Wed May 30, 2012
Former 'Car Czar' Takes On Auto Bailout And Bain
Originally published on Wed May 30, 2012 1:24 pm
NEAL CONAN, HOST:
This is TALK OF THE NATION. I'm Neal Conan.
Steven Rattner now finds himself in the middle of two debates that will be key parts of this presidential campaign. President Obama's former car czar dismissed Republican presidential candidate Mitt Romney's claims about the auto bailout as complete fantasy. But Rattner is also among the Democrats who criticized the president's attacks against Romney and private equity as unfair.
If you have questions about the auto bailout and the role of private equity, give us a call: 800-989-8255. Email us: firstname.lastname@example.org. You can also join the conversation at our website. That's at npr.org, click on TALK OF THE NATION. Steven Rattner, former counselor to Treasury Secretary Timothy Geithner where he helped advice the bailout of the auto industry. He's currently chairman of Willet Advisors and joins us now by phone from New York. And it's nice to have you on TALK OF THE NATION today.
STEVEN RATTNER: Excuse me. Thanks so much for having me.
CONAN: And I wanted to ask you a question, an allegation that Romney has come up with an ad today and that is that what the president has done by using tax dollars to invest in companies like Solyndra and other clean energy corporations - these were investments that did not necessarily work out so well, Solyndra went bankrupt - this amounted to public equity gambling with the public's money on Wall Street.
RATTNER: The program under which the investment in Solyndra was made was one that was passed by Congress, endorsed, I think, by two presidents, as a way to try to jumpstart some of our activity in the alternative energy area. I would not argue that every investment - obviously Solyndra was not perfect - was done perfectly, but I think it was all done with the best intentions, which is to develop our capability in these other important areas.
CONAN: Does it - is it the equivalent of private equity, Bain, for example?
RATTNER: I think it's more the equivalent of venture capital, which is the business of starting new companies that will create jobs and trying to encourage them, provide them with the capital they need to grow. My only point, there's nothing that - about Bain Capital that is immoral or illegal or unethical. It's simply not a business that was geared toward job creation. It was a business geared toward wealth creation. As I said, there's nothing wrong with wealth creation. But Mitt Romney has tried to put it forward as job creation, and that's not what Bain Capital's agenda was.
CONAN: Yet you were also critical of the Democratic attacks, or at least in the advertising against Bain Capital, as a - I think the word vampire was used.
RATTNER: I was concerned that people not throw out the baby with the bath water, so to speak, that in judging Mitt Romney's job creation record, which, as I said, he made fair game, I did not want - I did not think it was fair. And I think the president made very clear that he saw this the same way I do, that we were - nobody was trying to demonize private equity or make them out to be an illegal or immoral or unethical business.
CONAN: What's the difference between a venture capitalist, which is what we hear the Republican candidate describe himself as now, these days, and private equity?
RATTNER: Both are — both serve legitimate purposes helping our economy and our capital markets function. Venture capital is generally thought of as the business starting new companies, investing in young companies - like Facebook was not so very many years ago - and nurturing them. And it has a certain halo around it. I wouldn't deny that because people think of it as more of a job creation kind of business. Private equity is another name for - a broader name for what used to be called the leveraged buyout business, which is more typically the business of buying under managed companies, more mature companies, putting a fair amount of debt on them but then - often cutting costs in order to make them more profitable.
Both, as I said, are important functions of a capitalist society, but one has more of a patina on it, which is why Mitt Romney prefers to run around the country calling himself a venture capitalist, even though Bain's business model shifted over the years and, by the mid-'90s or so, was really much more of a private equity or leveraged buyout kind of strategy.
CONAN: And, well, you know, there are - we're going to be arguing about the numbers about job creation and that sort of thing and who did what and when Mitt Romney left Bain and what's a legitimate account and what is - that's going to be a running argument. But it's the question, I think, as the president put it, does Mitt Romney's experience at Bain qualify him to be president of United States?
RATTNER: I think business skills are a useful thing to have. I think they do teach you a number of things that are helpful in other professions. But I don't think it's a direct qualification to be president or particularly, more accurately, a direct argument for why you're qualified to create jobs. They're just very different sets of skills.
And again, there's nothing wrong with business. I have worked in business and on Wall Street for 30 years. I think it performs an important role in the country and in the world. And I do think you learn things in business that are useful and other things you might use. Certainly, my business experience was helpful when I went to Washington to work on the cars, but it's not - but I'm certainly not qualified to be president. And I wouldn't argue that my Wall Street experience did qualify me to be president.
CONAN: Let's get the auto bailout as well. That will be a central argument in this campaign, particularly in places like Michigan and Ohio, which are going to be very important states. Mitt Romney has said in the primaries and since that, in fact, well, he should take credit. He came up with the idea of letting the companies go bankrupt, managed bankruptcy.
RATTNER: And this is one of these places where Mitt Romney was for it before he was against it, before he was for it again. I have - I read, I believe, every word or close to as many words as I could find that Mitt Romney has written or said about the auto rescues. And over the period from the fall of 2008 when he wrote that famous New York Times op-ed piece until - as recently his last few days, he's been on every side of this issue. He has changed position multiple times. It's very hard to know exactly what he thought and when he thought it.
In the fall or 2008, he did say, let them go bankrupt, but he also said the government should stay out of it. When President Obama made the decision to rescue the companies in the spring of '09, he criticized it. Then, a couple months ago on The Detroit News, he tried to take credit for it, and also said that it would have been better if President Obama had never done anything, which is obviously not correct. So he said reversely everything you can say about this at different times that - and in different ways. But I don't think at the end of the day, he's really contributing anything positive to what happened with the autos. And I think President Obama will be pointing that out repeatedly during the campaign.
