in fixing
this challenging situation.'' Now, that is the quote from this.
The implication is that you are pretty agreeable to the
unions, and based on their experience. It is not about
impugning your character in any way, shape, or form. When you
testify that you have these Republican credentials, you are
testifying as an Obama Administration official. He is not
talking about your character, he is just simply saying that
your actions in public life have been agreeable to unions, and
I just want to make sure that is corrected for the record and
that is established. In no way it is a character assassination;
that is the context of his questions and comments.
I want to move on and I want to ask the three auto bailout
task force folks, Mr. Bloom, Mr. Feldman, and Mr. Wilson about
this and I want to get your comments on the record. Steven
Rattner, the Obama Administration's former car czar and one of
your former colleagues and boss, admitted to the Detroit
Economic Club this past December ``we should have asked the UAW
to do a bit more.'' You can see the quote on the screen here.
``We did not ask any UAW member to take a cut in their pay.''
Do you agree with Mr. Rattner that, in retrospect, you
should have asked the UAW to make more concessions? Mr. Bloom?
Mr. Bloom. I haven't seen Mr. Rattner's speech, so I don't
know the broader context, and I certainly don't know what he
means by a bit, so I can't comment specifically. If your
question is----
Mr. McHenry. No, I am asking you to comment----
Mr. Bloom. You asked me if I agreed with him. I can't tell
you whether I agree with him. I can answer your question. If
your question is do I think we should have asked the UAW to do
more, my answer is no.
Mr. McHenry. No?
Mr. Bloom. No. I think what we did was reasonable.
Mr. McHenry. Okay. So no pay cut; fine and dandy.
Mr. Bloom. I think the aggregate deal that General Motors
extracted from the UAW was reasonable.
Mr. McHenry. Okay.
Mr. Feldman?
Mr. Feldman. Again, I don't know what the context of
Steve's quote is.
Mr. McHenry. Well, let me restate this.
Mr. Feldman. But what I would say about the UAW is you have
to remember Chrysler went first. Chrysler's negotiation with
the UAW was really led by Fiat. So the deal that they
established, which became part of the pattern bargaining in
General Motors, was done between two third parties, did not
have Task Force intervention, no thumbs on the scale. So, in
hindsight, I am perfectly content with where everything came
out.
Mr. McHenry. Perfectly content. So no, the answer is no.
Mr. Feldman. The answer is no.
Mr. McHenry. Okay.
Mr. Wilson?
Mr. Wilson. Sure, Mr. Chairman. I have said publicly that I
believe that the only kind of remaining legacy issue of General
Motors is this pension under-funding, which is an issue--and
drag on its stock--an issue for the company, and that I wish
that the restructuring had addressed that in some way. It was
the judgment of General Motors management, in their negotiation
with the UAW, that they would keep the pension intact, and we
didn't intervene in that because this was our mandate. But I
believe that that is an issue that could have been better
addressed in bankruptcy.
Mr. McHenry. So the answer is yes, no?
Mr. Wilson. I think more could have been done.
Mr. McHenry. More could have been done, okay.
Well, thank you for answering the question. I wanted to
give you an opportunity to respond. This was in Mr. Zywicki's
testimony.
Mr. Feldman, if you will put up slide two on the screen
here, you will see an email that you sent on June 30th, 2009. I
recognize that you are not going to have instant recollection
of this. In your email you ask GM to bring the UAW into the
loop about negotiations over the termination of Delphi pension
plans, stating that it ``could get messy.''
The Obama Administration contended that it would not get
involved in the day-to-day affairs of GM. Was it your place to
advise GM to talk with UAW, and was this advice based on
prudent bankruptcy proceedings or was this more about political
expediency?
Mr. Feldman. I don't think it was about either, bankruptcy
or political expediency. I think if you go back to that moment
in time, basically the PBGC had made the determination that it
was going to terminate both the hourly plan and the salary
plan. It previously made the decision on the salary plan and,
really, what I was doing was reminding General Motors that,
given their relationships with the UAW, that they needed to get
out in front of the communications, not substantive advice to
General Motors.
Mr. McHenry. Well, this was prior to the PBGC terminating
the plan.
Mr. Feldman. Correct. But I think if I recall, and I don't
have perfect recall, but I think if you recall the PBGC, at
that point, had started its process of thinking about a
termination of the Delphi hourly and salaried plans.
Mr. McHenry. All right. Thank you for putting that on the
record.
With that, for the second round, we will go to Mr.
Cummings. I will recognize the Ranking Member for six minutes.
Mr. Cummings. Thank you very much.
Mr. McHenry. Thank you.
Mr. Cummings. Sorry Mr. Guinta had to leave, I am sure he
had another engagement, but he said something that was very
interesting. He said there are some folks that feel that only
the Federal Government could bail out folks and whatever, make
corporations run. I don't want to take the words out of his
mouth, but that is what he implied.
I don't think there is anyone over on this side that thinks
only the Federal Government can do what the Federal Government
was able to do. In other words, there are times when the
Federal Government has to step in, and I think I am glad that
the Federal Government did step in to this situation because we
were able to save millions of jobs.
And I know that there are people who are working right now
who would say thank you very, very much for saving my job.
There are people who, when their child got that notice about
college, being accepted to a college, they don't have to do
what the guy did in the commercial, drop his head; they are
able to say, okay, I can afford that college, we can do this.
There are others that are able to provide food on the table
for their families; there are others that are able to live the
life that they want to live, as opposed to being on the
sidelines of life, drawing an unemployment check. So I am glad
that President Obama and this team did what they did.
In the November 18th, 2008, New York Times op ed entitled,
Let Detroit Go Bankrupt, Mitt Romney wrote, ``A managed
bankruptcy may be the only path to the fundamental
restructuring the industry needs. The Federal Government should
provide guarantees for post-bankruptcy financing and assure car
buyers that their warranties are not at risk.'' Mr. Romney
predicted that, as a result of direct Government assistance to
the auto industry, ``its demise will be virtually guaranteed.''
