[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 
           LASTING IMPLICATIONS OF THE GENERAL MOTORS BAILOUT

=======================================================================

                                HEARING

                               before the

                  SUBCOMMITTEE ON REGULATORY AFFAIRS,
               STIMULUS OVERSIGHT AND GOVERNMENT SPENDING

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 22, 2011

                               __________

                           Serial No. 112-69

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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                      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 Regulatory Affairs, Stimulus Oversight and Government 
                                Spending

                       JIM JORDAN, Ohio, Chairman
ANN MARIE BUERKLE, New York, Vice    DENNIS J. KUCINICH, Ohio, Ranking 
    Chairwoman                           Minority Member
CONNIE MACK, Florida                 JIM COOPER, Tennessee
RAUL R. LABRADOR, Idaho              JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          BRUCE L. BRALEY, Iowa
FRANK C. GUINTA, New Hampshire
MIKE KELLY, Pennsylvania


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 22, 2011....................................     1
Statement of:
    Bloom, Ron, former Senior Advisor to the Secretary of the 
      Treasury; and Vincent Snowbarger, Deputy Director for 
      Operations, Pension Benefit Guaranty Corp..................    13
        Bloom, Ron...............................................    13
        Snowbarger, Vincent......................................    19
    Ikenson, Dan, associate director, Herbert A. Stiefel Center 
      for Trade Policy Studies, CATO Institute; Bruce Gump, vice 
      chairman, Delphi Retiree Association; Thomas Kochan, 
      professor, Massachusetts Institute of Technology; and 
      Shikha Dalmia, senior analyst, Reason Foundation...........    62
        Dalmia, Shikha...........................................    93
        Gump, Bruce..............................................    76
        Ikenson, Dan.............................................    62
        Kochan, Thomas...........................................    86
Letters, statements, etc., submitted for the record by:
    Bloom, Ron, former Senior Advisor to the Secretary of the 
      Treasury, prepared statement of............................    15
    Dalmia, Shikha, senior analyst, Reason Foundation, prepared 
      statement of...............................................    95
    Gump, Bruce, vice chairman, Delphi Retiree Association, 
      prepared statement of......................................    79
    Ikenson, Dan, associate director, Herbert A. Stiefel Center 
      for Trade Policy Studies, CATO Institute, prepared 
      statement of...............................................    65
    Jordan, Hon. Jim, a Representative in Congress from the State 
      of Ohio, letter dated June 21, 2011........................     8
    Kildee, Hon. Dale E., a Representative in Congress from the 
      State of Michigan:
        Economic Policy Institute Issue Brief #290...............    39
        Prepared statement of....................................     6
    Kochan, Thomas, professor, Massachusetts Institute of 
      Technology, prepared statement of..........................    89
    Snowbarger, Vincent, Deputy Director for Operations, Pension 
      Benefit Guaranty Corp., prepared statement of..............    21


           LASTING IMPLICATIONS OF THE GENERAL MOTORS BAILOUT

                              ----------                              


                        WEDNESDAY, JUNE 22, 2011

                  House of Representatives,
      Subcommittee on Regulatory Affairs, Stimulus 
                 Oversight and Government Spending,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1:40 p.m., in 
room 2154, Rayburn House Office Building, Hon. Jim Jordan 
(chairman of the subcommittee) presiding.
    Present: Representatives Jordan, Mack, Kelly, Issa (ex 
officio), Kucinich, and Cummings (ex officio).
    Also present: Representative Burton, Turner, Maloney, and 
Johnson.
    Staff present: Robert Borden, general counsel; Molly Boyl, 
parliamentarian; Drew Colliatie, staff assistant; John 
Cuaderes, deputy staff director; Adam P. Fromm, director of 
Member services and committee operations; Tyler Grimm, 
professional staff member; Christopher Hixon, deputy chief 
counsel, oversight; Justin LoFranco, press assistant; Mark D. 
Marin, senior professional staff member; Jaron Bourke, minority 
director of administration; Lucinda Lessley, minority policy 
director; Jason Powell, minority senior counsel; and Cecelia 
Thomas, minority counsel/deputy clerk.
    Mr. Jordan. The subcommittee will come to order. I want to 
thank our witnesses, and I apologize for running late. We will 
get started as quick as we can here. I will do my opening 
statement, and I understand Mr. Kucinich is on his way, good.
    And I just saw Darrell, I think Chairman Issa is on his way 
as well.
    American auto companies have long been a symbol of the 
industrial vigor that has made our country strong and 
prosperous. Generations of Americans have worked for General 
Motors and Chrysler. They should be proud of their service.
    We are here today because in late 2008 the Federal 
Government took extraordinary actions to intervene in 
automotive industry. Among firms that were bailed out was 
General Motors, which received roughly $50 billion in taxpayer 
funded assistance.
    This decision and its aftermath fundamentally remade the 
way our government interacts with the private sector. Dangerous 
precedents have been established. In understanding the 
consequence of the government actions leading up to and during 
the bailout, it is essential to figuring out the path forward.
    Taxpayers will end up billions of dollars short due to the 
money given to GM, and its far from clear that the bailout has 
succeeded in its goals of revitalizing the company. Megan 
McArtle of The Atlantic has found that we could have given 
every hourly GM employee $250,000 and still come out on top.
    Furthermore, the bailout of GM desecrated the rule of law. 
The bankruptcy proceedings that occurred were simply a 
patchwork legal vehicle for delivering ownership shares from 
the auto companies due to the government. What may have seemed 
expedient at the time disregarded the true intent of our 
bankruptcy process.
    In the end, the auto bailouts set a precedent that will 
make it more difficult for major companies to go through 
bankruptcy proceedings in the future, resulting in serious 
moral hazard. It wasn't even clear that these actions were 
legal in the first place. After Congress failed to pass 
legislation to allow for the bailout, only then did President 
Bush move to do so under the Troubled Asset Relief Program. 
However, TARP was designed to purchase troubled assets from any 
financial institution on such terms and conditions as 
determined by the Secretary.
    Todd Zywicki, a legal expert and professor at George Mason 
University, has pointed out TARP legislation did not permit the 
use of the allotted funds to bail out. The car companies, after 
all, were not financial institutions.
    We are pleased today to be joined by Mr. Ronald Bloom, who 
led the President's Auto Task Force. Before a congressional 
oversight panel in 2009 Mr. Bloom stated: From the beginning of 
this process the President gave the Auto Task Force a clear 
message. The first was to behave in a commercial manner by 
ensuring that all stakeholders were treated fairly and received 
neither more nor less than they would have simply because the 
government was involved. The second was to refrain from 
intervening in the here management of those companies.
    This hearing is taking place today largely because we 
believe that both of those directives were faulted.
    The committee believes there is substantial evidence that 
decisions made by the administration in the handling of the GM 
bailout were often politically motivated and that, to the 
detriment of many, government chose winners and losers. The 
treatment of Delphi pensions epitomizes the picking of winners 
and losers that occurred in the GM bailout.
    One group, hourly and union employees, are still receiving 
their full pension while another group, salaried nonunion 
employees, is receiving just a portion of their pensions as a 
result of decisions made in the Treasury-orchestrated 
bankruptcy process.
    The American people have the right to know that their money 
was not used to advance political ends and that every dollar 
was loaned with the intention of getting GM on a sustainable 
course to repay the Treasury.
    With that, I will yield back our time.
    Let's go to Mr. Cummings while we wait for Mr. Kucinich.
    Mr. Cummings. Thank you very much, Mr. Chairman. Today's 
hearing is entitled, ``Lasting Implications of the General 
Motors Bailout.''
    Without question, the most significant and lasting 
implications of the Federal assistance to General Motors, are 
the hundreds of thousands of jobs saved and the hundreds of 
American communities spared further suffering in the midst of 
the economic recession.
    On July 5, 2009, the U.S. Bankruptcy Court for the Southern 
District of New York issued a decision concluding that if the 
Federal Government had not come to GM's aid, the firm would 
have liquidated. The Court wrote, ``There are no merger 
partners, acquirers or investors willing and able to acquire 
GM's businesses other than the U.S. Treasury and Canada's 
Export Credit Agency. There are no lenders willing and able to 
finance GM's continued operations.''
    GM's liquidation would have been a significant loss to this 
country and would have been devastating to every community that 
is home to a GM plant or a GM parts supplier or a GM dealer.
    Faced with this crisis, the Bush administration extended $4 
billion to GM in December 2008 and an additional $5.4 billion 
in January 2009.
    When the Obama administration took over they required, as a 
condition of additional aid, that both GM and Chrysler 
implement viable plans to reduce their costs and effectively 
compete in a changed auto industry. After extensive 
restructuring, the new GM quickly exited bankruptcy in July 
2009.
    The results of our Nation's investments are now becoming 
clear. The first quarter of 2011 was GM's fifth consecutive 
profitable quarter. According to Robert Scott, an economist 
with the Economic Policy Institute, Federal, State and local 
governments saved between $10 and $78 for every dollar invested 
in the auto industry restructuring plan.
    The value of our investment in the auto industry becomes 
even clearer when we consider the costs of inaction. According 
to the Center for Automated Motor Research, even a 50 percent 
reduction in the operations of the big automakers could have 
reduced personal income by more than $275 billion over 3 years, 
resulting in a loss of more than $100 billion in State and 
Federal tax revenues. The Federal Government's investment saved 
hundreds of thousands of jobs and gave these automakers a new 
lease on life.
    The committee will hear today from one of the principal 
architects of our investment in the auto industry, Mr. Ron 
Bloom, and I welcome his testimony.
    I also welcome the testimony of our other witnesses, former 
Congressman Vince Snowbarger with the Pension Benefit Guaranty 
Corp.; Daniel Ikenson with the Cato Institute; Ms. Shikha 
Dalmia with the Reason Foundation; and Dr. Thomas Kochan with 
MIT.
    We will also hear from Bruce Gump, the vice chairman of the 
Delphi Salaried Retiree Association. Delphi is a parts 
manufacturing company spun off from GM in 1999. By 2005, it had 
filed for bankruptcy and in 2009 the PBGC took over the 
company's pension plans. GM agreed to top up the pensions of 
employees of Delphi main unions, meaning they will receive the 
pensions they were promised, but such top-ups were not provided 
to Delphi's salaried employees or certain other union 
employees.
    Given the statutory limits on the benefits that the PBGC 
can pay, many Delphi--many of Delphi's salaried retirees are 
receiving benefits that are far lower than promised by Delphi. 
The consequences of these shortfalls to salaried retirees are 
truly heartbreaking, particularly as these employees have lost 
their health coverage. This matter is, however, the subject of 
ongoing litigation that makes the PBGC as a defendant. It names 
the PBGC as a defendant.
    Mr. Bloom is also being sued, not just in his official 
capacity, but as an individual citizen whose personal assets 
are on the line. Obviously, this will prevent him from 
answering questions on this matter, a situation I hope everyone 
will respect.
    Again, Mr. Chairman, I want to thank you for this hearing.
    With that, I yield back.
    Mr. Jordan. I thank the gentleman.
    I ask unanimous consent that the gentleman from Ohio, 
Congressman Bill Johnson, be allowed to participate in today's 
hearing. Without objection, so ordered.
    I now recognize the other gentleman from Ohio, Mr. Turner, 
for an opening statement.
    Mr. Turner. Thank you, Mr. Chairman, and I also want to 
thank our ranking member, another fellow Ohioan, Mr. Kucinich, 
for holding this hearing and for the importance, really, of the 
issues that we are addressing today.
    I was very disappointed to hear that the administration has 
prohibited Mr. Bloom from speaking to us on the important 
issues of Delphi's pensions. I was hoping top hear Mr. Bloom 
explain the administration's plan for finally restoring the 
hard-earned retirement benefits of Delphi salaried workers from 
across the country.
    Two weeks ago, the White House unveiled a report entitled, 
``Resurgence of the American Automotive Industry,'' and 
President Obama paid a visit to Toledo, Ohio. What neither 
report noted, nor did the President mention, was the 
administration's plan to restore benefits to the Delphi 
retirees. I believe it's because there isn't one.
    The administration picked winners and losers where the 
pensions of many salaried Delphi workers were lost. This was 
done without any explanation, without any justification or 
without basis. And today it is still being done, without any 
answers.
    Now, I beg to differ, litigation does not prohibit Mr. 
Bloom from answering. What prohibits Mr. Bloom from answering 
is that perhaps the answers or the truth might be damaging in 
litigation, and that being it would be damaging because these 
Delphi retirees are entitled to these benefits. These benefits 
were wrongly taken from them and they deserve an answer.
    We live in a government where the government is responsive 
to the people. Things can't happen in secret. The 
administration picked winners and losers, and not only do the 
taxpayers need to know, because taxpayers' money was involved, 
but certainly these Delphi retirees deserve an answer. But more 
importantly, they deserve the restoration of these benefits.
    Almost 15,000 salaried retired workers, some of which were 
denied up to 70 percent of their pensions, all of them 100 
percent of their life insurance and 100 percent of their health 
insurance, it is devastating to them. It's an action that was 
done to them by this administration while they were picking 
winners and losers, and it's one that needs to be addressed by 
the administration, not only just in providing answers, which 
is what we are seeking today, but also in solving. These 
workers deserve to have their pensions restored.
    Now, pursuant to this hearing we have the ability to, I 
know, provide additional opportunities for Mr. Bloom and Mr. 
Snowbarger to answer questions. I am going to present today 
and, please, I have a staff member who is going to present to 
Mr. Bloom and Mr. Snowbarger 25 questions for Mr. Bloom, 30 
questions for Mr. Snowbarger. I would appreciate it if you 
would respond to these questions, the types you are going to be 
receiving today from Members, they go directly to this issue of 
the Delphi retirees and salaried workers. And we would 
appreciate your finally attending to give them the information 
that they deserve.
    With that, Mr. Chairman, thank you for having this hearing 
and we look forward to getting some answers for these retirees.
    Mr. Jordan. I thank the gentleman from Ohio for his 
statement and for his being here today and his hard work on 
this issue.
    The other gentleman from Ohio, my good friend, Mr. 
Kucinich, is now recognized.
    Mr. Kucinich. Thank you, Mr. Chairman. I ask unanimous 
consent to insert into the record a statement by our colleague, 
Congressman Kildee.
    Mr. Jordan. Without objection, so ordered.
    [The prepared statement of Hon. Dale E. Kildee follows:]

    [GRAPHIC] [TIFF OMITTED] T1295.001
    
    Mr. Jordan. If I could just interrupt for 1 second while we 
are doing that, I ask unanimous consent to submit a letter from 
Senator Portman and Representative Camp and a study led by the 
Competitive Enterprise Institute.
    Without objection, so ordered.
    [The information referred to follows:]

