2008 was one crazy, almost surreal year. It was the year when the economy took a nosedive, and the U.S. auto industry nearly ceased to exist. One of the last major decisions former President Bush made before he left office was to give Chrysler and General Motors a combined $17.4 billion to keep their doors open.

That money held over the two automakers for a few months, but The Detroit News reports that the Bush administration almost took a different tack. The New Yorker published a 57-page economic memo that was written by economist Larry Summers to President Elect Obama. The memo claims that President Bush was noodling an earlier bankruptcy for the automakers, backed by up to $100 billion in government financing.

By instead forwarding GM and Chrysler a bridge loan, Bush (pictured here with former Chrysler CEO Bob Nardelli) effectively prolonged the inevitable and pushed the tough decision on to the next administration. But that could have been the best possible action to take – Summers was reportedly of the opinion that pushing the automakers through bankruptcy too early could have severely damaged the entire U.S. auto industry – not just at Chrysler and GM.

In the end, Chrysler entered bankruptcy in April, followed by GM in June. Chrysler no longer owes the federal government any money, though Uncle Sam still owns 26.5 percent of The General. As a result of the Bush administration's choices, the Obama administration is the one that gets the blame and credit (depending on your political viewpoint) for shepherding the two automakers through bankruptcy.


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  • 71 Comments
      Polly Prissy Pants
      • 2 Years Ago
      Pass the buck.
      Guyomatic
      • 2 Years Ago
      It's unfortunate that even on an Automotive Blog some people get soooo political....I just want to see what's going on in the auto industry.... GM is now back to #1 in the world. Whether one believes the bailouts were right or not..... Blame GM's incompetent management and greedy union for the failures...It's sucks that we had to bail them out, but it's done.... Who in the world designed the Pontiac Aztec? Who approved it? GM had many of these failures... German union workers make over 30 euros an hour and are protesting the outsourcing of 'good union' paying jobs to the US...We've become the new Mexico ;( How ironic and depressing...
      mchlrus1
      • 2 Years Ago
      Maybe we should all read Atlas Shrugged and Communist Manifesto to get ideals from both ends.
      • 2 Years Ago
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      • 2 Years Ago
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      waleed
      • 2 Years Ago
      Even Bush was too late. The government has propped up GM and Chrysler for a long time and that's why they were producing mediocre cars for decades. If they were dying we should have let them die and let someone else take their place. If the government stops subsidizing big corporations and helping them with money and policies, people would have more money and more jobs (due to small businesses booming) and the USA would be a better place.
        mchlrus1
        • 2 Years Ago
        @waleed
        Ya I actually think it would have been a good idea to let Warren Buffet buy them out... did I say that out loud?
        • 2 Years Ago
        @waleed
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          • 2 Years Ago
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          Gubbins
          • 2 Years Ago
          They were propped up by so-called "voluntary restraints" on imports when the U.S. mfrs fell way behind the Japanese and pissed and moaned to Wash DC that they wanted a "level playing field". Too bad you don't remember that part. Now that the domestic offerings are so much better (after a lot of blood letting) they have no excuses.
      Travis C. Vasconcelo
      • 2 Years Ago
      Pure and simple...the decision to bail out the Banks, Wall Street, and the Auto Industry was a mistake. If a small individual-owned business goes bankrupt, no one bails them out. If a middle income American icon travel company goes bankrupt the media says "This is too bad we will lose another link to our great American heritage". Again no one bails them out. However, if a Large Scaled financial institution or auto maker SAYS they are going to go bankrupt, the Government showers them with money they don't even have to pay back? They do this under the rhetorical statement "This is saving American jobs" and think we will believe this. Truth, most American auto manufacturers build their cars in foreign countries with foreign labor and foreign sourced parts. Most banks are based in foreign countries and their customer service is based in India. Citi Bank (the largest of the bail out receivers) is based in Bangalore, India...it's CEO Vikram Pandit is INDIAN! My point being...if a company can't survive in this country, it SHOULD go bankrupt. We will learn from our mistakes and grow stronger. If we don't regrow this country from the inside out, all these bail outs are going to achieve nothing more than to prolong the inevitible...the end. Lets get real people...bailouts are nothing less than welfare...and we all know how successful that is!
        Zoom
        • 2 Years Ago
        @Travis C. Vasconcelo
        If a small company files for bankruptcy, they don't cripple the entire economy.
        axiomatik
        • 2 Years Ago
        @Travis C. Vasconcelo
        You're right, small businesses don't get bailed out. But the issue is the ramifications of failure. If Citibank fails, not only do 100's of thousands of jobs lost, but it has tentacles into all aspects of American Business. Thousands or millions of American businesses rely on loans or other services offered by Citibank. If they fail, those other, unrelated businesses may fail too. That is why there was much discussion after the meltdown in congress about how to prevent banks from getting to the point of being 'too big to fail'. Instead of 4 or 5 megabanks controlling a huge chunk of the banking industry, if they were 100 smaller banks, the failure of a few individual banks would be much less catastrophic. Also, Citibank is an American bank, headquartered in Manhattan. The CEO happens to be Indian, but that doesn't mean the company is. Fiat's CEO is Canadian, that doesn't make Fiat a Canadian company.