Mr. Wilson, has Mr. Romney gotten it right? Nearly four
years since Mr. Romney wrote those words, is GM showing signs
that it is guaranteed to fail?
Mr. Wilson. I am going to try not to interject myself into
the presidential debate, but I think----
Mr. Cummings. No, I just want you--you are a Harvard--and
that is a lot of thing, I was very impressed. A lot of people
don't realize this. You are an honor graduate of Harvard
College and then the business school at Harvard. So I don't
want anybody to think you are some lightweights. That is why I
am asking you. No, I am serious. I heard what they said about
you and I am going to ask you some questions about your
background a little bit later, but you can go ahead and answer
the question.
Mr. Wilson. Sure. I think the results, Congressman
Cummings, speak for themselves. I think that GM had its most
profitable year ever in its 103 year history in 2011, even
though auto sales still have not recovered back to their
normalized level. And I think it has a cost structure and a
capital structure that have made it the largest and most
profitable car maker in the world. So I think as long as they
keep on the same path, they maintain the same discipline that
they now have, I believe the company has a bright future.
Mr. Cummings. Steve Rattner, the former head of the Auto
Task Force, wrote, in a February 24th, 2012, New York Times op
ed that Mr. Romney's proposal ``sounds like a wonderfully
sensible approach except that it is utter fantasy.'' Mr.
Rattner further wrote that ``every scrap of private capital had
fled to the sidelines'' and without government financing
initiated by President George W. Bush in December 2008 the
companies would not have been able to pursue Chapter 11
reorganization.
Mr. Wilson, Mr. Bloom, Mr. Feldman, is Mr. Rattner's
assessment correct? Do you agree that there simply were no
other options available aside from complete liquidation or the
path that was taken? We will start with you, Mr. Bloom.
Mr. Bloom. It was our judgment, and I have no reason to
question it, and it was based on extensive talking in the
market, plus our collective experience, that if the Government
had not provided the debtor-in-possession financing, that
General Motors would have had to liquidate.
Mr. Cummings. Mr. Feldman?
Mr. Feldman. I completely agree. We were in touch with the
largest financial institutions in the world. They were simply
not going to provide capital. We spoke to the largest private
equity funds in the world; they were talking about needing nine
months to due diligence General Motors to make a determination
as to whether they would make an investment. The U.S.
Government, unfortunately, was a lender of last resort, but it
was the only lender, in my view.
Mr. Cummings. Mr. Wilson?
Mr. Wilson. That is correct, sir. I talked about, in my
written testimony, this unique confluence of events of both the
failures of the companies at the time of a complete freeze in
the financial markets, and it was those two things that made
this so unusual. In normal times, even in bad economic normal
times, you can find private capital. We beat the bushes to try
to find private capital and there was no one willing to step
forward with any kind of reasonable terms or any terms at all
to fund even a few billion dollars, much less the $80 billion
we needed to effectuate the rescue.
One private equity firm approached us and said they would
put in $1 billion, so we were still $79 billion short, if we
guaranteed them an 8 percent return. Now, what would the
reaction of the taxpayer have been, or this panel, had someone
agreed to do that? It should have been, rightfully, outraged
and, of course, we said no. So that was the state of the world
in which we lived in March of 2009 and the context in which we
had to make decisions.
Mr. Cummings. I guess it is easy for people to sit in the
bleachers and look down at the game and then try to second
guess the efforts of the team, and even when the team wins and
wins big time, sit on the sidelines and criticize the calls of
the game. That is just my opinion.
I yield back.
Mr. Turner. [Presiding.] Mr. Kelly?
Mr. Kelly. I thank the Chairman.
Just so we can be clear on this, and I sometimes get
confused; I have only been here for a year and a half, but I
think the confusion comes are we in Washington, D.C. or are we
on Mt. Olympus. Because the decisions made by government,
really, we talk about they bailed out the auto industry. I
understand you bailed out the auto industry, being the guy who
sold cars his whole life in a family that has been in it over
60 years: it is the market that saved the auto industry.
We are not talking, by the way, gentlemen, about union jobs
and non-union jobs, Republican jobs and Democrat jobs; we are
talking about American jobs. There is such a fragility to this
market, and I really get confused sometimes when people who
have never actually done it can tell you exactly what caused
this. I mean, wow, I can tell you what caused it: overcapacity,
over-production.
When you are structured to do 16.5 million units a year and
it goes down to 9 million units a year, my goodness, do you
think you have a problem when you have lost over 40 percent of
your market? The answer is yes.
The Government interfered with the natural flow of the
business cycle. They picked winners and losers. There is
absolutely no doubt that they picked winners and losers. This
idea that we have an evolving truth that, as time goes forward,
we can talk about what is fair and what is equal, that we can
pick and choose winners and losers and then sit back and say,
but if we hadn't done it, you don't understand, the market
would have collapsed.
The market did collapse. It collapsed because people didn't
know what their future looked like. A guy who doesn't know if
he is going to have a job next year does not go into a 48-month
commitment or a 60-month commitment to buy a new car. How do I
know this? I stand on the lot with them, I sit in the showrooms
with them, and I see their pain.
But whenever you determine that one group will be bailed
out and another will not, that is just flat outright wrong.
Let's not become confused. It is pure folly that if it had not
been for this measure all of the manufacturers would have
collapsed. Are you kidding me? Do you know there were auto
manufacturers that actually gained market share during that
time period? The market, not Government, determines success and
failure.
What happened in this situation is that the Government
decided who wins, who loses; who gets fully funded, who gets
nothing; who gets to sit at the table and eat, and who gets to
sit outside. Let there be no confusion over the definition
between of fair and equal. In the Country that I grew up in, it
is the same thing.
And I get sick and tired when people use a legal argument
to do an end-run on what is right for the American people. That
is absolutely pathetic. And if that is what we have reverted
to, no wonder the American people don't have faith in this
institution anymore. No wonder they don't have any faith in a
judicial system anymore that picks and chooses winners and
losers. Oh, yeah, you can fight it if you have enough money.