    [GRAPHIC] [TIFF OMITTED] T1295.002
    
    Mr. Kucinich. Thank you very much, Mr. Chairman. I want to 
thank you for holding this hearing. It's a chance to conduct 
oversight, but it's also a chance to take stock of a critical 
and successful government intervention. The Federal Government 
saved two companies, GM and Chrysler, and probably an entire 
region of the country. I come from that region.
    There's a GM factory located east of Cleveland called 
Lordstown. In March 2009 the community of Lordstown, Ohio, was 
profiled by CBS News in this way. They said, ``Holding on for 
dear life, where 70 percent of the town's tax base came from 
the GM plant,'' according to the mayor.
    Just last month the CBS News story profiled this community 
in a completely different light. It talked about it being 
jolted back to life by 4,000 pounds of steel. The Lordstown GM 
plant was essentially dead for a short period of time, without 
a single car being manufactured. But it's now alive and 
employing around 4,500 people. Those workers are using parts 
made down the road in my district. Roughly 20 percent of the 
parts from the GM Parma Metal Center in my district go to 
Lordstown for the manufacturing of the Chevy Cruze.
    The interconnectedness of the region doesn't stop there. 
The Parma GM metal plant buys equipment from the Automatic Feed 
Co. of Napoleon, OH to make auto parts, sustaining yet another 
Ohio work force.
    The web of connections goes on and on in communities 
responsible for the parts, materials, equipment, goods and 
services that the auto industry, the workers, and their 
families depend upon.
    Whether or not this web survived or was torn apart was at 
stake in late 2008 and throughout 2009. Thankfully, the Bush 
administration decided, rightly, to make the first loans, and 
the current administration built on what the Bush 
administration did, with more financial support for the 
restructuring of the industry and its successful emergence from 
bankruptcy.
    The most important point that I hope we remember throughout 
this hearing is the calamity which was averted for these 
communities through our investment in the auto industry. 
Without that investment, as many as 3.3 million U.S. jobs would 
have been lost, amounting to between 0.5 percent and 3 percent 
yearly reduction in gross domestic product from 2009 through 
2011.
    Second, I hope we remember it was absolutely necessary for 
us to act expeditiously. If GM, for instance, were to have 
languished in a prolonged bankruptcy, so too would Lordstown 
and many others languish in ruin as the jobs revenue and tax 
base for essential community services evaporate.
    In light of the success achieved by our support for GM, 
this hearing will also examine a difficult situation faced by 
workers and retirees of GM parts supplier Delphi. Being mindful 
of the ongoing litigation on this issue, in fairness to the 
other witnesses testifying at the hearing, I welcome the 
opportunity to hear testimony from Bruce Gump of the Delphi 
Salaried Retiree Association on a truly difficult situation 
that has been experienced by the individuals that organization 
represents.
    Mr. Chairman, on this point, before I yield, other 
committees such as Education and Labor, as long ago as December 
2009, have heard testimony on the fact that certain retirees of 
Delphi, such as salaried retirees as well as retirees 
represented by a number of unions, lost their benefits through 
Delphi's bankruptcy because they had no agreements to have 
their benefits topped up to the level they have worked for and 
deserve. It's a very painful situation and I know it's an issue 
that concerns you as well, Mr. Chairman.
    And while I appreciate Mr. Gump coming here, I think what 
we need to do is to determine a course of action that would 
solve the problem. So I would ask you if we could work together 
on legislation that would correct this situation and consider 
whether or not that legislation would enable the topping up of 
benefits of all the Delphi retirees and the union retirees who 
saw their benefits disappear in Delphi's bankruptcy.
    You know, we are going to need to have some kind of action. 
And just in the time that I have remaining, I would ask the 
gentleman if we could work together to do something here.
    Mr. Jordan. I always look forward to working with the 
gentleman from Cleveland, and working with you and other 
members from the Ohio delegation and surrounding States and 
Congress, on what is the best approach moving forward. So I 
appreciate the gentleman's statement.
    Mr. Kucinich. I would like to work with you and other 
members of the committee on this. And as Ohioans I think we 
have the chance to reaffirm our support not just for 
automotive, but America's manufacturing base has been at risk. 
And while I join with you in fighting the bailouts to Wall 
Street, which just produces paper, we are talking about people 
who produce cars, people who make steel, aerospace products, 
shippers, manufacturing. American manufacturing is something we 
ought to be investing in, and I want to thank the chair for 
holding this hearing so we can get into these issues. Thank 
you.
    Mr. Jordan. I thank the gentleman for his statement.
    I would just point out, before recognizing Mr. Kelly for an 
opening statement, that highlighting the Lordstown facility--
which we are all genuinely, you know, glad that it is still 
operating and jobs are there and it has helped that community--
underscores what took place here. There were winners and losers 
selected. We have, just down the road in Mansfield, Ohio, a GM 
facility that was closed.
    And what we are trying to get at was were these decisions 
made by General Motors or were they, in fact, made by the Auto 
Task Force and people in the government not only picking 
winners and losers and who they were going to provide money to, 
but also getting into the day-to-day operations of the company 
and deciding which facilities would stay open and which ones 
would not. That's an important question and one that I think we 
need answered as well.
    Mr. Kucinich. Thank you, Mr. Chairman.
    Mr. Jordan. I now yield to the gentleman from Pennsylvania, 
Mr. Kelly.
    Mr. Kelly. Thanks for having this hearing. As someone who 
was very close to the situation, being a Chevrolet/Cadillac 
dealer and going through that process, the thing that does 
bother me is we will never know if General Motors could have 
survived on its own. Because the General Motors that I know, 
the General Motors that my dad started with as a parts picker 
in the thirties, and went through a war, and he came back home 
and was able to rise through the organization and buy his own 
dealership--and I am talking about not a huge dealership, but a 
one-car showroom in a little town called Verona--and build it 
into something we were very proud of through hard work, through 
hard work, not that somebody picked that he was going to be a 
winner or said no, you don't have an opportunity. That never 
happened to him, but it did happen to me.
    It was after the government takeover of General Motors, in 
a business that we worked very hard to build for 56 years. I 
got a phone call; and in 5 minutes, 56 years of work and saving 
and putting everything on the line was pretty much taken away.
    I got a phone call, said, ``Listen, you know what, where 
are you?'' And I said, ``I am sitting at my desk.'' And said, 
``Well, I am in Detroit, I am with a lawyer and I am recording 
this. And we need you to sign that document we sent you 
yesterday.''
    I said, ``Are you talking about the 39 pages?'' 
``Absolutely.'' I said, ``I am not signing it.'' They said, 
``Why not?'' I said, ``because I refuse to give up my 
franchise.''
    They said, ``Well, that's really not up to you, we made a 
decision.'' And I said ``Well, you know, I have to tell you, it 
is up to me and it is up to the people, the 100-and-some people 
that work with me every day.''
    And to have somebody make a phone call and tell me that you 
are no longer going to be a dealer because of a decision that 
was made not by car people, but by government, not by people 
who have any skin in the game, not by people who put their 
whole life on the line, but by people who made a decision based 
on some type of metric that I absolutely have no idea where it 
came from.
    And then when you say, ``Hey, I am going to fight you, I am 
going to arbitration,'' for somebody to laugh at you and they 
say, ``Are you kidding me? You, Mike Kelly, Butler, 
Pennsylvania, with your limited resources and one lawyer 
against the U.S. Government? You don't have a snowball's chance 
in hell of making it.'' I said, ``You know what? I will take 
those odds. I will take those odds.''
    So we got through it, went to arbitration, got the 
dealership back. By the way, my friends that didn't go to 
arbitration are no longer in business, not because they 
couldn't make it in the open market, because government decided 
they would go out of business.
    That is not America, and we will never know if General 
Motors could have made it on its own. They followed a Judas 
goat and said, Yes, come with us, we will lend you the money, 
we will help you. And these gentlemen can fly into Washington 
and are berated, because their plan doesn't make sense, by the 
same people--they are $14.3 trillion in the red--telling these 
guys they don't know how to run a business?
    So my question is: Where does it lie? What really could 
have happened? Because in my opinion the government is the one 
that picked and chose who was going to win and who was going to 
lose.
    And so from my standpoint, Mr. Chairman, I do appreciate 
the opportunity to be here today, from somebody who has been 
able to get through some very difficult times. And we are now 
in our 60th year, not because of things that we have done 
separately, but things that we have done collectively as an 
organization, and through the grace of God we have been able to 
get through it.
    But I do wonder the direction of the country. And when we 
place our faith in our future in the hands of those who have 
never done it, who have never walked in our shoes, who have 
never done the things we have done, but who do have the ability 
to open a laptop and tell you, ``You are no longer in 
business,'' that's not the American way. I don't accept it. My 
father certainly wouldn't have accepted it, and I think it's 
time to shed some light on this.
    So I thank you for what you are doing because we are here 
truly to make sure that the job creators, the small business 
people, have an opportunity to compete and that it is not taken 
out of their hands by somebody who has never, ever, had any 
skin in the game.
    So I thank you, sir.
    Mr. Jordan. I thank the gentleman for his opening 
statement.
    Well, now I think what we are going to have to do is swear 
in our witnesses, and I apologize, guys, it's one of those 
days. We will swear you in. It's the custom of the committee to 
do that. And then we are going to have to take a brief recess, 
hopefully brief, to go vote, and then we will be back for 
questioning. And we will try to be as accommodating with your 
time, we understand you're busy as well, but unfortunately we 
do have three votes on the floor. So if you will just rise and 
raise your right hands.
    [Witnesses sworn.]
    Mr. Jordan. Let the record show that the witnesses answered 
in the affirmative.
    We have with us today, first, Mr. Ron Bloom, former senior 
adviser to the Secretary of the Treasury, U.S. Department of 
Treasury, now working as a senior manufacturing adviser to the 
President, I believe; and then also Mr. Vince Snowbarger as the 
Deputy Director of the Pension Benefit Guaranty Corp. and a 
former Member of Congress from New York State?
    Mr. Snowbarger. Kansas.
    Mr. Jordan. Kansas. Why did I have New York? I had it in my 
mind it was New York. A long way from New York. Kansas, right, 
still a great State. We appreciate you both being here.
    We are going to stand in recess for probably 35, 40 minutes 
and then we will be back.
    [Recess.]
    Mr. Jordan. The committee will be back. We are going to 
start with Mr. Bloom. You know this routine, you have done it 
before. You get 5 minutes, and then the light system there, you 
know, it's pretty self-explanatory.
    So if you can keep it around 5, that would be great. If you 
want to go shorter that's fine too, but we will go to Mr. Bloom 
and then Mr. Snowbarger.
    Go ahead.

STATEMENTS OF RON BLOOM, FORMER SENIOR ADVISOR TO THE SECRETARY 
 OF THE TREASURY; AND VINCENT SNOWBARGER, DEPUTY DIRECTOR FOR 
           OPERATIONS, PENSION BENEFIT GUARANTY CORP

                     STATEMENT OF RON BLOOM

    Mr. Bloom. Chairman Jordan, Ranking Member Kucinich, and 
members of the subcommittee, thank you for the opportunity to 
testify before you here today. I am here to report on the Obama 
administration's investments in GM and Chrysler.
    As you may know, since February 2011, I served on the 
National Economic Council as Assistant to the President for 
Manufacturing Policy. While I am here today in my capacity as a 
former Treasury official, I no longer work at Treasury and, 
therefore, no longer participate in the oversight of Treasury's 
automotive investments.
    Thus, I am not in a position to discuss events since 
February 2011, or anything concerning possible future actions. 
Further, I understand that the committee has taken an interest 
in issues regarding the pensions of certain former employees of 
the Delphi corporation.
    As has been communicated to your staff over the last few 
days and as I communicated in a letter to the chairman 
yesterday, I am a party to a lawsuit that is currently pending 
in Federal court in Michigan. I have been named as a defendant 
in that matter in both my official capacity as a former 
Treasury employee, as well as in my individual capacity. I am, 
therefore, not in a position to speak to the Delphi pension 
issue in any way.
    When President Obama took office, the American automobile 
industry was on the brink of collapse. In the year before 
President Obama took office, the industry shed 400,000 jobs. As 
2008 came to a close, both GM and Chrysler were running out of 
cash and faced the prospect of uncontrolled liquidations. 
Therefore, the previous administration provided $24.8 billion 
of support to the auto industry.
    When President Obama took office, we faced a full-fledged 
recession, our financial system was still exceedingly fragile, 
and GM and Chrysler were requesting additional assistance. 
After studying the restructuring plan submitted by the 
companies, President Obama decided that he would not commit 
additional taxpayer resources to these companies without 
fundamental change in accountability. He rejected their initial 
plans and demanded that they develop more ambitious strategies 
to reduce costs and increase sufficiency to become sustainable.
    However, President Obama also recognized that failing to 
stand behind these companies would have consequences that 
extend far beyond their factories and workers. GM and Chrysler 
were supported by a vast network of auto suppliers. 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 countless small 
businesses and communities with concentrations of auto workers.
    It was the interdependence among the automakers, suppliers, 
dealers, and communities that led some experts at the time to 
estimate that at least a million jobs could have been lost if 
GM and Chrysler went under. To avoid this outcome, the 
President decided to give GM and Chrysler a chance to show that 
they could take tough and painful steps to become viable, 
profitable companies and to stand behind them if they could.
    Working with their stakeholders and the President's Auto 
Task Force, both GM and Chrysler underwent fair and open 
bankruptcies that resulted in stronger companies. This process 
required deep and painful sacrifices from all stakeholders. 
However, the steps that the President 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 and Chrysler a chance to once 
again become viable, competitive businesses.
    Today the American auto industry is mounting a comeback. In 
2010, for the first time since 1995, GM, Chrysler and Ford 
increased their collective market share. Since June 2009, the 
auto industry has added 113,000 jobs, the fastest pace of job 
growth in the industry since 1998.
    The U.S. Government provided a total of $80 billion to 
stabilize the U.S. automotive industry. As of today, $40 
billion has been returned to taxpayers.
    While the government does not anticipate recovering all of 
the funds that it invests in the industry, loss estimates from 
Treasury and the CBO have consistently improved. Independent 
analysts estimate that the administration's intervention saved 
the Federal Government tens of billions of dollars in direct 
and indirect costs.
    In a better world, the choice to intervene in GM and 
Chrysler would not have had to been 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.
    Thank you again for the opportunity to testify. I look 
forward to your questions.
    Mr. Jordan. Thank you, Mr. Bloom.
    [The prepared statement of Mr. Bloom follows:]

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    Mr. Jordan. Mr. Snowbarger, you are now recognized.

                STATEMENT OF VINCENT SNOWBARGER

    Mr. Snowbarger. Good afternoon, Chairman Jordan and other 
subcommittee members. I am Vince Snowbarger, and I am Deputy 
Director for Operations at the Pension Benefit Guaranty Corp. I 
should also point out that from January 2009 until July 2010, I 
was also the acting director for the PBGC.
    I will testify today about the pension plans of the Delphi 
Corp., the Nation's largest producer of auto parts. As you 
know, in July 2009, PBGC stepped in to protect the pensions of 
Delphi's 70,000 workers and retirees. PBGC will cover about $6 
billion of the plan's shortfall. About 1.2 billion of the 
benefits is not guaranteed by the insurance program.
    PBGC's interest in Delphi and its pension plans spans the 
past decade. PBGC began actively monitoring Delphi after the 
spinoff from GM in 1999. In early 2005, Delphi's credit ratings 
were downgraded from investment grade to speculative grade.
    After Delphi entered bankruptcy in October 2005, PBGC 
worked intensely with Delphi, GM, and other stakeholders to 
keep the pension plans ongoing. Delphi consistently told its 
employees and PBGC that it intended to reorganize with the 
pension plans ongoing. However, when Delphi failed to make 
required minimum funding contributions to the plans, liens were 
triggered against Delphi's nonbankrupt foreign subsidiaries. 
Beginning in March 2006, PBGC perfected those liens so that the 
plans had a secured interest against foreign Delphi entities.
    In September 2007, Delphi filed a reorganization plan with 
the Delphi bankruptcy court. As a part that reorganization, GM 
and Delphi agreed to transfer part of Delphi's hourly plan to 
GM's hourly plan, and Delphi was to retain all other pension 
plans, including the salaried plan.
    In April 2008, the reorganization deal fell through. 
However, in the latter half of 2008, Delphi still anticipated 
that it could reorganize, maintain its salaried plan, and merge 
the hourly plan into the GM hourly plan.
    In September 2008, Delphi and GM, with the approval of the 
Delphi bankruptcy court, planned to transfer up to $3.4 billion 
of net liabilities from Delphi's hourly plan to GM's hourly 
plan in two phases.
    The first $2.1 billion was transferred that same month. 
That's September 2008. This transfer eliminated PBGC's lien on 
behalf of the hourly plan. The subsequent downturn in the auto 
markets left Delphi unable to pay GM the promised consideration 
for taking the remaining portion of the hourly plan, so the 
second transfer never occurred.
    In late July 2009, the Delphi bankruptcy court approved 
Delphi's modified plan of reorganization calling for the 
liquidation of the company, termination of its pension plans, 
and settlement of PBGC's claims. The settlement provided PBGC a 
$3 billion general unsecured claim against Delphi's bankruptcy 
estate.
    The investors in new Delphi required PBGC to release its 
liens on Delphi's foreign assets before its purchase could 
proceed. At the time of that settlement, PBGC had a $196 
million lien on behalf of the salaried plan. In exchange for 
releasing the liens, PBGC reached an agreement with the buyers 
to give PBGC $70 million in cash and a membership interest in 
the new company. The cash payment and membership interest 
effectively paid PBGC's salaried plan lien and gave PBGC a 
reasonable recovery on its other claims in the Delphi 
bankruptcy.
    In March 2011, new Delphi redeemed PBGC's stake in the 
company for $594 million. I would point out that's less than 10 
percent of the total underfunding in the plans. However, under 
statutory rules, the Delphi recoveries may allow PBGC to pay 
small amounts of additional benefits to older Delphi workers 
who retired or could have retired by July 31, 2006, 3 years 
before the Delphi plans terminated.
    Companies that sponsor pension plans have a responsibility 
to live up to the promises they made to their workers and 
retirees. Plans come to the PBGC because their sponsors have 
failed to properly fund them. In the unfortunate case like 
Delphi where the sponsors fail and liquidate, PBGC is forced to 
and will step in to protect workers and retirees.
    I would be happy to answer any questions.
    [The prepared statement of Mr. Snowbarger follows:]