CONAN: Well, you are obviously there, and again, you were working for the president, so let's not forget that. But you were there at the time. One of the things Mitt Romney said was private equity, private funds would have been available to General Motors and to Chrysler. And that would've kept the government out of it and realize much the same result that we have today.
RATTNER: As you point out, I was there. I was working for the president. So I'm - I do have a dog in the fight, but I also was there, and I believe I was aware of every overture, every conversation, every threat of a possibility that existed to try to save these companies. Let me be really clear. Nobody from the president on down was dying to put government money in these companies. We all would've much, much preferred a private solution. If anyone had come forward with the capital and the willingness to take this on, we would have happily let them play the role that the government ended up playing. But there was nobody, and I was there and I know that.
And so it's a complete red herring, dead end, whatever you want to call it, for Mitt Romney or anybody else. And he's not the only one to suggest that there was private capital available to solve this problem. There simply was no private capital in the spring of 2009 when many of us thought that we were in some kind of a free fall.
CONAN: So if the government had not offered the money, what would have happened?
RATTNER: There's no question what wouldn't have happened. Chrysler and General Motors would have run out of cash as - just as they did at the end of 2008. They would have - without the government help, they would have closed their doors. They would have laid off all their workers. They would have stopped production, and they would have liquidated.
And that's why it was actually - people forget, it was actually President Bush in the very end of 2008 who made the initial decision to put money in these companies because he and his secretary of the treasury, Hank Paulson, perfectly understood this and recognized that the government had a responsibility if it made reasonable financial sense to help these companies. So you had two presidents who understood that there was no private capital available for these companies. So why Mitt Romney thinks he has some other source of wisdom or knowledge on this is frankly beyond me.
CONAN: Steven Rattner, former counselor to Treasury Secretary Tim Geithner, the former - used to be known as car czar. 800-989-8255. Email: email@example.com. And David's on the line with us from Walnut Creek in California.
DAVID: Hi. Thanks for taking the call. Quick question. What happened to the bondholders of GM and Chrysler after the TARP money was put into them? And did that deny them their day in court thus usurping the authority of the third branch of government, the court system?
RATTNER: That's a perfectly reasonable question. I've obviously been asked that a number of times before. First of all, there were no bondholders in Chrysler. They were banks. GM had bondholders and banks. The GM bondholders and the Chrysler banks did take very significant haircuts as part of the restructuring the bankruptcies. That's the way capitalism works. If you make an investment or you make a loan and it doesn't work out, you take a haircut.
It was litigated first in the bankruptcy court, which is normal. But then it was appealed. The Chrysler decision was the first one. That was the one that was appealed all the way to the United States Supreme Court. Not a single court in any way contradicted or reprimanded us for anything that had happened in the restructuring. Everyone upheld the decisions. So the third branch of government absolutely had a full look at this, and the decisions by every court, as I said, all the way right up to the United States Supreme Court, was unequivocal, that this was done completely in accord with the law.
CONAN: David, thanks for the call. Let's see if we'd go next to Cherie(ph). Cherie is with us from Minneapolis.
CHERIE: Hi. All of the candidates are discussing job creation and who's better at it and so forth. But my question is: Is it even the government's role to be involved in job creation?
RATTNER: That's a good question. I think it is the government's role to be involved in job creation in the broad sense, that - I think perhaps the most important job of the president, apart from keeping us safe, is to keep us prosperous, to keep the economy growing. And part of the economy growing is more jobs. And so, yes, I do think that macroeconomic policy and running good policies that will lead to more jobs is an important part of the president's job.
But I don't think the government should be in the business of what some people call industrial policy or picking winners or creating make-work jobs and things like that. I think the government has a macro overall responsibility for job creation. But we are very proud of the private-sector emphasis on our economy versus certain other countries, for example, a number in Europe. And I - and that's where would I draw the line.
CONAN: Isn't investing in a clean energy company like Solyndra, isn't that picking winners?
RATTNER: I would concede to you it is a gray area, and it's something that is much debated. I'm - I have almost two minds myself on this. I can look back in history and give you many examples in the past of places where the government got involved in building transcontinental railroads, for example, providing incentives for that; interstate highways, things that without which we would be not the same country. But on the other hand, I do worry about the government playing the role of investor.
So I think it's a gray area. I think it's a fine line. I can't draw the line very, you know, completely in black and white, but I do worry that we have to make sure we respect that line, yeah.
CONAN: So there's a concern. People say, infrastructure, but, boy, that can get tricky. Power plants are infrastructure.
RATTNER: Well, you also - remember, we - if you look at our - one of the problems is that we live in a competitive world. And if you look at the countries against which we compete, China certainly being one that's on everybody's mind but even countries like Germany. Germany provides very, very heavy incentives for the development of alternative energies like solar. They don't pick - I don't even know, actually, whether they pick individual companies per se, but they certainly have policies to encourage these kinds of companies, excuse me, to start.
So we - to the extent we decide to stay off that playing field, we are potentially risking our competitive position. So these are tough decisions, and I can't give you blanket pronouncements that I'm for or against it. I think we have to work our way through this - as I've described to this gray area, piece by piece and try to arrive at some sensible approaches.
CONAN: Steven Rattner, thanks very much for your time.
RATTNER: Thanks for having me.
CONAN: Steve Rattner, chairman of Willett Advisors, author of, "Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry," with us by phone from New York. You're listening to TALK OF THE NATION from NPR News. Transcript provided by NPR, Copyright NPR.