I have to tell you, and you know and I know it and
everybody else knows it in this Country, I am not against the
unions. Listen, I love the unions. I love what they do. But why
did you bring them to the table? There is an old saying right
now that I really believe in: if you are not at the table, you
are on the menu.
This Government picked and chose who the winners and the
losers were. The recovery of the American automobile industry
has nothing to do with this. There would still have been
companies. These companies would have gone through a
bankruptcy, would have come back. We didn't save millions of
jobs. A bankruptcy with historical, what a recovery period. The
biggest bankruptcy in America history, bam, 36, 60 days we are
back on the street and running again, and no problems.
So when we talk about what is clear and what is
transparent, when we talk about what is fair, when we talk
about the 99 percent and the 1 percent, fairness, to me, is
pretty much handpicked. I will be fair with certain people, but
I won't be fair with others.
Mr. Chairman, I appreciate the hearing today and I know
that there is some confusion about it, but from having been
there and having to navigate through those very difficult
times, keep in mind one thing: it is the market that will
always be the opportunity. How you address that market, your
ability to compete in a market that is global, your ability to
build cars of the highest quality has never been contested. You
know what the problem was? It cost too much to build them here.
American people go out and the people I talk to, you know what
they look at? How much is it going to cost me a month. So that
is what it comes down to.
So I am going to yield back, but I have to tell you, having
been there and having been in those waters without a life
jacket, without anybody throwing me a line, it is offensive to
me that somebody was picked to win and the other people were
picked to lose.
Mr. Cummings. Will the gentleman yield?
Mr. Kelly. I do.
Mr. Cummings. I have tremendous respect for you and I know
you know that. I just want to make sure I understand. Are you
saying that this situation could have gone into bankruptcy and
we would have still had the results that we have? Is that what
you are trying to say?
Mr. Kelly. Well, reclaiming my time.
Mr. Cummings. Yes, please. I say this most respectfully.
Mr. Kelly. And I appreciate that, Mr. Cummings, because you
and I do have a good relationship. It did go through bankruptcy
and it came back. The question is who was made whole, who was
made partial, who was left out in the cold.
And I have to tell you, gentlemen, I appreciate you being
here today, but it took a year? It took a year to come? It took
a year to answer these things from SIGTARP? Really? I have a
passion for this too. In fact, my friends say to me all the
time, Kelly, you don't make any sense to me; you left what was
probably the next to the last on the list of what people
respect, being the automobile business, and you went to the
worst.
[Laughter.]
Mr. Kelly. We rely on you. You are the people who we rely
on for the answers. And when you don't testify, what does that
look like? Tell me. Not in legal jargon, but in common sense,
everyday American jargon. What does that look like to the
people who pay for all this, the American taxpayers? It is
pathetic. The fact that you can do it and you take advantage of
it is even more pathetic.
I yield back my time.
Mr. Turner. Thank you. As we proceed with additional
questions, I just want to remind everyone that the topic of
this hearing is The Administration's Auto Bailouts and the
Delphi Pension Decisions: Who Picked the Winners and Losers. It
is not the issue of the auto bailout itself, the bankruptcy
itself; it is what happened with the Delphi pension decisions.
We are having this hearing because these three gentlemen
refused to answer questions. Mr. Bloom agreed to answer written
questions for me a year ago at a hearing, refused since to
answer them, and these three gentlemen have refused to answer
SIGTARP's questions. The GAO report is not sufficient; we need
the SIGTARP report.
So, with that clarification, I will turn them to Mrs.
Maloney. Then after her question we will open it up to an
unlimited time period since Mr. Bloom indicated that the only
way he was going to answer the questions that he had promised
Congress that he would answer a year ago in writing is to be
asked those questions in this hearing room. I will stay and ask
him those questions.
Mrs. Maloney.
Mr. Cummings. Would the gentleman yield just for one
second, one question, Mr. Turner?
Mr. Turner. Yes.
Mr. Cummings. I just want to make clear on this. Did Mr.
Bloom, I have been here and I have listened. Did he say the
only way that he would answer questions is to answer----
Mr. Turner. Well, he is before us.
Mr. Bloom, I asked you----
Mr. Cummings. Is that what you said?
Mr. Turner.--if you would answer these in writing, and you
said that you would not. I certainly intend to ask you these
questions here because of that, and your answer stands in the
record.
Mr. Bloom. What I said was if you want to go through these
questions, I am here today. I also said I would talk to
SIGTARP. If you would like to have SIGTARP ask me these
questions, I will do it.
Mr. Turner. But you refused to provide me in writing the
answers that you promised, and we showed the video----
Mr. Bloom. As I said----
Mr. Turner.--before this Committee previously in writing.
Mr. Bloom. I responded to that already.
Mr. Cummings. I just wanted a clarification. That is all.
Mr. Turner. Thank you.
Mrs. Maloney.
Mrs. Maloney. Well, pertaining to the pension, I would say
that members of Congress recognize and sympathize with the pain
that many Delphi workers are experiencing since GM decided not
to top-up their pensions, and since everybody seems to want to
attack Mr. Bloom, I will just ask him. Do you recognize that
pain too, Mr. Bloom, of some people who were not made whole?
Mr. Bloom. Of course. Speaking personally and to my
knowledge, everybody on the Auto Task Force understood and had
great sympathy for all of the people involved in this tragic
circumstance who had to make sacrifices. The Delphi salaried
employees are on the list, but unfortunately, Congresswoman,
the list is very long. And as I have said repeatedly, our
judgment was, on balance, while there was terrible suffering,
much greater suffering was averted. But that in no way is to
suggest that there was not suffering.
Mrs. Maloney. Well, I agree with your statement. Had Delphi
failed, had GM failed, not only would their workers have
suffered, but also the entire communities. And I would say our
overall economic health of our Country would have been much
worse.