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    Mr. Jordan. Let me thank both witnesses for their 
testimony. We are going to start with Mr. Turner. The gentleman 
from Ohio is recognized for 5 minutes.
    Mr. Turner. Thank you, Mr. Chairman, and I want to thank 
you again for holding this important hearing. This is an issue 
that is certainly important in my district, but I think it is 
important to people throughout the country when they look at an 
administration stepping into a bankruptcy and there are 
pensions and retirees, and people are picked as winners and 
losers, they are not treated the same, this inequality.
    I think all of Americans should be very concerned about the 
process that this went through. What is the policy? What does 
it say about the security that people have in their pensions? 
And what does it say about the administration's commitment to 
ensure that people have access to their promised health 
benefits and to their salaries?
    Gentlemen, I presented both of you with lists of questions. 
Mr. Bloom, you received 25; Mr. Snowbarger, you received 30.
    I am going to ask for your commitment that you review those 
questions and that you, to the best of your ability, provide me 
with answers. Do I have that commitment?
    Mr. Snowbarger. I will.
    Mr. Bloom. Absolutely.
    Mr. Turner. Thank you. The questions involve many of the 
issues that I think the taxpayers deserve answers to. How did 
this process go through? How is it that there were winners and 
losers that were picked? And how can it be resolved, more 
importantly? Because the issue is, I think, this Congress, I 
know that this chairman doesn't want us to just discover what 
happened; we also want to find out what the solution is.
    Mr. Bloom, you and I had a conversation just before this 
hearing reconvened, and I want to, for the record, to restate 
it. You know, I was telling you that I think that everyone 
knows that when people aren't treated equally, that there's an 
injustice or inequality, and that I would like, since you have 
such a great knowledge and understanding of this issue, your 
expertise and commitment as to how these salary retirees from 
Delphi can be made whole.
    You said you would be very willing to work with me on that. 
It goes to my question of: Are you working on that? Is that on 
your to-do list? Because I would really want to know that the 
administration has it on its to-do list that this issue not 
be--that the status quo--that we do look at ways that these 
salaried retirees can have their pensions restored. Mr. Bloom.
    Mr. Bloom. Thank you, Congressman. And as I did say to you 
at the break, I am certainly happy to sit and talk with you or 
anyone else who has ideas about how this matter should be dealt 
with.
    Look, there is a core unfortunate reality that we face in 
this entire circumstance. These two companies came to the 
government, first the Bush administration and then to the Obama 
administration, in a state of insolvency. And unfortunately, 
what that means is, as my colleague has made reference to in 
another context, is that they simply had made promises to 
people that were larger than they were able to make--than they 
were able to honor. And that does not only go to the Delphi 
salaried retirees, it goes, unfortunately, to thousands of 
different----
    Mr. Turner. But, Mr. Bloom, just a second. Some of those 
promises were kept. And at the direction of the administration, 
they were kept. I mean, the retirees from Delphi were not 
treated similarly at the direction of the administration. So 
this is not just promises that they couldn't keep. Selectively, 
some people's promises were not upheld and others were.
    Mr. Bloom. Let me try and address that. First thing, as I 
said, because I am a defendant in a lawsuit, I am not in a 
position to comment specifically about Delphi.
    But I can say this. The company came to the administration 
with restructuring plans, and we reviewed those overall plans 
but we did not make determinations of particular treatment for 
particular groups. The company came to us with an overall plan, 
as was referenced by the chairman in his opening remarks.
    Mr. Jordan. Would the gentleman yield for 1 second? Would 
the gentleman yield for 1 second? I just want to ask one 
clarification on that.
    The company came to you with the restructuring plan, but 
isn't it true the Auto Task Force turned down the first plan?
    Mr. Bloom. Yes, it is absolutely true. So the reason--and 
the reason we did, sir, is we concluded that those plans did 
not create viable enterprises. And so we----
    Mr. Jordan. But the selectivity that the gentleman is 
getting to certainly took place with the whole restructuring 
plan, because he turned down the very first plan.
    Mr. Bloom. It was not selective. We concluded that the 
overall plan was not viable. We concluded that the company had 
not made, unfortunately, difficult enough decisions to turn 
them viable. So that if the President was going to commit 
additional taxpayer resources, we would have a reasonable 
chance of having viable companies on the back end.
    Mr. Turner. Mr. Bloom, my time is expiring. Mr. Chairman, 
with your consent, if I could have just 1 more minute to do a 
summation here.
    Mr. Jordan. Without objection.
    Mr. Turner. Thank you.
    Mr. Bloom, it was the administration picking winners and 
losers. And that really is the crux of everything that the 
taxpayers deserve to discover. I mean, that's what this whole 
hearing process is about. And I want to encourage the chairman 
to have additional hearings. I believe that there ought to be 
subpoenas to the administration. I believe that there ought to 
be depositions. Because this is not something that you just did 
in a vacuum, you did this with taxpayer dollars, and the 
taxpayers will not be made whole, nor will the pensioners who 
are retirees, salaried retirees from Delphi, but others will. 
Absolutely, somewhere in a room at the White House, people were 
picked as winners and losers.
    There was inequality and injustice that was done. And we 
deserve, and we will ultimately get to the bottom of how that 
was done and what basis that it was done.
    I want to have one more comment, Mr. Chairman, and then I 
will yield.
    The issue of the litigation is not one of requiring you to 
be silent. It is absolutely for your sole convenience that you 
stand in front of us and not answer questions based on pending 
litigation. Because if you made statements to us that were 
truthful, they wouldn't change the outcome of the litigation, 
right? Because the statements themselves--it's the actions from 
which liability arises, not from your statement. So by you not 
speaking on it today, you are protected, inconvenienced, not as 
a requirement.
    True, if you made statements in front of us that were 
inconsistent, it would go to your issue of veracity in 
litigation. If you revealed something that perhaps we all 
didn't know, it might expedite the process of litigation.
    But speaking in front of a congressional hearing and 
telling the American public truthfully what happened with their 
tax dollars and the administration's decisionmaking, does not 
affect the outcome of litigation. It is only for your 
convenience.
    Mr. Chairman, I encourage you to continue investigating 
this matter and bringing to light what occurred here. Thank 
you.
    Mr. Jordan. I thank the gentleman.
    We go next to the ranking member of the full committee, the 
gentleman from Maryland.
    Mr. Cummings. Yes. Just in the last set of questions, it is 
not, I would say to the gentleman, it's not that simple. Having 
been a trial lawyer for 20, for almost 30 years, it's not that 
simple. I am not trying to defend Mr. Bloom. When you are in 
litigation, it's just not that simple.
    But let me go to you, Mr. Bloom. President George Bush 
extended the first Federal aid to GM, totaling $9.4 billion. 
What did the President require as a condition of that initial 
aid; do you know?
    Mr. Bloom. I believe, Congressman--thank you for that 
question. I believe, actually, the total assistance provided by 
the Bush administration to General Motors was actually $13.4 
billion. The only requirement of that was that the companies 
come forward with restructuring plans and those plans were to 
be--come forward by, first, the 17th of February, and then 
judged on by the 31st of March. So that was the only condition 
of those loans. There was no condition that the company in any 
way restructure, actually restructure or address its long-
seated--deep-seated problems.
    Mr. Cummings. So when President Obama came into office, he 
required both GM and Chrysler to develop plans to restructure 
their businesses so they could be competitive. And GM's initial 
plan was reviewed, I take it, by the Auto Task Force which you 
advised, and that plan was rejected.
    And so can you--you said that the first plan was not, was 
it--did you say viable? And what did you--I am not trying to 
put words in your mouth, but you all made--that's basically a 
judgment call?
    Mr. Bloom. Yes, Congressman. I mean, look, the President 
very much wanted to find a way to stand behind General Motors 
and Chrysler if he could, but he also recognized that these 
companies had made a lot of mistakes over prior years and had 
gotten themselves insolvent. And, as I said earlier, we are not 
in a position to honor the promises they had made. That is a 
tragic situation that faced all the stakeholders of the 
company, but that is the situation that we were handed.
    And so what he insisted is that they make the difficult 
decisions that included, tragically, having to close factories 
and put blue collar workers out of work. That's a terrible 
thing to have to do. But the alternative was either, A, do 
nothing and have the companies liquidate in their entirety, in 
which case every single stakeholder would have done worse than 
they did, or just simply hand them a blank check and say--
because many of these stories are heart-rending--we are going 
to give you all the money that you asked to meet all those 
promises. Tragically, that would have been a multiple of the 
money that the President, in fact, extended.
    So in that light. We chose the middle path. We forced the 
companies to come up with very tough-minded restructurings as a 
condition of further assistance.
    Mr. Cummings. So you all gave GM 60 days to resubmit--is 
that right--a plan?
    Mr. Bloom. Approximately 30--60 days after the 31st of 
March.
    Mr. Cummings. And was that plan accepted, the next plan?
    Mr. Bloom. The subsequent plan, yes. The subsequent plan, 
we did choose to back the company and its management who had 
put forward that plan. We did choose to back that plan and to 
help them get through bankruptcy in order to effectuate that 
plan. That's correct.
    Mr. Cummings. So what sort of support did the government 
give GM during the current administration?
    Mr. Bloom. The total funds extended by this President to 
General Motors are approximately $36.1 billion, Congressman.
    Mr. Cummings. Okay. The U.S. Government became the dominant 
shareholder of GM, owning more than 60 percent of the company 
at one time. Was the United States an active or a passive 
shareholder?
    Mr. Bloom. That's a very good question, Congressman. We 
made a very conscious decision that while we did have to do 
this intervention because we are in an extraordinary moment in 
our Nation's history, the greatest recession since the Great 
Depression, etc., that we wanted to minimally involve ourselves 
in the operations of the company.
    And so after the bankruptcy, we were involved in choosing 
an exemplary group of men and women to be on the board of 
directors, but we did not involve ourselves in any way in the 
day-to-day management of the company.
    Mr. Cummings. And so the operational decisions of GM, you 
basically weren't involved in that; is that right?
    Mr. Bloom. We very consciously chose not to be involved in 
those. We left that to the board of directors, who directs the 
management who carries out their will.
    Mr. Cummings. I don't know if you can answer this question 
or not, but you have been accused of, in this hearing I think, 
of picking winners and losers. Can you comment on that? When I 
say picking winners or losers, I mean was there some political 
considerations involved, to your knowledge?
    Mr. Bloom. Congressman, there were no political 
considerations. The admonition of the President was to be 
commercial, to be tough-minded and to be fair. And that is 
the--and that is the direction that the staff the Auto Task 
Force, of which of I was a part, carried out.
    Mr. Cummings. Mr. Bloom, the title of today's hearing is 
``Lasting Implications of the General Motors Bailout.'' 
Wouldn't you say that the most significant lasting implication 
is we were able to avoid a massive disruption in the U.S. 
economy that would have been caused by the liquidation of GM? 
Is that a fair statement?
    Mr. Bloom. I think that's a very fair statement.
    Mr. Cummings. All right. I see that I have run out of time.
    Mr. Jordan. The chair now recognizes the gentleman from 
Florida, Mr. Mack.
    Mr. Mack. Thank you, Mr. Chairman. I too want to thank you 
for this hearing. I believe that everyone back home certainly 
has a big interest in this hearing.
    You know, it strikes me as kind of interesting that there's 
so much talk about winners and losers. How about, how about the 
people in southwest Florida, where there isn't an automobile 
manufacturer, who feel like the car industry was chosen over 
maybe some of the businesses that they were in? So it's an 
interesting conversation.
    But my questions are going to go to you, Mr. Bloom, just so 
I have perspective in this, because I am kind of new to some of 
this. Is it true that you spent the vast majority of your 
professional life prior to coming to the administration working 
for or on behalf of unions?
    Mr. Bloom. A good portion of it, yes.
    Mr. Mack. And then let me ask you another question. Do you 
believe that the free market is nonsense?
    Mr. Bloom. No, I don't.
    Mr. Mack. All right. Well, let me, if I could, ask for the 
first clip to be played.
    [Video shown.]
    Mr. Mack. That is you, isn't it, Mr. Bloom?
    Mr. Bloom. Yes, it is. Okay.
    Mr. Mack. So do you believe that it is appropriate for 
someone who has been a union leader and someone who doesn't 
believe in the free market to then be picked by the President 
and placed in charge of restructuring a private company and our 
American free market?
    Mr. Bloom. Well, first thing, I think a comment I made in 
jest at a speech does not represent my view on this matter, 
first thing.
    Second thing, I would leave to others whether or not the 
choice of my work--the choice for me to work on this is 
appropriate or not. And I was part of a large team. There were 
about a dozen people, staff, in the Treasury Department.
    Mr. Mack. All right. Well, let me just get back to this. 
But that was you making that comment, and you spent most of 
your adult working life either working for unions or on behalf 
of the unions. And I believe that you gave a speech in 2006 in 
front of the International Association of Restructuring, 
Insolvency, and Bankruptcy Professionals in Arizona, in which 
you described a bargaining technique, the ``dentist chair'' 
bargaining technique.
    Can you describe to us what the dentist chair bargaining 
technique is?
    Mr. Bloom. Yes. Again, in a light-hearted speech, I 
indicated I thought it was important that all parties for the 
bargain have skin in the game in order to produce the best 
result.
    Mr. Mack. What is the dentist chair technique?
    Mr. Bloom. It's a reference to how a person might go into a 
dentist's office and make sure that the dentist doesn't hurt 
them.
    Mr. Mack. And how would they do that?
    Mr. Bloom. They would do that by making clear that they 
also had a leverage on the dentist.
    Mr. Mack. And how did they have leverage on the dentist?
    Mr. Bloom. By grabbing him where it might hurt.
    Mr. Mack. So you think the free market is nonsense?
    Mr. Bloom. I didn't say that, Congressman. I explained that 
comment.
    Mr. Mack. Well, okay. People can see it for themselves.
    Mr. Bloom. Right.
    Mr. Mack. You worked as--either for or on behalf of unions. 
You believe that there's a bargaining, a way to bargain by 
making sure that the dentist feels the pain.
    Do you think that--let me say this. There are some people 
who might disagree with your approach. Would you agree with 
that?
    Mr. Bloom. There were a wide variety of views on the task 
force about how to best carry this out. There were people on 
the task force who had had experience on nothing but the 
business side of the house. There were those of us who had had 
some more experience on the union side of the house. We all 
worked together and came to a consensus of the best way to do 
this. We took it forward to our principals.
    Mr. Mack. If we could we're going to play another clip here 
for you and tell me what you think of this.
    [Video shown.]
    Mr. Mack. Did you really just talk about Mao now and that 