          stclair5211
          • 2 Years Ago
          @axiomatik
          That's why you don't let a company get that big!!! They uses to discourage and break up large companies. Remember bell telephone anyone??? This has been done on purpose by those who control the world. Too big to fail means more money for them. By help for you. They don't care about you, America or anything else. Ony money. Wake up America. GM is the devil.
          Travis C. Vasconcelo
          • 2 Years Ago
          @axiomatik
          I happen to have been working for Citi Bank when we were bailed out by the U.S. Government. I know who Vikram is and where we were headquartered. Yes, there is a big corporate office in Manhattan. But it is a front for the real operations in Bangalore. And you are right, many related businesses would and still will fail...just slower now than they would have. If you are hungry and someone tells you they will give you food in a few weeks if you will wait...will you wait? No, you will get up off your ass and either find food or die. Bail outs are nothing more than delaying the inevitible. In the wild the weaker animal dies and the stronger survive. The U.S. Government played God with these businesses...because their inherent weaknesses are still there. No one is bailing SAAB out....but people are trying to buy the remnants. As would have happened with Citi Bank, CM, and Chrysler. True, jobs would have been lost...but something would have come out of it, as it is with the small fry like SAAB. Everyone loves a fire sale!
      Mchicha
      • 2 Years Ago
      This must have been a very difficult time for both Bush and Obama. Ultimately, selling Chrysler to Fiat might be a curse or a blessing. Bush did the right thing by letting Obama deal with the problem because pushing things faster just to get it done would not necessarily have been a good thing. He just did not have the time to do it. Ultimately, President Obama made the right call for American Competitiveness.
        guyverfanboy
        • 2 Years Ago
        @Mchicha
        Selling Chrysler to Fiat is the best thing that could have happened considering Daimler and Cerebrus didn't do squat for the company.
        Rick C.
        • 2 Years Ago
        @Mchicha
        Oh, there was time. And denial. Real estate peaked in July 2006 before beginning the LONG slide, and the stock market began to tank in late 2007. Attempts to slow down those issues moved with glacial speeds. So yes, there was plenty of spare time. But those graphs are for the economic textbooks.
        The Other Bob
        • 2 Years Ago
        @Mchicha
        You made a coherent, nonpartisan comment. You clearly do not belong here.
        CanIGetAWhatWhat
        • 2 Years Ago
        @Mchicha
        And then there are those such as myself who feel on a moral, constitutional, and economic basis that it's not the government's job or right to use taxpayer funds to bail out any troubled private entity, no matter how big or "important" it is, or if in the short term it really would be better for American Competitiveness (which is debatable).
        Big Rocket
        • 2 Years Ago
        @Mchicha
        @Mchicha: By "American Competitiveness", do you mean a company gains a competitive advantage by privatizing the profits and socializing the losses? With the UAW and its high labor cost still in place, it is premature to celebrate "American Competitiveness". @Chris Shunk: "Chrysler no longer owes the federal government any money..." because Obama forgave some of the debt Chrysler owed to the American taxpayers, which was about $1.3 billion. Not quite the same as fully repaying all the debt, as your statement might be interpreted. Source: http://www.factcheck.org/2011/06/chrysler-paid-in-full/ "That still leaves taxpayers about $1.3 billion in the hole, and Treasury doesn't expect to ever get it back... the automaker [Chrysler] has not completely repaid the investments made by U.S. taxpayers, and that's the result of a decision by the Obama administration to forgive a significant portion of the original loan made by the previous administration."
      redgpgtp97
      • 2 Years Ago
      Sounds as if the Bush administration is trying to get credit for the decision Obama finally made. Yes the 17 billion held them over for a period of time but it was Obama who made the final choice to look at these companies books and figure out which one could be saved (GM) and which one to be sold (Chrysler).
        • 2 Years Ago
        @redgpgtp97
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          redgpgtp97
          • 2 Years Ago
          Well Kodak, Barnes and Noble, Circuit City, Blockbuster, etc, etc....are not on the same financial level as GM was/is being that it rakes in over $100 billion in sales and I am sure the taxes on these sales support that along with the taxes that the 50,000 highly paid GM workers (and xx000 Chrysler workers also) pay. The govt. didn't just choose to save these companies for the heck of it, there were financial , economic, and political reasons I'm sure involved but the point was to try to save the jobs that MAY have been lost. We don't know for sure and never will at this point how many since many think that other companies would have bought the pieces of GM and jobs would have been saved, while others said it would have been disasterous had they let them fail.
      BLS
      • 2 Years Ago
      Maybe they would have followed bankrupcy laws if it had been done under Bush and not screwed the bond holders.
      DawgByte
      • 2 Years Ago
      Bush should have gone through with his proposal. Both Chrysler and GM would have been better off in the long run filing for bankruptcy.
        • 2 Years Ago
        @DawgByte
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