I would like to take issue with the prior gentleman's
statement. He said that it could have been handled and it would
have worked itself out on it own. But I want to reference and
put into record a November 17th publication of 2010, and this
publication is entitled The Impact on the United States Economy
of the Successful Automaker Bankruptcies. This was issued by
the Center of Automotive Research, so this is an independent
validation, and in this research, which is independent from the
GAO research that basically says the same thing, the
Government's actions avoided personal income losses totaling
over $96 billion and avoided 1.1 million net job losses in 2009
and another 314,000 in 2010.
So, Mr. Bloom, since everybody wants you to answer the
questions, I will ask you--and, Mr. Feldman, Mr. Wilson, if you
would like to comment--is that correct? Do you agree with this
independent source? Had it not been for the Government
intervention, your work for crucial months in 2009, could the
Country have experienced more than a million net job losses? I
predict is even more. The impact even hit New York State for
the suppliers that went out of business that were supplying the
auto industry.
So I just wonder do you agree with this statement from this
independent research organization?
Mr. Bloom. I haven't reviewed the exact----
Mrs. Maloney. Well, it basically says had we not acted, we
would have lost----
Mr. Bloom. But our judgment at the time, and the material I
have seen since then that I have reviewed that suggests that
the losses would have been very significant in jobs. Cars said
a million; others have used larger numbers. Mark Zandi recently
said 2.5 million jobs were at risk. So I am not enough of an
economist to choose between them, but I think our judgment that
the losses could have been quite catastrophic has been
confirmed.
Mrs. Maloney. I just want to ask you, Mr. Bloom, has any
member of Congress congratulated you and thanked you for your
hard work in what resulted in, by all accounts, saving over a
million jobs that impacted many of our great States like Ohio,
Michigan, Pennsylvania, Missouri, and Illinois? They are all
interrelated in the supply chain of the auto industry.
I just would like to ask Mr. Bloom, Mr. Feldman, and Mr.
Wilson has any member of Congress ever thanked you? Today I
want to thank you for your public service. I want to thank you
for your hard work in saving American jobs and I would say
saving American industry and prestige. I personally cannot even
think of an America that doesn't make her own cars. And now we
have bounced back with that American spirit, can do, and are
even exporting cars and employing people and growing. I just
want to know has any member of Congress said thank you?
Mr. Bloom. Congresswoman, I very much appreciate your kind
words. From time to time, other members of Congress have
acknowledged that some good things happened.
Mrs. Maloney. Mr. Feldman, has anyone ever thanked you? I
thank you today. Has anyone ever thanked you?
Mr. Feldman. I appreciate that, Congresswoman. I think this
is the first time I have been thanked.
Mrs. Maloney. Well, thank you very much. You are an
American hero. I appreciate your hard work.
Mr. Wilson?
Mr. Wilson. Thank you as well, Congresswoman. I have had a
few Democrats and Republicans thank me over time, but it is
always nice to hear it. Thank you.
Mrs. Maloney. Well, I think more of us should be saying
thank you. Thank you for your public service. You saved jobs;
you helped America; you grew our economy. Thank you.
Mr. Turner. Ms. Romero, I would like to thank you for
bringing forth the light that these three gentlemen have
refused to talk to you and for your bringing it to our
attention in a way where we could pull them before us and get
them to talk to us to commit to talk to you.
We are going to go to a 10 minute round of questioning. My
next questions are going to be for Mr. Feldman.
I do have a quick question for you, Ms. Romero, first. You
said in your letter SIGTARP believes that the Auto Task Force
played a role in the pension decision and these individuals'
failure to speak are a significant obstacle. You do believe
that, right, that they played a role?
Ms. Romero. Yes. Yes.
Mr. Turner. Thank you.
Mr. Feldman, we are going to spend a significant amount of
time on the issue of what you did, what your role was, because
that is really what you guys aren't speaking about. I mean, the
whole question from SIGTARP, GAO, this Congress, have been what
did you do; what was your role; what was the basis of the
decision-making.
Now, I am going to read you your bio, that I am assuming
you either approved or wrote yourself. Mr. Feldman was
recruited to service as chief legal advisor for the Obama
Administration's Task Force on the auto industry. This cabinet
level Treasury Department Task Force was assembled to, quoting
your bio, help develop the overall strategy to restructure and
recapitalize General Moors Corporation and Chrysler, a
``strategy'' which resulted in the groundbreaking legal
proceedings that implemented a comprehensive financial solution
for both companies.
Now, SIGTARP believes that you were involved. You said you
were negotiating among the parties. I understand that, from an
absolute legal standpoint, that PBGC is a party to this and has
an ability to make its own decision in settlement negotiations,
but they didn't do that in a vacuum, right, Mr. Feldman? They
had you running in between a bunch of different other people
making proposals to PBGC as to what they should or should not
do. Now, isn't that correct, Mr. Feldman?
Mr. Feldman. I think really what they would or would not be
willing to do--and to just take a step back, the Auto Team,
which was the working group at Treasury that reported to the
Auto Task Force, was really charged with helping restructure
Chrysler and General Motors. We took on additional tasks that
were critical to those two entities, including the financial
arm of Chrysler, the financing arm of General Motors, and then
ultimately Delphi because General Motors was providing funding
and at the time we got involved was really the sole source of
funding for Delphi. But we did not--go ahead, you can take
back.
Mr. Turner. Thank you. Going to the issue, then, using your
language instead of mine, of determining what they would or
wouldn't do, who are the parties that you ran in between of
doing the negotiating determining the would or wouldn't do?
Because would or wouldn't, it is still going to PBGC and saying
someone would like you to do X; will you do X, right?
Mr. Feldman. The PBGC and General Motors were the main
parties involved in making decisions--well, the PBGC was the
main party involved in making decisions about the termination
of Delphi's pension plans. What the impact of that was had an
impact on General Motors, and I was playing essentially shuttle
diplomacy between General Motors and the PBGC, which candidly
didn't get along very well.
Mr. Turner. And who else?
Mr. Feldman. On that issue?
Mr. Turner. Yes.
Mr. Feldman. I reported to the Auto Team, but I didn't--
there wasn't a--I am not thinking of a party that was directly
involved in that.