somehow--well, let me ask you this, is that representative of 
the culture in the unions, the leadership in unions?
    Mr. Bloom. I think it is representative of trying to make a 
point through exaggeration.
    Mr. Mack. Well, you know--through exaggeration?
    Mr. Bloom. Correct.
    Mr. Mack. Excuse me, I don't think that Americans think 
that exaggerating at a time when our economy is hurting so much 
is the right way to go. Now you might have made these 
statements earlier, but you did say that you think free market 
is nonsense. You described a tactic of bargaining that is not 
professional. You also talk about Mao and how political getting 
things done is at the end of a barrel.
    Do you think that maybe it was a mistake that you were put 
in a position in the first place to be part of any kind of 
restructuring of anything in the American free market?
    Mr. Bloom. That would be for others to judge.
    Mr. Mack. Who--how did you get into that position?
    Mr. Bloom. I was asked to serve by people at the Treasury 
Department.
    Mr. Mack. Did President Obama pick to you serve?
    Mr. Bloom. I do not know what the President's role was in 
the choice.
    Mr. Mack. Thank you, Mr. Chairman.
    Mr. Jordan. I thank the gentleman. Before we turn to Mr. 
Johnson, just let me ask this question. What is the status of 
the Auto Task Force today? Is there still such an entity, 
because I know your title has changed, but is there still--
obviously the taxpayers still have an interest, so what is the 
status of the Auto Task Force?
    Mr. Bloom. As I said in my opening remarks, Mr. Chairman, I 
am not at the Treasury Department anymore. But my understanding 
is there is--the Auto Task Force itself was actually a group of 
members of the Cabinet who convened to provide oversight to the 
overall effort. There was then is staff group set up at the 
Treasury Department to do the day-to-day work. My understanding 
is the Treasury Department still does have a staff group that 
is providing oversight for our investments in those companies. 
I am not a part of it.
    Mr. Jordan. The individuals who were selected that we knew 
publicly as part of the task force, you were on that, Mr. 
Rattner first chaired it, others' names escape me right now 
were part of it. That group of people is no longer meeting on a 
regular basis having input and oversight of the auto industry 
or are they?
    Mr. Bloom. If you are referring to individuals like myself 
and Mr. Rattner, on an individual basis we are not obviously, 
but yes, there is a group at Treasury. I am not familiar with 
who they are because I am not at the Treasury. But I know there 
are a group of individuals at Treasury whose job it is to 
look--to provide oversight to our remaining investments in the 
automobile industry, yes.
    Mr. Jordan. Okay. I thank the gentleman. I now recognize 
the gentleman from Ohio, Mr. Johnson.
    Mr. Johnson. Well, thank you, Mr. Chairman, and to the rest 
of the subcommittee members, for allowing me to attend and 
participate in today's oversight hearing.
    As some of you may know, I represent Ohio's Sixth 
Congressional District and a large number of a Delphi retirees, 
both salaried and unsalaried, live in my district.
    I think we have heard and will continue to hear about the 
unintended consequences that occur when the Federal Government 
bails out private industries and picks winners and losers. 
Clearly the Obama administration picked winners and losers in 
the bailout process. And I am especially thankful, Mr. 
Chairman, that you are holding this hearing. Hopefully we will 
get the administration to answer some of these questions, 
although now I am seriously doubting that that will come.
    I am kind of appalled by what I have heard. I have a list 
of questions here, but I have to ask this first one. Did I 
understand you, Mr. Bloom, that you said that those comments 
that you made on that clip were in jest?
    Mr. Bloom. I said some of them were in jest and some of 
them were exaggerations to make a point.
    Mr. Johnson. At what point did you start laughing to make 
the joke? When did you deliver the punchline? Because I didn't 
see any laughing in that video. I didn't see a punchline in 
that video. I deliver speeches virtually every day. That looked 
like a pretty serious speech to me.
    Mr. Bloom. I thought my demeanor was quite lighthearted, 
but I guess that would be for others to judge.
    Mr. Johnson. I am passing judgment then, I don't understand 
that.
    Mr. Bloom, did you not say at the following at a 
congressional hearing about 2 years ago from the beginning of 
this process the President gave the Auto Task Force two clear 
directions regarding its approach to the auto restructurings. 
The first was to behave in a commercial manner by ensuring that 
all stakeholders are treated fairly and receive neither more 
nor less than they would have simply because the government was 
involved. The second was to refrain from intervening in the 
day-to-day management of these companies.
    Did you say that?
    Mr. Bloom. Yes, Congressman.
    Mr. Johnson. Do you think that the Auto Task Force 
accomplished the President's first direction, specifically that 
all were treated fairly and received neither more nor less than 
they would have simply because the government was involved?
    Mr. Bloom. Yes, I think--feel very strongly that our 
treatment, as I said in response to a prior question, that 
our--our objective, our directive and I think the result was 
that people were treated commercially and fairly.
    Mr. Johnson. Mr. Bloom, I find it hard to believe that you 
or anyone else could believe that everyone was treated fairly 
considering that the Delphi retirees lost 30 to 70 percent of 
their pensions, all of their health care benefits, all of their 
life insurance, while hourly retirees retained their full 
pension and health benefits. Frankly, that is almost as funny 
as your comment during the video clip. But they must be 
exaggerations, because how do you consider that fair?
    Mr. Bloom. Congressman, I didn't see they were treated 
equally, I said they were treated fairly.
    Mr. Johnson. Define fair.
    Mr. Bloom. I am going to try to.
    Mr. Johnson. Define fair.
    Mr. Bloom. I am going to try to, sir.
    What the companies did is came forward with business plans 
that in their commercial judgment provided the treatment that 
was required in order to successfully effectuate the 
bankruptcy. We looked at those plans and, as the earlier 
question indicated, we rejected the first version and then 
approved a second version. Those plans were then brought 
forward to bankruptcy courts. And in both cases, General Motors 
and Chrysler, bankruptcy judges reviewing that, with nothing 
other than the question of legal, of accordance with the law in 
mind, judged that both that both those plans were reasonable 
and both those plans were in full concert with bankruptcy law.
    Mr. Johnson. In full concert maybe with bankruptcy law, but 
where does the word ``fair'' come into play? How can you 
consider that taking away pensions, life insurance and benefits 
from one group and not having that same treatment to another 
group be considered fair?
    Mr. Bloom. Because the different situation that the groups 
found themselves in provided the opportunity for different 
treatment which the companies believed was fair. For instance, 
the suppliers.
    Mr. Johnson. But it wasn't the company, it wasn't the 
company. Did you not say just a few minutes ago that the 
administration through the Auto Task Force approved and 
disapproved of these plans?
    Mr. Bloom. I said the companies tabled the plans and the 
auto and the administration approved the plans.
    Mr. Johnson. But basically where does the buck stop, Mr. 
Bloom? The administration, right?
    Mr. Bloom. Clearly we approved the plans and the plans had, 
for instance, that the people who supplied parts to the 
companies received almost in many cases 100 cents on the 
dollar. We did that because the companies believed and 
persuaded us that to provide that level of treatment to their 
suppliers was critical to successfully reorganize. Likewise, 
the claimants for warranties who received a complete 100 cents 
on the dollars. We were also persuaded that while that was more 
than other unsecured creditors got, it was necessary and fair 
to effectuate the restructuring.
    Mr. Johnson. Mr. Bloom, my time is up, I hate to cut you 
off. I wish we could continue this all day because I have a lot 
more questions. I would like to answer the question that my 
colleague--that you would not answer, as to whether or not you 
were the right person for the job. I am going to tell you, I 
don't think so, because of what has happened to the people that 
live in my district. Your idea of what is fair and what is not 
fair defies my understanding of the word.
    We teach our children that if you tell the truth, you have 
done nothing wrong, everything will be okay. And yet you don't 
want to talk about the Delphi situation here because of 
litigation, which certainly leads me to have some big 
questions. I am going to assert to you that I am going to 
continue digging, I hope our chairman will continue digging. 
One way or another we are going to get these answers. If it 
were up to me, those who refused to answer would be found in 
contempt of Congress. And if I have anything to say about it, 
that is exactly what is going to happen.
    Mr. Chairman, I yield back.
    Mr. Jordan. I thank the gentleman. I now recognize the 
gentleman from Pennsylvania, Mr. Kelly.
    Mr. Kelly. Thank you, Mr. Chairman. Mr. Bloom, thanks for 
being here today. I would like to play a clip for you because 
in April 2010 General Motors began a national media campaign 
claiming that it had repaid the government loan in full, 5 
years ahead of schedule. And here is a look at the clip and I 
just want to get your opinion on this, whether it is 
disingenuous or not.
    [Video shown.]
    Mr. Kelly. I think you have seen that before.
    Mr. Bloom. I have.
    Mr. Kelly. Okay. Your opinion, disingenuous?
    Mr. Bloom. It might not have been the way I would have 
worded it, but we made a decision.
    Mr. Kelly. So you would agree that it is disingenuous then?
    Mr. Bloom. No----
    Mr. Kelly. No, no. Seriously, being an automobile dealer 
all my life, you know, and I served on several national 
committees for the automobile manufacturers, you know one of 
the things we come out with media campaigns and marketing 
campaigns, you know the critical part of those campaigns? 
Making sure that everything we say is in fact true and factual. 
And that is put through scrutiny, great scrutiny. So I would 
suggest if we are going to use taxpayer funds to run a 
marketing campaign that we should spend it actually on product 
and not in propaganda.
    Now, at this time this advertisement ran Secretary Geithner 
said, we are encouraged that General Motors has repaid its debt 
well ahead of schedule and confident that this company is on a 
strong path of viability. You were quoted as saying that the 
Treasury Department has tried to be as straight as humanly 
possible, and we watch this clip and the question is, was the 
Treasury Department being as straight as humanly possible?
    Mr. Bloom. The Treasury Department didn't make that ad, 
sir. The Treasury Department made a decision on behalf of the 
administration to not intervene in the day-to-day operations of 
the company, including providing oversight----
    Mr. Kelly. I would disagree, I have a lot of friends who 
are no longer in business because of decisions that were made. 
I know you weren't responsible for it directly, but you did 
steer the whole program.
    Now in an article, and this is from a very conservative 
paper called the New York Times, Repaying Taxpayers With Their 
Own Cash. New York Times wrote that what neither General Motors 
nor the Treasury Department disclosed was that the company 
simply used other funds held by the Treasury to pay off its 
original loan. Furthermore, the Special Inspector--Inspector 
General for TARP wrote in its quarterly report to Congress in 
April 2010 that the source of funds for these quarterly 
payments were the other TARP funds currently held in escrow 
account.
    Now my question, do you think that General Motors ad 
campaign and the statements made by the Treasury Department 
told the complete truth about these loan repayments?
    Mr. Bloom. Congressman, I am happy to answer questions 
about what the Treasury Department said. I indicated to you 
that we didn't make the General Motors ad and whether we would 
have made it that way is something I can't comment on. I will 
tell you what the Treasury Department----
    Mr. Kelly. Just as an average guy who watches a lot of TV--
no, no, no, this is easy.
    Mr. Bloom. I don't watch a lot of TV.
    Mr. Kelly. You don't?
    Mr. Bloom. No.
    Mr. Kelly. Okay. Well, I don't watch as much as I used to.
    Mr. Bloom. Nor I.
    Mr. Kelly. But I have to tell you, when I see this type of 
thing going on and we told the public, geez, General Motors is 
working so hard and they are paying back all the money. What we 
didn't tell them was they were using taxpayer money to 
disingenuously make a statement they were actually paying off 
their loan. They in fact did not.
    Mr. Bloom. Congressman----
    Mr. Kelly. I have to tell you, I lived that, I walked that 
walk, and I understand the difference between taxpayer funded 
loan repayments and private individuals paying back the loans 
that they took out and they are responsible for.
    I will tell you this was not a good program. It did in fact 
pick winners and losers. It did in fact use taxpayer money. 
Every penny of this money came out of taxpayers' pockets and we 
have huge loans. I like what you said earlier about part of the 
problem with these companies were they made promises they 
couldn't keep, and I have to tell you, I hope we use that same 
type of philosophy when I read about how the President made his 
decision, they weren't going to allow these companies to 
continue to operate the way they operated knowing it was 
leading to a path of destruction. They weren't going to lend 
the money to do that. I hope we use that same philosophy when 
we talk about raising the debt ceiling on a business that 
really General Motors pales in comparison to the way this 
business is being run and it is all being done the same way 
with taxpayer dollars.
    Mr. Chairman, I am going to yield back my time. But I have 
to say this is one of the most disappointing examples of how 
the government gets involved and in over its head and putting 
people in a position that they absolutely did pick winners and 
losers. The biggest losers in this whole thing, the American 
taxpayer.
    Mr. Jordan. I thank the gentleman. I now recognize the 
ranking member, Mr. Kucinich.
    Mr. Kucinich. I want to say to my friend Mr. Kelly some of 
the questions that he raises, someone who has been involved 
with auto dealers, are questions that I raised with Mr. 
LaTourette in the last Congress and those are legitimate 
questions.
    Now I have a slightly different take on this, and Mr. Bloom 
rather than an outright bailout wasn't in support of GM and the 
auto industry, truly an investment, not only in auto companies 
themselves but in communities in the country. And America's 
overall skill set to continue with manufacturing sectors, that 
could have been lost actually if the Big Three had gone down.
    Mr. Bloom. I think a number of independent observers, 
Congressman, have indicated that if General Motors and Chrysler 
had failed the auto supply base would have likely quickly 
failed with it. Ford could have very well gone down after that. 
The CEO of Ford supported the auto restructuring for that very 
reason. I think the entire ability of the United States to make 
cars was at risk at that time.
    Mr. Kucinich. Well, my colleague is right about the role of 
the taxpayers, but the taxpayers put in value. Did the 
taxpayers receive value back?
    Mr. Bloom. I think what the taxpayers got back is hopefully 
they have an automobile industry, they have all those people 
working, they have all those communities with that support, all 
those dealers who--and some dealers unfortunately were not able 
to keep their dealerships, but the overwhelming majority were 
and if General Motors could----
    Mr. Kucinich. That was a private decision, was it not?
    Mr. Kelly. That was a decision by General Motors.
    Mr. Kucinich. And I wasn't happy with many of those 
decisions. We had some good people in the greater Cleveland 
area who lost their dealership.
    Mr. Bloom. No one could be happy with those decisions, but 
it was worth noting that if General Motors had failed every 
single dealer would have lost their dealership.
    Mr. Kucinich. Mr. Speaker--speaker already. Mr. Chairman, I 
ask unanimous consent for a November 2010 report published by 
the Economic Policy Institute to be put in the record.
    Mr. Jordan. Without objection so ordered. And while we are 
here, again our colleague Mr. Kildee has a letter that he would 
like to submit for the record, too.
    [The information referred to follows:]