Mr. Turner. You didn't share any information about what the
package was in developing this strategy that is in your bio
with individuals at the White House, with individuals at
Treasury? Is that what your testimony is?
Mr. Feldman. Well, I worked for Treasury, so certainly I
reported to the Auto Team----
Mr. Turner. Outside of the Auto Team.
Mr. Feldman. I kept George Madison informed.
Mr. Turner. In Treasury, outside of the Auto Team.
Mr. Feldman. George Madison was General Counsel of
Treasury, not part of the Auto Team. I was in the Legal
Department at Treasury, so I did keep Mr. Madison updated; he
was the General Counsel of Treasury. But in terms of the White
House, the only people I ever spoke to at the White House was
Brian Deese and Larry Summers.
Mr. Turner. Okay, we are going to turn to emails now. We
have a July 6th email from Joseph House at PBGC. This one we
don't have on the top.
Mr. Feldman. Okay.
Mr. Turner. It is a July 6th email, 9:45 p.m., so he is
emailing late, and he said I just spoke with Matt Feldman, who
relayed the following: ``We agreed that any settlement
discussions would be best saved for direct coordination between
U.S. Treasury and PBGC at this point, rather than a subject of
group coordination.''
Now, he is saying that the settlement discussions were, at
that point, as a result of his conversation with you, a direct
coordination between Treasury and PBGC. He does not mention
General Motors. Do you disagree with his email?
Mr. Feldman. You would have to ask Mr. House what he meant
by the email, but I interpret what he meant to mean that we
were going to talk to the PBGC and then we, meaning Treasury,
were going to talk to General Motors. Treasury did not play a
role or did not have authority to settle issues between the
PBGC and General Motors.
Mr. Turner. But you did have a role in making
recommendations and making proposals.
Mr. Feldman. I would certainly comment on proposals and
recommendations. The PBGC would ask me did I think that
something would be acceptable; General Motors would say do you
think the PBGC would find something acceptable. I certainly
gave them my judgment.
Mr. Turner. Well, what occurred after the July 6th email--I
am going to read that one again. This is Joseph House saying
that he had just spoken to you and that he agreed with you that
any settlement discussions would be saved for group
coordination between Treasury and PBGC, rather than direct
coordination, is followed by the email that I showed you
previously, which is slide 6 on July 8th.
If we could have slide 6, please.
[Slide.]
Mr. Turner.--where again Mr. House is reporting that he had
spoken to you. This one is 6:23 p.m. and this is July 8th. So
subsequent to your reported agreement by Mr. House that we are
going to directly coordinate this settlement negotiation
between Treasury and PBGC, he then reports that you say that
Feldman reported that he made progress discussing our proposal
with a number of key folks in Treasury and at White House, but
has not yet wrapped up his coordination.
Let's turn to slide 5, then.
[Slide.]
Mr. Turner. This is July 15th, 10:57 a.m. This is Karen
Morris forwarding one from John Minke and it says, Feldman will
then take it to GM and get their approval, which will either be
a rubber stamp or one last chance to nick us on the deal.
We all accept that PBGC has the legal authority with
respect to its decision-making. We also know that it did that
in the environment of the pressure of these negotiations and we
also understand that there were a number of parties who had
positions and roles and proposals as to what PBGC should do or,
using your language, would or wouldn't do.
Mr. Feldman, we would like to get a better understanding of
that, which is why you have been called this Committee and why
SIGTARP wants to talk to you, because they believe that you
were actively involved in the decision-making. Now, I am going
to ask you a very simple question. I am assuming that with
respect to the Delphi salaried pensions, that the proposals
that ended up with the pensions being cut were not solely
generated by PBGC; that in the negotiations with your liaison
with the White House, others in Treasury outside of the Auto
Task Force, the Auto Task Force, and General Motors, that they
had positions and recommendations as to how those pensions
should be handled. Is that correct?
Mr. Feldman. I never had a conversation, nor do I recall
any conversations where we told the PBGC how the----
Mr. Turner. I didn't ask you that.
Mr. Feldman. I am sorry.
Mr. Turner. I ask you whether or not anyone else had a
position or a proposal in your shuttle negotiations with
respect to the Delphi salaried pensions other than PBGC. That
is a pretty simple question. I would assume the answer has to
be yes.
Mr. Feldman. I don't believe so, not with respect to the
salaried.
Mr. Turner. So you are testifying under oath before this
Committee that at no time did anyone else that you were working
with in your position as the chief legal adviser shuttling
negotiations, no one else offered you and no one else provided
you any other proposal with respect to the Delphi salaried
pensions in any aspect?
Mr. Feldman. Let me correct it. Delphi certainly, its
position was it wanted to retain the pension plans and have
General Motors pay for it or assume it. As I recall, and the
time frame is a little bit fuzzy, but, as I recall, Delphi
certainly did not want to give up its pension plans in the
early stages of my involvement.
Mr. Turner. Anyone else have a position or a proposal with
respect to those pensions during your settlement negotiations?
Mr. Feldman. I don't want to be unequivocal, but not that I
recall.
Mr. Turner. As you were before. Well, that is part of the
subject matter of this investigation and SIGTARP's
investigation, so I wish you well in your recollection process
with the----
Mr. Feldman. I am happy to look at more emails or other
information you might have.
Mr. Turner. Excellent.
Mr. Feldman. I don't recall it.
Mr. Turner. Excellent.
Mr. Cummings?
Mr. Cummings. Mr. Chairman, just out of curiosity, are you
planning to end the hearing now or are you getting ready to
just go on and on and on?
Mr. Turner. No, I am going next to Mr. Bloom for him to
answer the questions that he is now refusing to answer in
writing that he had promised Congress in June of last year that
he would answer in writing, because he invited those questions,
and I will entertain, with your concurrence, the dismissal of
the other panel members if there are no other questions for
those other panel members, so Mr. Bloom can stand before us and
answer the questions he has refused to answer.