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    Mr. Kucinich. Thank you.
    I just want to quote from that report which I have asked to 
be submitted in the record. It said, ``The return on investment 
for the public from the restructuring of the domestic auto 
industry was extraordinary. Federal, State and local government 
stayed between $10 and $78 for every dollar invested in the 
auto industry restructuring plan. Federal taxpayers are likely 
to recoup most of all their investment in GM and will enjoy a 
net gain of at least $61 billion on their 5 billion to 7 
billion investment in the auto industry recovery plan.''
    Now, back to Mr. Bloom, would you agree that the actual 
return on Treasury's investment of the domestic auto industry 
in terms of actual return, plus amount saved, would be greater 
than the amount of financial taxpayer assistance extended to 
companies?
    Mr. Bloom. I think a number of independent studies have 
indicated that, Congressman.
    Mr. Kucinich. And you say a number of independent studies, 
can you present the committee with any independent studies that 
indicate that?
    Mr. Bloom. We would be happy to provide you with additional 
data on that.
    [The information referred to follows:]
    [Note.--The information referred to was not provided to the 
subcommittee.]
    Mr. Kucinich. So would you tell this committee what are the 
taxpayers getting out of their investment in GM besides just 
monetary payback?
    Mr. Bloom. Well, again I think they are getting the fact 
that we have an automobile industry here in America, General 
Motors employs tens and tens of thousands of people, the supply 
base employs three times what GM employs. There are tens and 
tens and thousands of dealers. There are numerous communities, 
small businesses. When a large manufacturing plant closes, 
wherever it is, the impact on the overall community is 
enormous. And so all those communities that have GM plants, all 
of which would have lost those employers would have suffered 
far, far greater harm than in fact they have suffered during 
the recession. And your example of large town, for better or 
worse, is only one of dozens of what we would have seen across 
this country if we had allowed General Motors and Chrysler to 
fail.
    Mr. Kucinich. I want to say again that my colleagues in 
this room have complained quite correctly about the government 
picking winners and losers. I join them on that theme with 
respect to what happened on Wall Street, because I not only 
voted against the bailout, I was one of the leaders against the 
bailouts. But I am looking at something a little bit different 
from the finance economy which has paper transactions and 
actually works to put people out of work. This is American 
manufacturing, this is our core, this is part of our strategic 
industrial base. And while some could argue that what the 
government did was actually pick a winner, if that is true, the 
winner it picked was the American automotive industry and the 
American auto workers, and all of the small businesses that 
depend on that industry.
    So I just want to mention that, and I have a great deal of 
respect for my colleagues who are concerned about how 
taxpayers' money is being spent here. And I think in this one 
it sounds like the Auto Task Force was cognizant of their 
responsibilities.
    Mr. Jordan. I thank the gentleman. Mr. Snowbarger, we 
haven't forgotten about you. I guarantee I will have at least 
one question for you at some point.
    I first want to go to Mr. Bloom. You said earlier, we did 
not involve ourselves in the day-to-day operations. That is 
your statement.
    Mr. Bloom. Yes, sir.
    Mr. Jordan. Can we put up on the slide the e-mail from Mr. 
Feldman to--okay, good, can you look at this e-mail?
    Mr. Bloom. I would like to, sir, but I can't.
    Mr. Jordan. I will read. This is from Mr. Feldman, part of 
the Auto Task Force, correct?
    Mr. Bloom. Yes.
    Mr. Jordan. You know him.
    Mr. Bloom. Yes.
    Mr. Jordan. Served on the task force with him, okay.
    Have you guys begun a dialog--this is to General Motors--
have you begun a dialog with the UAW over your desire to see 
the hourly plan terminated? At a minimum this could be messy 
and UAW should probably be brought into the loop.
    Are you aware of this correspondence between the Auto Task 
Force and the group you served on?
    Mr. Bloom. I was, and I don't think I am copied on this e-
mail.
    Mr. Jordan. Well, let me just ask this question, is that 
involvement of the Auto Task Force in day-to-day operations?
    Mr. Bloom. I think this is a matter that touches on the 
Delphi litigation, so I am unfortunately not in a position----
    Mr. Jordan. Let's go to the next one, let's go to the next 
one. We have the next one. This is I think from Jennie 
Ingbretson to Greg Martin at General Motors: Greg, we would ask 
that you move the reference to Treasury down to the third 
paragraph taking it out of the lead.
    So this is on a press release that was going to go out 
where we now have the Auto Task Force involving themselves with 
General Motors on a press release. So again, I just want to 
ask, is this involvement in day-to-day operation?
    Mr. Bloom. No, I think what this is is involvement 
regarding the Treasury Department. So in other words, when the 
company is talking about us, meaning the Treasury Department, I 
think it is proper that we would have interest in how we would 
be characterized.
    Mr. Jordan. Some would argue this, Mr. Bloom, some would 
argue if Treasury is involving themselves in press releases 
that the company is doing, but not making any other decisions, 
not picking winners and losers and not deciding which 
manufacturing facilities stay open and which stay closed, even 
though we have taxpayer dollars at risk, some would say that is 
really what is going on? This is what the Auto Task Force did 
they were coordinating how press releases went out, but we--GM 
made the decisions which facilities stayed open and which ones 
were closed.
    Mr. Bloom. What we were doing is----
    Mr. Jordan. I am just asking you this, do you see how 
someone could gather and reach that conclusion?
    Mr. Bloom. No, I wouldn't, Congressman.
    Mr. Jordan. Really? Really?
    Mr. Bloom. Yes, I would answer the question, what we did is 
if General Motors was going to talk about the Treasury 
Department we would obviously want it to be done properly. 
General Motors came forward to the Treasury Department with a 
restructuring plan. We scrutinized that plan, we criticized 
that plan, we examined that plan. But we did not----
    Mr. Jordan. Let me ask you something, can we look at that 
plan? Let me ask you this, the first restructuring plan that 
you guys gave the thumbs down to, are Members of Congress 
allowed to see that?
    Mr. Bloom. I believe those plans were actually posted on 
the Web, the February plan.----
    Mr. Jordan. The last time I got a chance to talk about this 
in the Judiciary Committee we were told that was proprietary 
information, we couldn't look at that.
    Mr. Bloom. To the extent the companies provided us 
information under confidentiality agreements----
    Mr. Jordan. So, oh, oh, we can't see what you saw.
    Mr. Bloom. I didn't say that. I said to the extent the 
companies provided us information that they believed implicated 
their proprietary technologies or business plans, we were not 
in a position.
    Mr. Jordan. Well, answer my question. We won't be able to 
see the same thing you saw?
    Mr. Bloom. I am happy to take that----
    Mr. Jordan. Yes or no.
    Mr. Bloom. I am happy to take back a particular request. 
And if there is a document----
    Mr. Jordan. If it is changed, because it was no before. I 
would like to see what you saw. You made a decision. GM had a 
restructuring plan, you said no, yet you are not involved in 
day-to-day operations, yet you are influencing press releases 
and everything else. We would like to see the same plan you 
saw.
    Mr. Bloom. If you have documents you wish to see, I am 
happy to review the list. I am not at Treasury, but I am sure 
Treasury would be happy to review the list and provide you 
those documents that would be appropriate.
    Mr. Jordan. Let me put up one more e-mail. This is from 
General Motors to Treasury. As indicated in this morning's 
call--so I understand, you probably had daily calls, weekly 
calls, it says in this morning's call, so there was some 
reference to a call that was taken. I assume some kind of 
conference call: We will await a further, ``temperature check 
from Jennie on whether to go Friday.'' This is an announcement 
on your new small car.
    So again timing when the company will announce what it is 
going to do while the task force was giving the thumbs up or 
thumbs down to that. Yet no influence, no picking winners or 
losers, no involvement in day-to-day operations. Do you still 
stand by that statement?
    Mr. Bloom. Yes.
    Mr. Jordan. You see this here, though? Temperature check, 
getting a temperature check from the Auto Task Force before GM 
can release another press release.
    Mr. Bloom. Again if General Motors----
    Mr. Jordan. They are not talking about Treasury, they are 
talking about the new car they are building. You can't say that 
this involves Treasury.
    Mr. Bloom. I believe this press release was--again, I don't 
know the specifics of this particular press release. We 
obviously communicated with General Motors on a regular basis, 
particularly prior to the bankruptcy. We communicated with them 
on a regular basis regarding their plans. But that did not mean 
that we gave them direction about which plants to close or 
which cars to make.
    Mr. Jordan. It seems to me you just can't--common sense 
says you can't have it both ways. You can't have all this 
taxpayer money at risk, an Auto Task Force selected by the 
President, you replaced the board, you replaced the CEO of 
General Motors, and say we are not running the company. It just 
has to be one or the other.
    Mr. Bloom. We absolutely did.
    Mr. Jordan. Yet you maintain this fine line and yet you are 
influencing how they write the press release.
    Mr. Bloom. What I said was--I said in my statement we 
absolutely were involved in picking the Board of Directors at 
the conclusion of bankruptcy. And as I said, after the 
bankruptcy we relied on the Board of Directors to be 
responsible for overseeing the day-to-day operations----
    Mr. Jordan. Let me do one question, and I will go a second 
round first to Mr. Kucinich and then Mr. Kelly and Mr. Johnson.
    Mr. Snowbarger, throughout this process what kind of 
interaction was there between the Auto Task Force and--because 
were you heading up the Pension Guaranty board then. Well, 
throughout this process you were running--you were involved 
with Delphi in this process. So what kind of interaction took 
place between the two of you?
    Mr. Snowbarger. In regard to General Motors?
    Mr. Jordan. In regard to both, Delphi General Motors 
overall.
    Mr. Snowbarger. My recollection was that very early in the 
process PBGC had a conversation with Mr. Rattner, I believe. 
Mr. Bloom was invited to that meeting but it was held up at 
another occasion, at which we discussed the consequences of the 
General Motors failure on the pension system of General Motors 
and what the impact of that might be on the pension insurance 
system.
    Mr. Jordan. What discussions did they have with you 
relative to the hourly being topped off and not the salary?
    Mr. Snowbarger. None.
    Mr. Jordan. Any comments, any correspondence that they gave 
you on that specific question?
    Mr. Snowbarger. I don't recall any, no.
    Mr. Jordan. Okay. The ranking member is recognized for an 
additional 5 minutes or a second round of questioning.
    Mr. Kucinich. Thank you very much, Mr. Chairman. I just 
want to say that, well, that the chair's line of inquiry here 
whether or not the Auto Task Force was running GM is an 
appropriate line of inquiry. He has an interest in knowing 
that. I would have an interest in knowing that because the 
outcome is so stunning it may give you more credit than at this 
point you apparently are willing to want to claim. But I want 
to say, Mr. Chairman--Mr. Chairman, I am going--okay--When the 
chair comes back, I am going to state this for the record 
because it relates to something that he said and I will be glad 
to enter it into a colloquy with him if he has any response, 
but the e-mail that was put into evidence that the chair had 
quoted about the press release may inadvertently prove Mr. 
Bloom's case because the e-mail shows that Treasury is actually 
not in control. If you look, ``Greg, we would ask that you move 
the reference to Treasury down to the third paragraph taking it 
out of the lead.'' If they were in control they wouldn't have 
asked. They would tell, they would be dictating. That didn't 
happen. Just a subtle difference, but I just want to call that 
to the attention of the committee.
    And what the e-mail does is it concerns GM's 
characterization of Treasury and of course you can have an 
interest in a characterization without actually dictating the 
policy. That is a point that I wanted to make.
    I have a few questions to Mr. Snowbarger. The PBGC takes 
over a pension when a corporation decides to stop offering the 
pension to its retirees, either through a bankruptcy or 
corporate decision not to do so. Can you briefly describe the 
circumstances that led to the creation of the PBGC to protect 
defined benefit pensions?
    Mr. Snowbarger. First of all, let me correct a 
misimpression there. Companies can't just decide not to 
continue their pension plan.
    Mr. Kucinich. They have to file.
    Mr. Snowbarger. Well, but they have to show they cannot 
continue their business and maintain the plan.
    Mr. Kucinich. Okay, can you tell us what----
    Mr. Snowbarger. Well, I don't know how far back you want to 
go.
    Mr. Kucinich. Let me go--no, for the retirement plans that 
have taken over by the PBGC have you found that their original 
sponsoring corporations had been making the appropriate 
contributions to their retirement funds to keep them fully 
funded or not?
    Mr. Snowbarger. Pension plans don't come to the PBGC if 
they have been properly funded.
    Mr. Kucinich. My understanding is that Delphi Corp. failed 
to make necessary contributions to its retirement plans and 
when PBGC assumed trusteeship of them you found them to be 
underfunded, is that true?
    Mr. Snowbarger. That is correct.
    Mr. Kucinich. And when PBGC takes over an underfunded 
retirement plan how does the PBGC meet its funding obligations 
particularly when a pension fund for which it assumes 
trusteeship does not have enough assets even to pay the 
benefits that PBGC is allowed to pay under law?
    Mr. Snowbarger. We basically have four sources of revenue. 
One is premiums, they are set by Congress. The second is 
recoveries and recoveries from bankruptcies and from 
settlements with corporations, investment income and then 
bankruptcy recoveries which are typically pennies on the 
dollar.
    Mr. Kucinich. So do you have the ability in the bankruptcy 
process to recover assets that can be put to use to pay 
benefits?
    Mr. Snowbarger. We are unsecured creditors in a bankruptcy 
for most purposes.
    Mr. Kucinich. And that means?
    Mr. Snowbarger. That means we get pennies on the dollar, if 
there are assets at all.
    Mr. Kucinich. Does Congress normally provide top-up support 
for insufficient pensions that PBGC has taken over?
    Mr. Snowbarger. No.
    Mr. Kucinich. Would that require special legislation?
    Mr. Snowbarger. Yes.
    Mr. Kucinich. Can you meet your current--the long-term 
obligations with your current assets?
    Mr. Snowbarger. If you look at the long-term picture, at 
this point we are $23 billion in deficit. We have plenty of 
money for meeting immediate obligations, but over the long term 
we are $23 billion short assets to liability.
    Mr. Kucinich. And could you translate that, how many 
millions of retirees are actually looking at receiving or 
having retirement benefits that are far below what they 
anticipated when they were in the work force?
    Mr. Snowbarger. Well, we cover the pensions of 
approximately 1.5 million people. Approximately 80 percent of 
those we pay the full amount of their benefits and so they 
aren't reduced, more like 84 percent. So it is only 16 percent 
that receive some reduction in benefits although that can be 
fairly substantial.
    Mr. Kucinich. So just to wrap it up, Mr. Chairman. Those 
1.5----
    Mr. Snowbarger. One and a half million.
    Mr. Kucinich. They are in trouble and the PBGC is in 
trouble because the corporations who had made a commitment to 
fund those programs didn't keep their end of the deal, isn't 
that right?
    Mr. Snowbarger. Again, plans don't come to PBGC unless they 
are underfunded.
    Mr. Kucinich. So is that right?
    Mr. Snowbarger. Yes.
    Mr. Kucinich. Okay. I want to thank Mr. Chairman.
    Mr. Kelly [presiding]. I would like to thank the ranking 
member also.
    Mr. Johnson, give you 5 minutes.
    Mr. Johnson. Thank you, Mr. Chairman. Mr. Bloom, did you 
know when you were working at the Treasury that GM was paying 
their loan with the taxpayers dollars from one pot to another, 
did you know that?
    Mr. Bloom. When General Motors----
    Mr. Johnson. That is a yes or no. Did you know that?
    Mr. Bloom. I am going to try to give you a complete answer.
    Mr. Johnson. I would just like a yes or no. Did you know 
they were taking out of one taxpayers' pot and putting it into 
another?
    Mr. Bloom. We knew that they were using their corporate 
resources, which were legally theirs, to repay the loan.
    Mr. Johnson. And it was taxpayer funding, you knew that, 
right?
    Mr. Bloom. We knew that all funds invested in General 
Motors had come from either ourselves or the Canadian 
Government.
    Mr. Johnson. Did you have any sense of responsibility to 
the American people to divulge that? I mean this is the 
Treasury, this is the group that handles and manages the 
Nation's wealth and it is being pillaged. Did you not have a 
sense of responsibility to let the American people know that a 
corporation that had defaulted was playing a shell game with 
taxpayer dollars?
    Mr. Bloom. I don't think in any way, shape, or form we 
deceived the American people, and I don't think anybody was 
being pillaged in any way, shape, or form.
    Mr. Johnson. Do you think it was appropriate to claim that 
they were paying down their debt from one part of taxpayer 
dollars that was essentially a pop up in the first place into 
another?
    Mr. Bloom. I think the Treasury's characterization of what 
General Motors did, which is that we invested money in this 
company, after we made the investment the money was the 
property of the company. At that point they chose to use some 
of their corporate resources to repay a debt that they had 
taken out from the Treasury.
    Mr. Johnson. You called it an investment, I think the 
American taxpayers saw it as a bailout, right? That was money 
that was supposed to be paid back, correct?
    Mr. Bloom. The money was invested in three forms, some of 
it was in the form of preferred stock, some of it was in the 
form of common stock, and some of it was in the form of a debt 
instrument.
    Mr. Johnson. We have to move on. I have another e-mail clip 
that I want to have shown up here if it could come up. You said 
a few minutes ago that you had no specific knowledge of the 
small car--what is it called, the revised small car release? 
Look at the cc line up there that is highlighted in red. Who is 
ron.bloom?
    Mr. Bloom. No, I didn't say that, Congressman. What I said 
is I wasn't on the e-mail you referred to Mr. Feldman.
    Mr. Johnson. You said you had to no specific knowledge of 
that release?
    Mr. Bloom. No, I did not.
    Mr. Johnson. Oh, that is what you said. We can have it read 
back.
    Mr. Bloom. We can have it read back, yeah, that would be 
fine. If I said that, I misspoke. What I said was I was not 
involved in the e-mail that was asked about Mr. Feldman. I was 
aware that General Motors had made decisions regarding the 
construction of a new facility or the revitalization of the 
facility to make small cars. Yes, I was aware of that.
    Mr. Johnson. I think it is pretty clear that you jest with 
a very straight face because I am having trouble understanding 
when you are joking and when you are not, because this all 
looks like a joke to me and to the American taxpayer.
    Mr. Snowbarger, was the PBGC pressured by the Auto Task 
Force or anyone else involved in the bailout process to make 
the determination to terminate the Delphi salaried employees 
pension plans?
    Mr. Snowbarger. No.
    Mr. Johnson. If not, why then did the PBGC decide to 
terminate a plan that was funded in a similar manner and at a 
similar level at the average of the top 100 pension funds in 
America at the time? Why was that decision made?
    Mr. Snowbarger. Well, I disagree with your characterization 
that it was funded at that level. We applied the same standard 
to all of the Delphi plans and the standards are in ERISA, and 
by statute in other words, and we made the decision on that 
basis, as well as the fact that Delphi was no longer----
    Mr. Johnson. We have a short time fuse here. Why then is 
the PBGC fighting so hard against releasing the records of the 
PBGC decisionmaking process that led up to that determination?
    Mr. Snowbarger. I disagree with that characterization.
    Mr. Johnson. Have you released those records?
    Mr. Snowbarger. I believe we have.
    Mr. Johnson. You have released those records?
    Mr. Snowbarger. I believe so, yes. We released them to this 
committee as well as to the IG, Special IG for the TARP, as 
well as to GAO, as well as Freedom of Information Act requests 
from Barry Selfikes, hourly employees, and in the court case as 
well.
    Mr. Johnson. Okay. Well, I apologize then, I was 
misinformed. Thank you for clearing that up.
    I have no further questions, Mr. Chairman. I think this is 
regrettable and I can assure you that I am going to continue to 
look for the answers to find out how we rectify this and bring 
justice to the Delphi retirees.
    Mr. Kelly. Thank you, Mr. Johnson. Mr. Burton from Indiana.
    Mr. Burton. I apologize for just getting here, Mr. 
Chairman, but one of the concerns that I have had, and I am not 
sure who can answer this question, is why the salaried 
employees--and I have heard that you can't comment on this 
because it is in litigation, but to the degree that you can 
answer any questions, I would like to know why the salaried 
employees got chopped up so badly compared to the others that 
were under contract. It just doesn't make any sense to me and 
it doesn't seem fair.
    When I look at--I don't know if there is a chart. Do we 
have any of those charts? There was a chart or a slide we could 
show. Hello--oh, there we have it. If you look at this slide I 
just want to concentrate on the last column there, those are 
the salaried employees. You see they took 100 percent cut in 
their life insurance, 100 percent cut in their health care, 100 
percent cut in their vision and dental, 100 percent cut in 
medical, and between 30 and 70 percent cut in their base 
pensions. And I just don't understand why. What did they do 
that was so bad that they didn't get the same consideration as 
those that were under contract?
    Mr. Bloom. Well, Congressman, as I indicated earlier I am 
not in a position to comment specifically on the allegations in 
the Delphi litigation. I can----
    Mr. Burton. Excuse me, I don't think it is allegations. You 
may not be able to comment, but these aren't allegations. A lot 
of these salaried employees live in my district and I have 
talked to them about that, so this isn't allegations. They were 
cut. So anyhow go ahead.
    Mr. Bloom. Again, I am not in a position to comment on 
that. I am certainly in a position to agree with you that many 
stakeholders in the entire General Motors and Chrysler 
bankruptcy unfortunately received far, far less than they were 
promised and not everyone received the exact same amount as a 
percentage of what they were promised. As I indicated earlier, 
for instance, the number of the suppliers, probably many of 
whom do business in your district, received 100 cents on the 
dollars. And that was because the company came forward with a 
restructuring plan that they believed provided the treatment of 
the various stakeholders that was required in order to 
successfully effectuate the bankruptcy. We did not insist that 
they pay everybody 100 cents on the dollar because that would 
have cost the taxpayer a multiple of what was eventually 
invested in General Motors. And we did judge that the 
management had made a good faith effort to be commercial and 
fair in their judgments about how to treat people.
    Mr. Burton. Let me interrupt here. I mean this is pretty 
damning when you look at this, because the union workers that 
were under contract and the others that were under contract 
they were treated at least somewhat fairly. In fact, some of 
them were treated very well considering the bankruptcy. But the 
salaried employees, just for what reason I know not, just got 
killed, and it just seems almost un-American that you would 
show deference to one segment of the employee population for a 
company like General Motors and then throw the rest of them to 
the dogs. And it just seems really bad.
    I am not saying this because they are from--Delphi has a 
plant near Kokomo in our district. I would say this about any 
company in the United States. If there is a bankruptcy, it 
seems like it should be shared pain. And there certainly is no 
shared pain as far as the salaried employees were concerned.