Mr. Cummings. Well, that is fine with me. And I hate to
waste people's time, so I think that is very generous of the
Chairman. You know, one of the things, Mr. Chairman, it has
come to my attention that your questions of Mr. Bloom have been
answered by the Secretary of the Treasury, and Mr. Bloom
forwarded your questions after the hearing.
Mr. Turner. Actually, no, they haven't. I have the
Secretary's answers and his answer was this is a matter of
litigation; I cannot answer.
Mr. Cummings. I see. All right. But if the Chairman wants
to dismiss, I think we should allow these folks to go. I have
no problem with that.
Mr. Turner. I am certainly fine with that.
At this point, then, we will take----
Mr. Cummings. One other thing. I did forget to say one
thing. When Mrs. Maloney was asking the question about anybody
saying thank you, I just want you all to know I am thanking
you, and I thank you very much.
To Ms. Romero, I am hoping that this has been helpful to
you. I am hoping that you get the cooperation you need. We, on
both sides of the aisle, support your efforts and we want to
make sure you have access to the information that you need in
order to do your job, and I want to thank you for working with
both of our offices to try to make this thing move along. Thank
you.
Ms. Romero. Thank you so much, Ranking Member Cummings.
Mr. Turner. At this point we will take a one minute recess
while the other members of the panel but for Mr. Bloom excuse
themselves.
[Pause.]
Mr. Turner. Mr. Bloom, we are going to get started. We have
votes that are going to occur, so we are going to be limited,
as I am certain you are very sad to hear, in the number of
questions that we are going to ask you. I want to reiterate
that these are questions that were given to you on June 22nd
that to this Committee, in a seat similar to the one you are
sitting in, you said absolutely that you would answer in
writing. You did not answer them and today you are refusing to
answer them in writing, so we are going to go through this
where I ask you the question and get your answer.
Mr. Bloom. Congressman, the only clarification I would like
to make is that I believe that the letter that the Secretary of
the Treasury or Tim Madson, on behalf of the Secretary of the
Treasury, sent you on November 1st, 2011, did not refuse to
answer the questions because of the litigation. In fact, there
are two and a half pages of response to the issues raised in
the letter. But that said, if you have questions, I will do my
best to answer them.
Mr. Turner. We will submit those questions and answers,
because we have them, obviously, for the record and everyone
can see that in fact they say this is subject to litigation.
But we are not going to waste our time on this.
Mr. Cummings. Mr. Chairman, Mr. Chairman, Mr. Chairman.
Just a point of clarification. I have the letter, the November
1st letter, and I have just kind of perused it, but my staff
has read it in detail, and just for clarification, you said
that he said that it was under litigation. It just seems like
there is a lot more to this letter than that. He seems to be
answering quite a few things in detail. I just wanted
clarification on it, that is all.
Mr. Turner. We have answers both in this letter and also
letters answered directly from Secretary Geithner, and in that
letter he specifically states, he cited both and you cited it
previously, an answer of litigation. And this does not answer
the questions, but we will go forward.
Mr. Bloom, in the discourse between Treasury and PBGC, what
role did the Auto Task Force play in the decision-making to
terminate the pension plan of the Delphi salaried retiree
workers?
Mr. Bloom. I couldn't really expand on what Mr. Feldman
said. I think that would be my answer.
Mr. Turner. So you have no separate answer of yourself.
Mr. Bloom. No.
Mr. Turner. Well, Mr. Feldman indicated that it was an
advisory position, and what we would like to know is what was
the position of the Auto Task Force in those discussions with
respect to the Delphi salaried workers and their pensions.
Mr. Bloom. I think it was what Mr. Feldman said it was.
Mr. Turner. You are going to do that for every answer?
Mr. Bloom. I don't know.
Mr. Turner. You don't have an independent answer?
Mr. Bloom. On that question, Congressman, I do not have a
different answer. If I agree with what has already been said, I
thought it would be expeditious for me to----
Mr. Turner. If you had answered it in June would you had
your own answer?
There are many that believe that there were significant
numbers of conflicts of interest between the Treasury, PBGC,
the Auto Task Force, and new GM. Secretary Geithner serving on
both the board of PBGC, being the Secretary of the Treasury,
the Auto Task Force being part of Treasury, and, of course, new
GM receiving from the Treasury its capital infusion.
Did you ever have a discussion at the Auto Task Force, the
actual or potential conflicts within Treasury and the Auto Task
Force with respect to this bankruptcy proceeding and the Delphi
salaried pensions? And what was the subject of those
discussions?
Mr. Bloom. I do not recall a conversation in Treasury about
whether or not the issues you raise would pose a conflict of
interest. I do not recall such a discussion.
Mr. Turner. Do you believe now that they do?
Mr. Bloom. I don't see where a conflict of interest would
have been, no, sir.
Mr. Turner. In the termination of the Delphi salaried
pension plans, a significant issue of dispute are the foreign
assets held by Delphi and the liens that PBGC either asserted
or might have asserted against those liens. Ultimately, PBGC
released these liens as part of a settlement in exchange for
payments by new GM that did not include the Delphi salaried
retirees' pension plans; the liens did. Do you recall any
discussions at the Auto Task Force concerning Delphi's foreign
assets, the liens, and PBGC?
Mr. Bloom. I do not recall any such discussions.
Mr. Turner. Would you assert today that those discussions
did not occur?
Mr. Bloom. No.
Mr. Turner. Is it possible they occurred?
Mr. Bloom. I think anything is possible. I do not recall
any such----
Mr. Turner. Did you ever have a conversation about Delphi's
foreign asset and the liens of PBGC?
Mr. Bloom. I have no recollection of having any
conversation of that nature.
Mr. Turner. We are getting pretty far here. So far we get
you will give us the answer of the gentleman who answered
previously or you don't recall. Helpful.
Mr. Bloom. I can only testify to the best of my ability,
Congressman.
Mr. Turner. Clearly. There is a significant amount of
concern that has been raised about political considerations
with respect to the PBGC negotiations and the pension plans,
salaried retirees' pensions, and even the issue of the foreign
asset liens of PBGC. Did you ever have any consideration or any
discussions concerning the political effects of the outcomes of
your recommendations?
Mr. Bloom. Could you clarify what you mean by the political
impacts of the outcomes?
Mr. Turner. I think it is fairly clear. Did you have any
discussions concerning the political aspects or consequences of
your decision-making?
Mr. Bloom. No, not that I recall.
Mr. Turner. The United Auto Workers have stated that the
Delphi salaried retirees should be treated with fairness and
equity. Additionally, the UAW stated in a letter dated January
15th, 2010, that it supports providing the same top-ups to the
salaried workers as a matter of fairness and equity that had
bee provided to other Delphi workers. You answered Mrs. Maloney
and indicated that you understand the pain that people have. Do
you agree with UAW?
Mr. Bloom. I am not familiar with the full context of the
UAW's comment, but I can answer your question. I can't say
whether I agree with them or not because I haven't read that
document. I think a lot of people, as I said earlier, have
suffered as a result of the GM bankruptcy, and if Congress
would choose to help one of those constituents who was hurt,
that would be up to Congress to do. I think it would open a can
of worms, but I don't have a judgment as to whether Congress
ought or ought not to do it.
Mr. Turner. Mr. Cummings?
Mr. Cummings. I guess I have about, what, about 10 minutes?
I am going to read this letter into the record.
November 1st, 2011, Department of Treasury. It is addressed
to the Honorable Michael R. Turner and it says, Dear
Representative Turner. This is from Mr. Massad, the Assistant
Secretary, Department of Treasury. And this is one of the
letters that we were just talking about in response to
questions that were raised sometime earlier by Congressman
Turner.
It says I am writing in response to your recent letter to
Secretary Geithner in which you raise certain questions
regarding the Pension Benefit Guaranty Corporation's decisions
related to the pensions of certain former employees and
retirees of the Delphi Corporation. You submitted these
questions previously to Mr. Ron Bloom, who has since left his
position with the Administration. Please allow me to respond on
behalf of the Secretary.
We recognize that the bankruptcy of Delphi has been
extremely difficult and challenging for all its employees and
we are acutely aware of the significant hardships that the
entire United States automobile industry has faced in recent
years. The issues you raise in your letter pertaining to
certain agreements entered into by General Motors Corporation
in 1999, when the old GM spun off Delphi into a separate
company, as well as decisions made in connection with Delphi's
2005 bankruptcy filing.
Around the time of Delphi's 1999 spinoff from old GM, old
GM entered into ``top-up agreements'' commitments to pay
supplemental pension benefits to certain participants in the
Delphi hourly pension plan, represented by three unions, United
Auto Workers, the International Union of Electrical Workers,
and United Steel Workers. Those agreements provided that, in
the event that benefits under Delphi hourly plan were frozen or
the plan was terminated, old GM would cover any shortfall below
the level of benefits promised.
Over the next several years, Delphi suffered large losses
and filed for bankruptcy in October 2005. In 2007, old GM,
Delphi, and the three unions who were party to the top-up
agreements agreed to extend these commitments. Although there
were negotiations between old GM and other unions concerning
similar arrangements, old GM did not enter top-up agreements
with any other union, nor did it enter into an agreement with
participants in the Delphi salary pension plan. At the time of
the 1999 spinoff, the Delphi salary plan was fully funded;
whereas the Delphi hourly plan was underfunded. Delphi's
original plan was to emerge from bankruptcy proceedings without
terminating its pension plans.
In 2009, four years after Delphi filed for bankruptcy
protection in 2005, it was determined that, for Delphi to
emerge from Chapter 11, its pension plans would need to be
terminated. As a result, Delphi entered into agreements with
the PBGC to terminate the Delphi salary plan and the Delphi
hourly plan, and placed both plans under the trusteeship of the
PBGC.
Treasury did not have a role in authorizing, approving, or
consenting the termination of the Delphi salary plan. In 2009,
in connection with the bankruptcy proceeding of old GM and
Delphi, General Motors Company agreed to honor certain
commitments into which old GM had entered, including the 1999
top-up agreements. New GM has stated publicly that although the
Delphi bankruptcy was ``a very difficult situation,'' it felt
that it had made appropriate provisions for the Delphi salary
plan at the time of the spinoff in 1999.
The questions you submitted to Mr. Bloom primarily asked
whether the Presidential Task Force on the auto industry was
involved in the decisions made by the PBGC and GM regarding the
pensions of former employees and retirees of Delphi. As Mr.
Bloom explained in various congressional testimonies in 2009,
and more recently before the Subcommittee, the previous
administration provided temporary loans to General Motors and
Chrysler to avoid uncontrolled liquidations of these companies
at a time when our economy and financial system were already
severely stressed.
President Obama agreed to extend that assistance provided
that the companies produce viability plans as to how they could
become competitive. On February 15th, 2009, President Obama
created the Auto Task Force, made up of cabinet level officials
and staffed by Treasury, to review the viability plans for the
companies. The overriding objective that guided the Auto Task
Force was to bring much needed stability to this crucial sector
of our economy, keep hundreds of thousands of Americans
working, and give General Motors and Chrysler a chance to
become viable and competitive American businesses.
As Treasury officials have stated, the President directed
the Auto Task Force to take a commercial approach and ensure
that in any restructuring the companies took on only those
liabilities necessary for successful operation. The Auto Task
Force refrained from intervening in the day-to-day decisions of
these companies. These companies' restructuring, including GM's
decision to assume top-up agreements entered into by GM in
1999, were consistent with those principles.
These matters have also been reviewed by our Nation's
judiciary in two contexts, as well as by the Government
Accountability Office. As you may know, the termination of
Delphi salary plan and its placement under the trusteeship of
the PBGC are currently the subject of litigation in black
versus Pension Benefit Guaranty Corporation. On September 2nd,
2011, the court dismissed the portion of the case against
Treasury, the Auto Force, Secretary Geithner, Steve Rattner,
and Ron Bloom.