    Mr. Bloom. It may be, Congressman, that the bankruptcy laws 
of the Nation should be reviewed on that question, but the 
company's action were entirely consistent with bankruptcy law. 
Two judges ruled over that very, very carefully, extensive 
hearings, and judged that the company's actions were completely 
in concert with bankruptcy law. I agree with you that it is 
terrible when any individual or business isn't able to receive 
the entire promise that they were made. All stakeholders to 
this tragedy had to take sacrifice. And there were 
circumstances where some received more than others. It was 
based on the commercial judgments, as I said.
    Mr. Burton. Well, if judges rendered that kind of a 
decision based upon current bankruptcy laws we probably ought 
to take another look at them, because if a major corporation 
goes bankrupt like this and leaves one segment of the employee 
population hanging out to dry, that needs to be reevaluated.
    So I will talk to my staff. Thank you, Mr. Chairman, for 
the extra time. I will talk to my staff about taking a look at 
the bankruptcy laws. Thank you.
    Mr. Kelly. I thank the gentleman from Indiana. Also back to 
the ranking member, Mr. Kucinich.
    Mr. Kucinich. I want to thank the chairman. And I want to 
thank the gentleman from Indiana because of a point that he 
makes about people in his district and Delphi employees who 
were not protected in the bankruptcy is well received here. And 
as I mentioned earlier when Chairman Jordan was in the chair, I 
look forward to working with my colleagues to see what we might 
do to be able to provide some relief to those individuals who 
were essentially left out, because all we are trying to do here 
is to make sure that our constituencies who may have been 
involved in this are not going to be destroyed financially.
    Which goes to the question, Mr. Bloom, that the concern 
that so many Members have expressed here about what has 
happened in dealerships. Now the Auto Task Force didn't deal 
with that question. I understand that, you have testified to 
that. But, you know, in my district and other places around the 
country GM essentially put people out of business like that, 
people who had auto dealerships in their families for 
generations. And there is a lot of hard feelings about that. 
Those feelings are not going to easily go away, because there 
were people who were embedded in a community, gave everything 
they had to a business and then suddenly with the government 
providing the money this is what gets people. The government 
provides the money, you save the corporation, the corporation 
turns around and destroys dealerships so--you can respond.
    Mr. Bloom. Congressman, nobody again is glad that General 
Motors believed that in order to survive it had to 
substantially restructure its dealer base. But General Motors 
unfortunately had become a much smaller company than it was 
when it had the number of dealers it had. The company believed 
that in order to be successful and to not have the investments 
that the President made simply be for naught that they needed 
to rationalize their dealer network. We examined that 
proposition in addition to many other propositions, including 
that they close factories. And the chairman pointed out earlier 
that one of the factories was closed in his district. That is a 
terrible thing when a factory is closed and all those workers 
are told to go home. But the alternative was no General Motors 
at all. And if there had been no General Motors at all, then 
everybody would have lost their job, everybody would have lost 
their pension.
    Mr. Snowbarger began to talk about what would have happened 
to the PBGC if the General Motors pension plan had terminated 
or the Chrysler plan had terminated. They have a million and a 
half beneficiaries; General Motors all by itself has almost 
that many. So we have to evaluate this against the real world 
alternative and the real world alternatives is if General 
Motors is allowed to entirely liquidate and everybody loses----
    Mr. Kucinich. I understand, but you need to understand from 
our side of the table here is that a whole lot of this looked 
arbitrary to us. Just so you know. I am not putting this on 
you, I am just saying that is the way it looked. You need to be 
aware of that. I just want to----
    Mr. Bloom. I appreciate that.
    Mr. Kucinich. For the record here, Mr. Chairman, my friend 
Mr. Johnson inserted into the record an e-mail from Greg Martin 
referencing the revisions made by Frederick Henderson. And I 
think it is important to identify who the people are. Greg 
Martin was an official at General Motors, Frederick Henderson 
was the CEO of GM, and the fact that Mr. Bloom was on a cc 
really doesn't prove anything here, I don't think, other than 
the fact that GM was in control of GM. The Treasury Department 
represented observers having to ask not having to dictate to 
GM. And frankly I think that is what we found here, that GM 
throughout the bailout remained under private control. And I 
don't see from this memo which has Mr. Rattner and Mr. Bloom up 
here as a cc, that this coming from GM officials, that this in 
any way indicates that it was--that it was non-GM officials who 
were leading the dance.
    So I just want to point that out. And I again I do that 
because I understand the concerns that my colleagues have, 
share many of those concerns, I would just want to correct the 
record, and I thank you, Mr. Chairman.
    Mr. Kelly. I thank the ranking member.
    I am going to allow myself 5 minutes, Mr. Bloom and Mr. 
Snowbarger. I think today the most important thing we can 
understand about this hearing is it is not about Democrats and 
it is not about Republicans, it is about the American people, 
and I would think that this hearing is indeed essential when we 
talk about taxpayer dollars being invested.
    If you could, Mr. Bloom there was $50.2 billion in total 
TARP assistance. Can you tell me how that was divided up?
    Mr. Bloom. Congressman, I am not familiar with that 
particular number. There is $49.5 is the total assistance to 
GM. I am familiar with that number. I am not--I am trying to be 
responsive to your question. I am not familiar with a $50.2 
number.
    Mr. Kelly. Do you know how that was divided up?
    Mr. Bloom. Well, the 40--again the rough numbers are that 
had the total assistance provided to General Motors was $49.5 
billion. The total assistance provided to Chrysler was $12.5 
billion, there was $1.5 billion provided to Chrysler Financial, 
$17.2 billion provided to General Motors Acceptance Corp., now 
called Ally Financial, and there is about $4.1 billion between 
assistance provided to suppliers and to guarantee warranties. 
Not all of those funds were drawn down and so the amount of 
funds that were drawn down is about $4 billion less than that, 
but that is roughly the total amounts that were at one point 
allocated to those companies.
    Mr. Kelly. Well, I know quite a bit of money was put in 
escrow. And as we referenced early, some of the moneys that 
were put in escrow were used to pay down the loan with 
interest. I am just going to walk you through something, I have 
done this for many, many years, I am sure most the people in 
the gallery have done the same thing. When you buy an 
automobile there are stipulations put in--there are 
stipulations put in what we would call putting a deal together. 
A lot of it has to do with the total amount of money you are 
going to borrow and the stipulation in most cases requires some 
down payment money. And I am just trying to relate this so that 
the American people understand this. The down payment money 
required at the time an individual buys a car is usually 
referred to as cash. And it is truly cash. It is not part of 
another loan structure because that in fact does distort the 
total amount that that car is owed on. I think what bothers me 
more than anything else, we used borrowed money, taxpayer money 
in order to pay off a loan. It wasn't cash that was paid down. 
I don't know I am getting that across.
    My point is, again this is for the American people to 
understand, this truly was a very odd and very strange 
bankruptcy and one that is so complicated that in 40 days it 
could right from the dead and be on its feet again and be no 
problem, no problem. That is truly--that was a remarkable 
activity. I know myself that had I declared bankruptcy, I don't 
think I would be given that same opportunity.
    So the American people really do need to know that this was 
in fact as the President described, a historic structuring of a 
loan. But the bottom line is these are all taxpayer dollars and 
I think that is the thing most discouraging. And you made a 
reference earlier that the new GM, I have absolutely no idea 
that the old GM is still in bankruptcy and the new GM is not.
    General Motors has survived, it would have survived in some 
form having going through bankruptcy on its own. Old GM is gone 
forever and we know that because it did follow a little 
different route and bought into a program that absolutely led 
it down a road that it could never recover from. It is just 
difficult to sit here and listen to the premise that General 
Motors in its wisdom was able to eliminate private businessmen, 
people who had franchises. I was one of them. One of my 
franchises was taken away, not because I didn't know how to run 
it, not because it wasn't profitable, not because I wasn't 
hitting my market share and doing all the things I had to do. I 
had friends who absolutely--not only were they terminated as 
dealers, they chose to exit as individuals. Some people took 
their own lives because a business was taken from them by a 
procedure that had absolutely nothing to do with natural 
events.
    So while this may have been historic in the President's way 
of talking about it, it was absolutely catastrophic for small 
business people. And I am not blaming you, but I am saying the 
American people better understand that there is something going 
on right now that makes absolutely no sense to me. I have to 
tell from you somebody who was a General Motors dealer now for 
60 years, General Motors never gave me anything. Every car, 
every car, every part, everything I have ever done was 
purchased with my own money or my family's money. So to sit 
there--and I am not blaming you again, I am just saying this 
premise that General Motors could not afford its dealers is 
absolutely ridiculous. We were all on our own, we were living 
outside of that home and we were supporting our own families.
    So I think the American people have always believed that 
they want what is fair, not what is legal because at 63 years 
old I know there is no correlation between what is fair and 
what is legal. It is absolutely horrendous that we were able to 
do these type of thing to individuals who had made such great 
contributions in their communities. And if you don't believe 
that, I would suggest you go into any of these little 
communities and find out these dealerships that are no longer 
there. Their names are still on the outfield fences of all the 
Little Leagues, they were the people who supported the Girl 
Scouts, the Boy Scouts, their local bands, everything that was 
going on in their high schools. These are the guys they go to 
first.
    To me picking and choosing winners and losers is absolutely 
up to the free market, it is not up to the government. The 
government made a very serious mistake and overstepped their 
bounds. I do appreciate your being here today.
    I will recognize Mr. Issa for 5 minutes, please.
    Mr. Bloom. I will just say one thing, and I would agree 
with almost everything you said. Where I would respectfully 
disagree is if the government had not stepped in I do not 
believe General Motors would have faced a fate other than a 
complete liquidation and the elimination of all dealerships who 
sold General Motors cars.
    Mr. Kelly. But we will never know.
    Mr. Bloom. We won't know, sir. But at the time I think we 
could find no evidence whatsoever that private capital markets 
financed this company in bankruptcy.
    Mr. Kelly. And I do understand that but there were 
bankruptcies they could go through, a structured bankruptcy. 
Unfortunately it was taken out of their hands and it was taken 
care of by the government. I have to tell you, I was there, I 
walked the walk, and I know people who lost not only their 
dealerships, but they took another exit, too. And I got to tell 
you it was absolutely horrible and should never, ever, ever 
happen again. And at that point I am going to recognize Mr. 
Issa for 5 minutes.
    Mr. Issa. I thank the chairman. Mr. Bloom, I am just old 
enough and unlike the chairman I wasn't in the car business 
directly, but I was a supplier to the car business. Do you 
remember Potamkin Cadillac in New York? Do you remember ever 
hearing that name? Largest Cadillac dealer in America, largest 
limousine provider? Victor Potamkin once challenged General 
Motors by trying to get a replacement of the President. You 
know how General Motors fixed that? They paid him twice what 
his dealership was worth, then handed it to Roger Penske, just 
to get him out of the business. At that time they didn't have 
you to do their dirty work, so they simply paid him a lot of 
money to get rid of a thorn in their side who they felt was 
agitating against the then President.
    Do you think at least in some way that General Motors had a 
reason to make selections that had something to do other than 
with the absolute monetary hard core dollar and cents best 
interest when they used you in order to cut their number of 
dealers?
    Mr. Bloom. Congressman, I am not familiar with the story 
you have related, so I can't speak to it.
    Mr. Issa. It's famous enough that I say it knowing that 
Roger Penske is a dear, wonderful guy that I have raced 
against. But the bottom line is General Motors over the years 
hated some of their dealers, loved others, cut all kinds of 
deals. The difference is they didn't have the government to do 
it free for them.
    Mr. Bloom. Congressman, as I said, I don't have any 
evidence one way or the other. I am not doubting the veracity 
of your story. You asked----
    Mr. Issa. But do you think----
    Mr. Bloom. To your question which I can answer----
    Mr. Issa. Since in retrospect we found dealerships that 
made sense that were cut and others that were preserved. There 
were huge amounts of mistakes in that decision process.
    Mr. Bloom. I think what we did when we looked over General 
Motors' plan to rationalize their dealer network is we 
satisfied ourselves that the company had acted reasonably. We 
did not review dealer-by-dealer decisions because again we did 
not want to intervene in the day-to-day operations of the 
company.
    Mr. Issa. So in that case you were vulnerable to whatever 
their underlying reasons were because you weren't able to audit 
the legitimacy of something that was ordinarily not doable?
    Mr. Bloom. Again we were not in the position and we did not 
want to place ourselves, we did not think it would be 
appropriate to put ourselves in the position to become the 
management of the company and decide whether it be a dealership 
decision or a factory decision.
    Mr. Issa. Let me follow up with a question. I chair this 
committee but I also serve on the Judiciary Committee. And I 
was there for the revisions to the patent or to the--I was 
there for the patent, but I was there for the revisions to the 
bankruptcy laws. Do you think that what you did in 
circumventing the bankruptcy laws, what otherwise would 
ordinarily have happened in any conventional bankruptcy and 
bypassing the decisions that could have been made, not by you 
but by a bankruptcy judge and other trustees, do you think that 
you set a good precedent for a model for the future, a bad 
precedent, or do you think you are simply a one-time event?
    Mr. Bloom. I think that two bankruptcy judges have found 
that we did absolutely nothing to circumvent the bankruptcy 
laws, that this was in fact an ordinary course bankruptcy. So I 
don't think there is any change in the basic status of our 
Nation's bankruptcy laws.
    Mr. Issa. So you think that maintaining the pensions for 
union workers while screwing the salary workers was in the 
ordinary course of what would have happened in any other 
bankruptcy? Isn't it true in any other bankruptcy everybody 
would have been in the same pot of losing their pensions? They 
would have been all or nothing? This differentiation has never 
happened in bankruptcy to my knowledge. Has it happened to your 
knowledge?
    Mr. Bloom. Yes, It has quite a bit actually.
    Mr. Issa. Oh, really?
    Mr. Bloom. Yeah.
    Mr. Issa. And your basis is salary people are not important 
but union workers are?
    Mr. Bloom. It is not my basis. My basis is companies make 
decisions how to best effectuate bankruptcies and sometimes 
that decides that certain unsecured creditors, sometimes like 
suppliers, sometimes like warranty holders are treated 
differently because the company concludes in order to maintain.
    Mr. Issa. I suspect you probably find that bond holders 
getting a haircut ahead of general creditors is also typical.
    The gentleman, the former chairman wants a little time. So 
I yield the remaining time to him.
    Mr. Kelly. Mr. Burton.
    Mr. Burton. I thank the gentleman for yielding.
    But the bankruptcy judge just approved the plan. They 
didn't actually make any decision on how the funds were to be 
disseminated. They just approved the overall plan.
    Mr. Bloom. I think what they did, Congressman, was 
determine that the bankruptcy laws of our country had been 
followed.
    Mr. Burton. Well, okay. But they made no changes; they just 
said the bankruptcy laws had been followed?
    Mr. Bloom. Yes.
    Mr. Burton. But they didn't actually make any determination 
on whether there was fairness or not.
    I ask unanimous consent for another minute or so.
    Mr. Kelly. Without objection.
    Mr. Bloom. I think the determination was that the 
bankruptcy laws had been followed, that they hadn't been turned 
on their head, or any phrase like that.
    Mr. Burton. Okay. You were on the Auto Task Force. You were 
a part of that. I am looking here at some notes. It says in a 
piece of correspondence: Have you guys begun a dialog with the 
UAW over your desire to see the hourly plan terminated? At a 
minimum, this could get messy, and the UAW should probably be 
brought into the loop.
    Do you know about that comment?
    Mr. Bloom. Yes. I answered a question about that earlier.
    Mr. Burton. Well, answer it again. I didn't hear it.
    Mr. Bloom. No, I am happy to, sir.
    Yes. I wasn't on that particular e-mail chain, and given 
that that is part of the litigation, I am not in a position to 
comment on it.
    Mr. Burton. Well, did you say this at a dinner? There was a 
dinner, and it was reported by David Shepardson, Washington 
correspondent for the Detroit News, at a farewell dinner of the 
Auto Task Force held in the restaurant Rosa Mexicano in late 
July 2009, that you allegedly said, ``I did this all for the 
unions.''
    Mr. Bloom. No, I did not say that.
    Mr. Burton. You did not say that?
    Mr. Bloom. No, sir.
    Mr. Burton. So you were misquoted?
    Mr. Bloom. That's correct.
    Mr. Burton. Well, I am going to call that guy up and ask 
him if you said that. You know that you are under oath here?
    Mr. Bloom. I am fully aware.
    Mr. Burton. You made no comment like that at all?
    Mr. Bloom. No, sir.
    Mr. Burton. Well, Mr. Chairman, we will check that out. I 
am going to call this reporter and we will just see what he 
said.
    The other thing, though, is you did see the graph and you 
did see how the salaried employees were treated as opposed to 
the union workers.
    Mr. Bloom. I did.
    Mr. Burton. You did. And you were involved in that 
decisionmaking process?
    Mr. Bloom. No, I was not.
    Mr. Burton. Who was involved in the decision?
    Mr. Bloom. General Motors came forward with a plan. As I 
said, I am not in a position to comment on the particulars of 
the Delphi situation. But like, as in all the aspects of this 
bankruptcy, General Motors came forward with a plan about how 
they thought best to reorganize themselves. We looked at that 
plan.
    Mr. Burton. And the Auto Task Force had nothing to do with 
that?
    Mr. Bloom. No. I said no, we had very much to do with it.
    Mr. Burton. But you can't comment because it's in 
litigation?
    Mr. Bloom. This particular question about the treatment of 
the Delphi salaried employees I am not in a position to comment 
on. I would be delighted to talk with you about the treatment 
of other stakeholders, about other groups, about other aspects 
of the bankruptcy. I am happy to talk with you about that at 
whatever lengths you would like.
    Mr. Burton. Well, if you look at the graph, the other 
employees weren't treated all that badly. The union workers, 
the UAW was treated extremely well. Some of the others were 
treated a little less well, but the salaried employees really 
got screwed.
    And if you were on the Auto Task Force and had anything to 
do with that, you ought to be ashamed of that. That's terrible. 
Those people should never have been treated like that.
    Thank you, Mr. Chairman.
    Mr. Kelly. I thank the Member.
    Just 1 minute, Mr. Bloom, and we are going to be finished 
here. We have had references to the fact that it was the board 
of directors, the General Motors board of directors that made 
these decisions.
    Mr. Bloom. Let me try to be more accurate. What I said was 
we were involved in putting a new board of directors in after 
the bankruptcy.
    Mr. Kelly. Okay.
    Mr. Bloom. During the runup to the bankruptcy, it was the 
management. There was a board of directors, but it was the GM 
management board.
    Mr. Kelly. If you could, because I know you know the answer 
to this.
    Mr. Bloom. Yes.
    Mr. Kelly. Under the old GM, how was that board of 
directors determined?
    Mr. Bloom. Elected by the shareholders.
    Mr. Kelly. And under the new GM, how was that board of 
directors determined?
    Mr. Bloom. The original board, the original board of the 
new GM, was put forward by the Treasury Department as the 
largest shareholder.
    Mr. Kelly. So to say that, really, the decisions were not 
made by the Treasury Department--these are all folks that were 
appointed, in fact, by this administration. These were not 
elected by shareholders; is that a correct statement?
    Mr. Bloom. We were the largest shareholder.
    Mr. Kelly. I understand.
    Mr. Bloom. But I think the distinction I was trying to 
make, Congressman, was that as the employees of the 
administration, we did not make these decisions. After the 
bankruptcy, we entrusted a group of independent men and women.
    Mr. Kelly. And I understand that, but I also know that the 
appointments came out of the administration, and I think you 
and I both know that. So having said that, there's a huge 
difference between a shareholder, the old GM that was elected 
by shareholders, board of directors, and the new GM that, 
because of the way you divvied up the company, you established 
who the board of directors would be. So it wasn't really done 
in the same way it had been done in the past. So I think it's 
important to be honest about it.
    I am going to recognize the ranking member for 1 minute.
    Mr. Kucinich. Just briefly, and I thank the gentleman for 
yielding because, you know, this question about whether or not 
the government controls GM's decision, that's the focal point 
here, and the points that the chair just made, Mr. Kelly just 
made, the relationship between the new board decisionmakers 
that resulted in a lot of dealers closing, I see that as a 
legitimate line of questioning. But one of the things it does 
not establish--and I just want to say this for the record--and 
if Mr. Bloom himself had anything to do with it, and you kind 
of indicated that when you were charging the--on behalf of 
those who lost their dealerships, and it's not necessarily that 
Mr. Bloom had anything to do with it, but I think the chair is 
well taken in probing further how those decisions were made. I 
think the public has the right to know. I think the public has 
the right to know.
    Thank you, Mr. Chairman. Thank you.
    Mr. Kelly. With that, I am going to thank the panel. Mr. 
Bloom, thank you very much. Mr. Snowbarger, thank you very 
much. We are going to recess for 1 minute, and then we have a 
final panel after that. Thanks so much.
    [Recess.]
    Mr. Jordan [presiding]. I want to welcome our second panel 
of witnesses. Again, I apologize for today's schedule. And as 
you see, unfortunately, all your great wisdom is only going to 
get to a couple of Members of Congress, it looks like, because 
there are so many different things at this hour, but we really 
wanted to get this hearing in.
    Our first witness is Mr. Dan Ikenson, associate director of 
the Herbert A. Stiefel Center for Trade Policy Studies, Cato 
Institute. We appreciate you being here.
    Mr. Bruce Gump, vice chairman of the Delphi Salaried 
Retiree Association; Dr. Thomas Kochan, did I get it right?
    Mr. Kochan. Pretty close.
    Mr. Jordan. Pretty close. That means I didn't get it right. 
I know you are being kind.
    Dr. Kochan is the George Maverick Bunker professor of 
management at the Massachusetts Institute of Technology. And 
Ms. Shikha Dalmia, senior analyst at the Reason Foundation.
    As I said, if you were here earlier, it's the custom of the 
committee to swear everybody in. So would you please stand and 
raise your right hands.
    [Witnesses sworn.]
    Mr. Jordan. Let the record show everyone answered in the 
affirmative.
    Let's go right down the list. Mr. Ikenson, you are up 
first.

   STATEMENTS OF DAN IKENSON, ASSOCIATE DIRECTOR, HERBERT A. 
STIEFEL CENTER FOR TRADE POLICY STUDIES, CATO INSTITUTE; BRUCE 
GUMP, VICE CHAIRMAN, DELPHI RETIREE ASSOCIATION; THOMAS KOCHAN, 
 PROFESSOR, MASSACHUSETTS INSTITUTE OF TECHNOLOGY; AND SHIKHA 
           DALMIA, SENIOR ANALYST, REASON FOUNDATION

                    STATEMENT OF DAN IKENSON

    Mr. Ikenson. Thank you. Good afternoon, Chairman Jordan, 
Ranking Member Kucinich, and members of the subcommittee. I am 
Dan Ikenson, associate director of the Herbert A. Stiefel 
Center for Trade Policy Studies at the Cato Institute.
    Since 2009, I have followed closely the events surrounding 
the auto company bailouts and bankruptcies, and I am grateful 
for the opportunity to share my concerns regarding the lasting 
implications of the GM bailout. The views expressed today are 
my own and should not be construed as representing any official 
positions of the CATO Institute.
    With help from some pundits and various media outlets, the 
administration is pitching the narrative that the auto bailouts 
were successful. The evidence in support of that conclusion 
seems to be limited to the fact that GM has been profitable 
over the last five quarters and that Chrysler has repaid much 
of its debt to the U.S. Treasury.
    But calling the bailout successful is to whitewash:
    One, the diversion of funds from the Troubled Asset Relief 
Program by two administrations for purposes unauthorized by 
Congress.
    Two, the looting and redistribution of claims against GM's 
and Chrysler's assets from shareholders and debt holders to 
pensioners.
    Three, the unprecedented encroachment by the executive 
branch into the finest details of the bankruptcy process to 
orchestrate what bankruptcy law experts describe as sham sales.
    Four, the cost of denying Ford and the other more deserving 
automakers the spoils of competition.
    Five, the costs of insulating irresponsible actors such as 
the United Autoworkers from the outcomes of an apolitical 
bankruptcy proceeding.
    Sixth, the diminution of U.S. moral authority to counsel 
foreign governments against similar market interventions.
    And, seven, the lingering uncertainty about the direction 
of policy under the current administration that pervades the 
business environment to this very day.
    I think if the President wants to take credit for saving 
the auto industry, he should also take responsibility for the 
regime uncertainty that has persisted during his 
administration, since much of that uncertainty, which is 
manifest in weak business investment and hiring, flows from 
lessons learned from the auto intervention.
    Acceptance of the administration's pronouncement of auto 
bailout success demands profound gullibility or willful 
ignorance. If proper judgment is to be passed, then all of the 
bailout's costs and benefits must be considered. Otherwise, 
calling the bailout a success is like plotting the recovery of 
a drunken driver after an accident while ignoring the condition 
of the family he severely maimed.
    The lasting implications of the bailout will depend on 
whether or not Americans ultimately accept the narrative that 
the bailout was a success. If it is considered a success, the 
threshold for interventions will have been lowered and 
Americans will have to judge even more bailouts in the future. 
If it is considered a failure, as it should be, the lasting 
implications will be less destructive because the threshold 
that tempts interventionists will be higher.
    On that score, contrary to what the administration would 
have the public believe, gauging the success of the GM bailout 
requires consideration of more than just the ratio of finances 
recouped over financial outlays. There are numerous other costs 
that don't factor into that equation.
    If the bailout is considered a success, some of the lasting 
implications likely will include the following:
    One, an increase in government interventions and bailouts 
of politically important entities.
    Two, fear-mongering will be considered an effective 
technique to stifle debate and enable a stampede toward the 
politically expedient outcomes.
    Three, Americans will be more willing to extend powers 
without serious objection to the executive branch that we would 
not extend in the absence of a perceived crisis.
    Four, a greater diversion of productive assets is likely to 
occur, from productive assets to political ends, such as 
resources for research and development engineering to lobbying 
and lawyering.
    Five, a greater uncertainty to the business climate as the 
rule of law has weakened and higher-risk premiums are assigned 
to U.S. economic activity.
    Less prudent decisionmaking from Ford Motor Co., for 
example, knowing that it has banked its bailout.
    A greater push for the administration for a comprehensive 
national industrial policy and less aversion to subsidization 
of chosen industries abroad.
    The objection to the auto bailout was not that the Federal 
Government wouldn't be able to marshal adequate resources to 
help GM. The most serious concerns were about the consequences 
of that intervention, the undermining of the rule of law, the 
property confiscations, the politically driven decisions, and 
the distortions of market signals. Any verdict on the auto 
bailout must take these crucial considerations into account.
    GM's recent profits speak only to the fact that politicians 
committed more than $50 billion to the task of subsidizing and 
reconfiguring GM. With debts expunged, cash infused, and 
efficiencies severed, ownership reconstituted, sales rebates 
underwritten, and political obstacles steamrolled, all in the 
midst of a recovery in U.S. auto demand, only the most 
incompetent operations could fail to make profits.
    But taxpayers are still short a minimum of $10 billion to 
$20 billion, depending on the price that the government's 500 
million shares of GM will fetch. That is a lot of public money 
in the balance. Nevertheless, the administration should divest 
as soon as possible without regard to the stock price.
    Keeping the government's tentacles around a large firm and 
an important industry will keep the door open wider to 
industrial policy and will deter market-driven decisions 
throughout the industry, possibly keeping the brakes on the 
recovery.
    Yes, there will be a significant loss to taxpayers, but the 
right lesson to learn from this chapter in history is that 
government interventions carry real economic costs, only some 
of which are readily measurable. Thank you.
    Mr. Jordan. Thank you, Mr. Ikenson. We appreciate the great 
points you made in your testimony.
    [The prepared statement of Mr. Ikenson follows:]

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    Mr. Jordan. Again, just so you know, obviously your 
testimony will be part of the record. We will get that to each 
Member so they can hear your good words.
    I do have to leave here in a couple of minutes. I want to 
preside for Mr. Gump's testimony, and then Congressman Kelly 
will take over for our last two witnesses.
    Mr. Gump, you are recognized for 5 minutes.

                    STATEMENT OF BRUCE GUMP

    Mr. Gump. Thank you. Chairman Jordan, Ranking Member 
Kucinich and members of the committee, thank you for the 
opportunity to represent the thousands of Delphi retirees who 
were in fact mistreated by the Obama administration during its 
unprecedented intervention in the auto industry, particularly 
in respect to the remaking of General Motors.
    I know you have had an opportunity to read my written 
testimony, so I will summarize quickly.
    And I want to start off by saying that I am not a lawyer, I 
am an engineer. I will do the best I can with some of this, but 
you have to understand that I may not be able to get all of it 
right.
    From the time Candidate Obama said in May 2008 that if a 
company goes bankrupt and workers need to be our top priority, 
not an afterthought, to the weekly radio address by Vice 
President Biden just a few weeks ago when he said, We are 
focused on making sure that if you work hard, play by the 
rules, you will be able to get ahead, put your kids through 
college and retire with dignity and security, we have learned 
that talk is cheap in this town and action and determination to 
do what is right is hard to come by.
    In this situation, a purposeful decision was made to create 
a government that was commercially minded instead of being 
bound by the precepts of our Constitution, such as due process 
and equal protection.
    Decisions were discriminatory and politically motivated 
that were made behind closed doors, out of sight of any 
supervisory board or committee. And for the last 2 years the 
records of those decisions have been protected and fiercely 
guarded by both the PBGC and the Treasury. The only explanation 
so far was that there was no commercial necessity to do 
anything for those people. In reality, it was done for the 
expediency of GM's bankruptcy exit, not for the benefit of the 
people of the country.
    A quick chronology would include the fact that GM was 
forced into Chapter 11 bankruptcy by the administration. 
Delphi, a GM spinoff, had already been in bankruptcy for 
several years but remained a major supplier to GM, and so was 
needed in order for GM to be able to survive. Because Delphi 
had not made contributions to their pension plans, the PBGC had 
placed liens on Delphi's foreign assets which made it 
impossible for Delphi to sell those assets. So the Treasury cut 
a deal with GM, the PBGC, and Delphi such that the PBGC gave up 
their liens in favor of an equity position in new Delphi, a 
one-time $70 million payment from GM, and a $3 billion 
unsecured claim. Thus, GM could keep their major supplier, but 
the participants in the pension plans lost a great deal, unlike 
the pensioners at General Motors.
    In May 2009, the PBGC met along with Treasury, Delphi, GM 
and the UAW to come to a mediated settlement on the GM and 
Delphi bankruptcies. We were not represented, even though our 
government is charged with equally protecting all of the 
citizens of this country. They did nothing for the groups of 
workers, especially the salaried workers who were considered 
too weak to retaliate at the bad treatment that they planned, 
but they well cared for the groups that were well organized, 
rich, and large enough to retaliate. That is what is meant by 
commercial necessity.
    The PBGC also followed an involuntary termination process 
whereby they simply took over without any adjudication or 
outside review, thus denying us the opportunity to be 
represented or follow any kind of due process. Simply put, our 
decades of effort for the company were considered to be 
valueless to this administration, and so they kicked us to the 
curb while taking good care of their supporters, the only 
worker group represented at the negotiating table.
    In short, this administration's unprecedented involvement 
from the perspective of the retirees who could not protect 
themselves was political, illegal, unethical and immoral. They 
had the ability to treat every worker in a fair and equitable 
manner, and they still can, but they refused then and they 
continue to refuse to do so.
    The long-term effects of these decisions are horrendous, 
indeed. According to a study by Youngstown State University 
extended to include the national consequences, every year, $1.6 
billion of economic activity has been lost and will continue to 
be lost every year for the next two decades or more.
    Clearly, in violation of the requirements of TARP, 
thousands of retirees have completely lost their futures. They 
will struggle to survive at or near the poverty level for the 
rest of their lives. The lost health care insurance on top of 
the reduced pensions results in many not being able to pay 
mortgages or put their kids through college. They have to 
compete for the same nonexistent jobs that so many others are 
trying to find.
    One such person is here with me today. She has to deal with 
several other issues, including a husband who is fighting a 
debilitating disease. She and thousands of other retirees are 
in an unsustainable situation.
    Others have seen their homes foreclosed. They have had to 
declare personal bankruptcy. Some have seen their families 
break up, or worse.
    This is simply shameful and it must be corrected.
    We need help, your help, to bring true transparency to this 
issue, to reveal for all to see the records of the agreements 
that helped some, but excluded others. We need your help to 
achieve a fair and equitable settlement for all the Delphi 
retirees, especially the salaried retirees who worked just as 
hard, contributed just as much, and depended on the company and 
our government, to live up to the promises made over decades.
    We are here because the administration believed that we 
were too weak to fight back, but this is an issue of right and 
wrong. It is not Democrat or Republican or administration 
versus the legislature. We must not allow a precedent that 
allows the U.S. Government to classify citizens based on their 
perception of political strength to stand, nor should we allow 
an unprecedented step to be done in such a nontransparent 
manner. We will stand on this side of right, and we will fight. 
That is why we are here, and we need your help to win.
    Mr. Jordan. Thank you, Mr. Gump.
    [The prepared statement of Mr. Gump follows:]

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    Mr. Jordan. Dr. Kochan.