In addition, the bankruptcy court in the Southern District
of New York reviewed and approved GM's bankruptcy and
reorganization. In assessing the new GM's decision to honor the
top-up agreements, the bankruptcy court found no violation of
the bankruptcy code or applicable case law, and concluded that,
as a matter of reality, the purchaser needs a properly
motivated workforce to enable the new GM to succeed, requiring
it to enter into satisfactory agreements with UAW, which
includes arrangements satisfactory to the UAW for UAW retirees.
In addition, the bankruptcy judge and the district court
approved the transaction at every step. None of those judges
seriously questioned the validity of the legal process, which
was typical for a bankruptcy sale. In fact, the bankruptcy
judge stated, ``While because of the size of this case and
interests at stake, GM's Chapter 11 case can hardly be regarded
as routine. GM's proposed Section 363 sale breaks no new
ground. This is exactly the type of situation where there is a
good business reason for immediate sale.''
In its March 30th, 2011, review of the key events leading
to the termination of the Delphi hourly and salary plans, GAO
stated that ``The Auto Task Force did not indicate what should
be done with the Delphi pensions.''
We are committed to continue transparency regarding the
restructuring of General Motors. There is an extensive public
record available concerning treatment of the pensions of Delphi
employees and retirees. Congress has held several detailed
hearings on the subject and there are a number of publicly
available court filings, bankruptcy court opinions, oversight
reports, and statements from Delphi and General Motors.
Treasury has posted online certain key automotive industry
financing program documents which are available at
FinancialStability.gov. Additionally, pursuant to a request
from you and other members of the House Committee on Oversight
and Government Reform, Treasury has provided you numerous
documents related to the Delphi pension matter.
In the end, GM underwent a fair and open bankruptcy. This
process required deep and painful sacrifices from all
stakeholders, including workers, retirees, suppliers, dealers,
creditors, and countless communities that relied on a vibrant
American auto industry. However, the steps that the
Administration took not only avoided a catastrophic collapse
and brought needed stability to the entire auto industry, they
also kept hundreds of thousands of Americans working and gave
GM a chance to once again become a viable, competitive American
business, and they avoided further shocks to our financial
system and economy at a time when we could least afford it.
Thank you for your continued attention to this important
matter. Please feel free to contact me or my staff if we can be
of further assistance. Sincerely, Timothy G. Massad.
Mr. Bloom, do you have anything you can add to that? Have
you learned anything else in an effort to satisfy the
Chairman's questions?
Mr. Bloom. No.
Mr. Cummings. I yield back.
Mr. Turner. Mr. Bloom, I want to thank you for sitting
through and answering some of the questions that I provided you
in writing on June 22nd of last year that you had committed to
answer in writing that you have never submitted answers to. And
the reason why I appreciate you sitting here and answering them
is because I wanted, on television and on the record, both your
demeanor and your lack of answers to be evident.
Mr. Bloom, we have had this hearing because you refused,
for 14 months, to answer SIGTARP's questions. You had to come
to our hearing because we have subpoena power; they don't. You
come and you say I will be glad to answer SIGTARP's questions.
Mr. Bloom, you are not glad to answer anybody's questions. You
are not glad to answer mine; you are not glad to answer
anybody's. And you were responsible for affecting billions of
dollars and thousands of people's lives with our taxpayers'
dollars.
People are not only hurt, they are angry, and this is
exactly, contrary to what President Obama promised us with the
most open administration, not someone like you sitting in front
of us, unwilling to answer the questions.
Now, I want to--Mr. Cummings read the letter. I want to re-
emphasize the paragraph that he read that is on page 2, at the
bottom, that says, As you may know, the termination of the
Delphi salary plan and its placement under the trusteeship of
the PBGC are currently the subject of litigation in Black v.
Pension Benefit Guarantee Corp.
This letter is not an answer to the questions that I had
submitted to you.
Then we have, and I am going to submit these for the
record, Secretary Geithner's answers, which were similar
questions that were posed as posed to you, where we were just
trying to find out how were these decisions made, who made
them, so that you can have the appropriate type of oversight
over taxpayers' dollars, because that is how Government works;
it is open, it is a democracy. You are not playing with the
undiscretionary dollars of the President, you are actually
effectuating and administrating taxpayers' dollars.
So Geithner had the same questions. I am going to submit
these for the record. And he says openly in the beginning
answer that the termination of the Delphi retirement program
for salary employees and its placement under the PBGC's
trusteeship are currently the subject of litigation in Black
versus PBGC. I cannot comment on the specifics of any pending
litigation.
And then for the next eight pages, these are the
Secretary's response. I cannot comment specifically on these
topics as they are the subject of pending litigation. I cannot
comment specifically on these topics as they are the subject of
pending litigation. I cannot comment specifically on these
topics as they are the subject of pending litigation. And he
goes on for the next 33, almost 35 questions to answer the same
way, that he can't answer us.
So here we sit. People have lost their pensions; billions
of dollars spent. The Secretary of the Treasury won't answer
the questions. You won't answer the questions. SIGTARP has many
of them. We are going to work with SIGTARP on their processes
of trying to solicit from you substantive and valuable answers
to the questions.
This Committee has subpoena power, it has deposition power.
Mr. Bloom, I assure you, we can continue to revisit this with
you and your panel members. I would certainly hope that when
you say you are going to participate and answer SIGTARP's
questions, that it is certainly going to be more thorough than
your answers here.
Now, Mr. Bloom, we are all waiting for a SIGTARP report
that is going to tell us what happened. GAO can't give it to
us. This process should not be in this manner because of your
commitment to the taxpayers. Do we have your commitment that
you will work to refresh your recollection, that you will try
to answer fully, to your greatest ability, the questions that
SIGTARP is going to have for you?
Mr. Bloom. I will answer the questions that SIGTARP asks me
to the best of my ability.
Mr. Turner. Mr. Bloom, with that, we have votes that have
been called. We are going to adjourn the hearing.
[Whereupon, at 12:52 p.m., the subcommittee was adjourned.]