                   STATEMENT OF THOMAS KOCHAN

    Mr. Kochan. Thank you, Mr. Chairman, and members of the 
committee. Thank you for the opportunity to testify today.
    I am going to make three points in my testimony.
    First, government actions to restructure General Motors and 
Chrysler through controlled bankruptcy processes were essential 
to and successful in saving between 1 and 3 million jobs, 
avoiding a potential second Great Depression, and providing the 
pressure and the opportunity for U.S. firms to reemerge as 
world-class competitors in the global auto industry.
    Two, support of the UAW and other unions with ongoing 
relationships with GM during this restructuring process was 
critical to the survival of these companies and to the entire 
U.S. automobile industry. Further support and cooperation 
between the company and the union are essential for GM as well 
as for other auto industry companies for building sustainable 
jobs and enterprises.
    Three, the specific top-up provisions governing Delphi 
hourly workers were negotiated as a part of a complex, multi-
issue, multi-party agreement governing the creation of Delphi 
in 1999, and again in the restructuring negotiations during the 
Delphi initial bankruptcy proceedings in 2006.
    To retrospectively single out and renege on this provision 
during the 2008 and 2009 restructuring and bankruptcy processes 
would have materially harmed the ongoing relationship between 
the union and company and would have jeopardized the industry's 
restructuring and rebuilding process.
    Let me expand on these points a bit.
    The combined actions of the Bush and Obama administrations 
to support the restructuring of the auto industry is likely to 
be assessed by historians as one of the most important and 
effective steps taken during that perilous time to avoid the 
great recession from descending into a Great Depression. The 1 
to 3 million jobs saved in 2009 were probably expanded in 
subsequent years.
    The actions also avoided setting off a cascading set of 
costs and losses of revenues to State, Federal, and local 
government budgets which would have resulted from increased 
unemployment insurance costs of between $8 billion and $25 
billion, losses in GDP that would have in turn reduced revenues 
of State governments between $15 billion and $48 billion, and 
reduced Federal revenues somewhere between $59 billion and $170 
billion.
    The combined effects of the loans and the structural 
adjustments and the additional concessions from workers and 
creditors, the leadership changes that were put in place, and, 
in the case of Chrysler, the joint venture with Fiat, have now 
positioned the automobile industry to reemerge as a world-class 
competitor.
    For the first time in a decade, the three companies are 
reporting profits, are expanding capacity, hiring workers, and 
collectively gaining market share.
    I emphasize the effects of these actions on the entire 
automobile industry in the United States because of the high 
degree of interdependence that exists across assemblers, 
suppliers, and dealers.
    The effect of the largest firm, in this case General 
Motors, entering a bankruptcy without a debtor-in-possession 
financing option would have produced at best a long and 
uncertain restructuring process and at worst a potential 
liquidation of the company. Either of these outcomes would have 
set off a chain reaction that would likely have brought down a 
significant number of automobile suppliers and significantly 
harmed other assembly firms and even more dealers than were 
already harmed across the country.
    Indeed, it's the interdependence across these major 
assemblers and suppliers that have grown over the years as more 
output has been outsourced to the supplier base.
    In 1980, it was about 1.2 to 1, where jobs from the 
supplier base to the assemblers existed. In 2008, this has 
grown to 3.5 to 1. Moreover, most of these suppliers provide 
components to multiple assemblers. Delphi, for example, is the 
sole-source supplier of cockpits for vehicles in the Mercedes 
plant in Alabama. If Delphi had been forced into liquidation, 
Mercedes production would have been shut down.
    This is only one of many examples of this nature. Ford, in 
particular, would have been put at risk by an extended and 
uncertain outcome of a GM bankruptcy because it outsources a 
higher proportion of its components to outside suppliers than 
does Chrysler or GM. Instead, Ford not only avoided bankruptcy, 
it used its time gained in these past several years to build a 
very strong partnership with the UAW that will serve as a model 
for the industry in years ahead.
    Let me speak to the role of the UAW in this industry. The 
survival of GM and Chrysler through these processes required 
the support of the UAW and other key unions with ongoing 
relationships with the companies. Moreover, for these companies 
to prosper and to build sustainable jobs and enterprises in the 
future, labor and management relations will need to continue to 
be transformed, that transformation process that began prior to 
the crisis. This involves not only deep economic concessions by 
the work force, it also involves joint union-management efforts 
to work together to pull--to improve quality on the shop floor, 
to improve the quality of the negotiations process, and to 
engage in consultation and information-sharing processes at the 
highest levels of the companies and the unions.
    In 2007 negotiations, prior to this crisis, all three of 
the major companies in the United States and the UAW agreed to 
restructure and lower the costs of health care, of pensions for 
current and retired employees, and cut wages of starting 
salaries in ways that matched or came close to matching their 
major competitors.
    Each of these companies, to varying degrees, has also been 
working to engage its workers in building the kind of 
knowledge-based work systems that foster innovation, 
productivity, and quality improvements. Years of research and 
evidence and experience has demonstrated that, to these 
companies and to the union, that they need to work together as 
partners in leading and sustaining this kind of transformation.
    Finally, this issue of the top-off, is worth some 
commentary and it needs to be put in its historic context.
    The UAW negotiated provisions to protect its members' 
pensions in 1999 when Delphi was initially severed off as a 
separate company from GM. At that point the union recognized 
there was significant risk that Delphi might not survive. And 
as a responsible union, it negotiated a number of contingency 
provisions to protect its members and retiree benefits.
    These negotiations and subsequent ones that took place 
when, indeed, Delphi was forced to declare bankruptcy in 2006 
involved multiple issues, multiple tradeoffs, economic 
concessions, and sacrifices by of the stakeholders: current 
workers, salaried workers, future employees, retirees.
    Mr. Kelly. Dr. Kochan, I am going to ask you to----
    Mr. Kochan. Yes, I will. I will finish in 30 seconds.
    To single out one provision to the so-called top-out clause 
for scrutiny at this late, without considering this overall 
package in tradeoffs, would be inappropriate and highly 
counterproductive. Moreover, there is a well-established 
provision in the Bankruptcy Code of honoring contracts of 
suppliers and other shareholders with critical ongoing 
relationships with the company. This is exactly the case here.
    Finally, I will close with one comment. And that is, this 
statement has nothing to say about the question of fairness to 
the salaried employees. As an individual, as a professor who 
studies and works with all members, all segments of the labor 
force, I find it very upsetting that the salaried workers were 
left out of this process. My testimony has nothing to say about 
the fairness or unfairness of that, other than what I have just 
referred to.
    Mr. Kelly [presiding]. Thank you. Thank you very much.
    [The prepared statement of Mr. Kochan follows:]

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    Mr. Kelly. Ms. Dalmia.

                   STATEMENT OF SHIKHA DALMIA

    Ms. Dalmia. Thanks for having me here.
    I am a senior analyst at Reason Foundation, a nonprofit 
think tank. I have lived in the metro Detroit area for the last 
23 years--I think I am the only one here on the panel who lives 
in Michigan--and written extensively about the auto industry.
    As a homeowner in the area, my fate is intimately tied to 
that of the auto industry and, hence, I am among the region's 
hundreds of thousands of homeowners who are rooting for the Big 
Three.
    But I don't think that the $95 billion or so taxpayers--
that the taxpayers have spent to bail out GM and Chrysler has 
positioned them for future success. Taxpayers stand to lose $28 
to $34 billion dollars. But beyond that, there are at least 
four hidden costs that would plague the U.S. economy in the 
years and decades to come, and I will address each of them very 
briefly.
    The first is--and in my view, the most unfortunate aspect 
of the bailout--is that it has completely undermined the rule 
of law in bankruptcy. One of the main arguments for the bailout 
was that GM and Chrysler didn't have the cash on hand, nor 
could they raise it from moribund financial markets to finance 
a Chapter 11 bankruptcy. Hence, if the government did not step 
in and bail out the companies, they would face liquidation.
    Many experts doubt that liquidation was a plausible 
scenario for GM. But if it were, and GM were unable to raise 
private bankruptcy financing, there was an argument for the 
government to guarantee the loan amount to private lenders--
which arguably would have been a lot less than the bailout 
amount--and then let longstanding bankruptcy law determine how 
much of a loss the various stakeholders--unions, lenders, 
shareholders--would have to suffer.
    Instead, this administration essentially wrote its own 
bankruptcy laws as it went along, throwing out longstanding 
established precedent.
    For example, and we have talked about this earlier, 
normally secured creditors are paid back on a priority basis in 
bankruptcy proceedings. But the government put unions, who are 
regarded as low-priority unsecured creditors ahead of them. The 
whole processes was riddled with myriad examples of unorthodox 
practices.
    Such flouting of bankruptcy law essentially signals to 
future lenders that should they loan money to politically 
important private companies, they can't count on the standing 
rule of law to protect them.
    Additionally, the other big unintended hidden cost of the 
bailout is the opportunity cost. One of the ironies of the 
bailout is that it constitutes a missed opportunity, not a 
second chance for GM and Chrysler. At best, it has prepared 
these companies to compete with the industry leaders of 
yesterday rather than those of tomorrow.
    American automakers have been losing market share to 
foreign competitors even before the current recession began, 
and one big reason was their uncompetitive labor costs. 
Bankruptcy should have been an opportunity for them to 
significantly rationalize their obligations to labor, clean up 
their balance sheets, and start afresh.
    GM and Chrysler's post-bankruptcy labor costs are 
comparable to Toyota's, which are about $56 an hour. But Toyota 
no longer sets the industry's cost curve. Smaller Asian firms 
such as Hyundai and Kia, whose labor costs are $40, do. It is 
an open question whether GM can compete with the Kias of the 
future.
    Also, GM did not get meaningful relief from its legacy 
costs, something it would have under a normal bankruptcy. 
Without the bailout, these companies would have carried on in 
some form, but they would have looked very different from what 
they do right now. The bailout has further entrenched the 
status quo in the auto industry.
    The third big problem with the bailout is that it has 
unleashed a systemic moral hazard that will fundamentally 
weaken America's market-based economy. In the 2 years prior to 
the bailout, GM had accrued $70 billion in losses, thanks to an 
unwieldy and bloated operation that supported eight brands. It 
had amassed a debt that was 24 times its market capitalization. 
Yet it had no cash on hand for product development or to 
weather a rainy day.
    By contrast, in those 2 years, Ford laid off workers, sold 
money-losing brands, and mortgaged all its assets, including 
its logo, the blue oval, to build $25 billion in reserves that 
it invested in product development and for use in an economic 
downturn.
    But the bailout rewarded GM's irresponsible, reckless 
behavior and penalized Ford's prudent, forward-looking one. 
Given such precedent, any company that feels that it is too big 
to fail, or is a national icon, or is deeply enmeshed in the 
broader U.S. economy, or is a major regional employer, will 
wonder whether it makes more sense for it to save for an 
economic downturn or hold out for taxpayer assistance. Just as 
the Wall Street bailout became a justification for the auto 
bailout, the auto bailout will become justification for future 
bailouts.
    And the last problem with the bailout is that it has 
legitimized increased government management of private 
companies. Government help means government control, and given 
the controls of the bailout are not identical to those of 
returning the companies to profitability, it was inevitable 
that there would be political meddling in the operations of the 
companies in the name of protecting jobs, taxpayer investment, 
and so on.
    The Wall Street Journal has extensively documented what a 
huge role politics played in determining which and how many 
dealerships the companies would shutter. There are many other 
examples.
    The bailout has opened the door for a kind of direct 
government involvement in private business that makes a mockery 
of the constitutional scheme of a government of limited and 
enumerated powers. Ultimately, this might be the most damaging 
legacy of the bailout.
    Mr. Kelly. All right. Thank you for your testimony.
    [The prepared statement of Ms. Dalmia follows:]

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    Mr. Kelly. I will grant myself about 5 minutes.
    Mr. Ikenson, would you do me a favor and just kind of walk 
through the metrics of this successful government intervention 
in the free market? And I am trying to understand, because in 
the real world there's a different way of defining success.
    Mr. Ikenson. Yes.
    Mr. Kelly. If you could tell me, at the end of the day, the 
total taxpayer investment versus the total loss.
    Mr. Ikenson. I believe there was $50 billion invested in 
GM, and that doesn't count some of the tax exemptions that have 
been granted. There's about $12 to $14 billion in tax 
exemptions granted to the company to offset losses. It was an 
unorthodox provision, given what transpired with GM.
    GM also is getting--GMAC, was also kept afloat to the tune 
of about $17 billion. And the main reason for GMAC's 
preservation was to help facilitate the sales of GM cars. And 
my understanding is that there is a tax credit to purchasers of 
the Chevy Volt.
    So the number that the public has grabbed a hold of is $50 
billion, but I think it's probably more than that.
    In November, there was an IPO, and 23--I think $23 billion 
was raised, leaving taxpayers on the hook for about $27 
billion. And GM still holds--the government holds about 500 
million shares of GM.
    In order to be made whole financially for that first $50 
billion, the price of GM stock needs to be about $53, or the 
average price for selling 500 million shares needs to be $53 
million. As of this morning, it's $30, and it's been hovering 
in that neighborhood for the past several months. And the 
reason it's not going to appreciate substantially anytime soon 
is because the market knows that the largest shareholder of GM 
stocks wants to dump about 500 million, so that's keeping 
downward pressure on the value. So I think it's a safe bet that 
taxpayers will be stiffed about $10 to $20 billion on that. But 
those are just the financial costs.
    The other costs, which Shikha and I described in terms of 
rule of law, in terms of denying the spoils of competition to 
companies like Ford, Honda, and Hyundai, those are other costs. 
There are plenty more difficult to observe, those costs which 
are unseen, that need to be factored into this. It's not just a 
financial cost.
    Mr. Kelly. So if you could, the total figure that you come 
up with.
    Mr. Ikenson. Left right now? I am assuming that there's 
going to be a sale of GM and the average price of that sale is 
going to be around--in the thirties. So taxpayers are out about 
$12 billion there. Then there is the tax exemptions, $12 to $14 
billion; some of that is a direct hit on taxpayers, not all of 
it.
    And then there is the GMAC $17 billion which, to my 
knowledge, has not been paid back. So if you have a pencil.
    Mr. Kochan. That is 41.
    Mr. Kelly. I do. I am up to $41 and pretty soon we are 
going to get to some serious money, are we not?
    Mr. Ikenson. Yes, that's right--and the $7,500 credit, tax 
credit for purchases of Volts. I don't know whether General 
Electric is going to be getting its major tax credit there. 
They are on the hook for 50,000. I think Jeff Immelt told the 
President that he would buy 50,000 of these volts. So it's a 
lot of money. It's more than what----
    Mr. Kelly. I will comment, I am a Chevrolet dealer. The 
main purchasers of Chevrolet Volts are not the American public. 
And I would suggest or submit to anybody that if it takes 
$7,500 of taxpayer money to make that car viable, that's 
probably not a car you really want in the market.
    Mr. Ikenson. Right.
    Mr. Kelly. I have a bad habit of only buying cars from 
General Motors that I can actually sell and make a profit on; 
which is an unusual concept in Washington, by the way.
    Mr. Kochan. Mr. Chairman, may I comment?
    Mr. Kelly. Just 1 minute, Doctor.
    I do find it unusual that we are going through the pains of 
the Dodd-Frank, and I have a lot of friends in the small banks. 
I mean, can you imagine any bank being able to walk away from a 
$41 billion loss and say, ``You know, that was a great 
investment.'' Only in this Beltway do we come up with these 
types of metrics, and I think it's absolutely astounding that 
we can say that with a straight face.
    And as far as the American car company recovery, are we 
also taking credit for the disaster in Japan? Because a lot of 
those cars would have been sold here, had they been able to be 
produced. And I think that we are really, we are making a very 
unstable argument for the recovery process.
    Dr. Kochan, you wanted to make a comment.
    Mr. Kochan. Thank you, Mr. Chairman.
    The $41 billion is a good number to use as the total cost. 
But you have to balance that against two things: first, just 
the numbers on the low end of the savings of unemployment 
insurance and other government expenditures, the loss of 
revenue that would have resulted to State and local governments 
and to the Federal Government; at the low end of all of those 
estimates, from three different sources, comes to $82 billion. 
And so you get really a one-to-two.
    Mr. Kelly. But your premise is based on the idea that 
General Motors would have failed completely had it gone--okay--
see, I don't----
    Mr. Kochan. A long, unstructured bankruptcy would have had 
substantial costs, and that's the low end. The liquidation 
costs would have been a factor of about five more than that. 
That's liquidation. This is only a long, unstructured debt.
    Now, the second thing that has to be considered here, and 
you know this as an experienced person in the industry, the 
cascading effects across the industry would have been 
devastating; not only your dealership, but many, many others; 
not only Delphi but many other suppliers; not only GM and 
Chrysler. Ford's CEO testified that he would put--he would see 
his company at risk. So we have to take an industry 
perspective, not just----
    Mr. Kelly. I hear you. I hear you.
    Mr. Kochan. I agree with my colleagues on the panel. We are 
not in the business of saving specific companies. We are in the 
business of protecting the American economy, jobs, communities, 
and the future of the industry. And that's what was at risk.
    Mr. Kelly. I appreciate the model that you are speaking of, 
but I think there would have been some survival of General 
Motors at some level. So a lot of this of is purely academic.
    Mr. Kochan. No, it's not just purely academic, Mr. 
Chairman.
    Mr. Kelly. Mr. Kochan--Ms. Dalmia, please.
    Mr. Kochan. Mr. Chairman, let me finish.
    Mr. Kelly. No, I will come back to you. I will come back to 
you. Ms. Dalmia.
    Ms. Dalmia. You know, just to put this question of metrics 
in some context, Toyota and Hyundai have lost 2.5 percent of 
their market shares between January and May. Out of that, 1.4 
percent of that market share has been picked up by Hyundai and 
Kia. And automakers, the Big Three have picked up 0.8, out of 
which a bulk of it is by Ford which is a non-bailed-out 
company.
    So the $80 billion, or however much we have spent, has gone 
to protect about 0.4 or 0.5 percent of the market share of GM 
and Chrysler. I just find it hard to believe that GM would not 
have survived to capture that kind of market share at this 
stage in the game, you know, when car sales have been going up 
a little bit.
    So, you know--I mean, these are all counter factuals--but I 
agree with Dan that if we are going to credit GM and Chrysler 
for saving jobs, then we also need to take the cost of the 
broader economy of the jobs lost.
    The very fact that the UAW's pensions and their wages have 
been protected more than at a competitive level suggests that 
we have fewer jobs in the economy, because the worker cost of 
these workers is really quite high. If we were paying them a 
little less, you might have had more jobs, in fact.
    Mr. Kelly. Yes, and I can appreciate that.
    But as I said earlier, the whole purpose of the hearing 
today was for the American public to actually understand where 
their tax dollars went. And there's an argument on both sides, 
and I do understand it. But I do think a lot of what we are 
talking about--and one of the things I don't understand is we 
are willing to say that that is something we can write off.
    Maybe somebody can explain to me, why is this 
unrecoverable; the losses that we are projecting? I know as an 
independent person if I borrow money, I am actually responsible 
for the whole amount.
    Mr. Ikenson. I am sorry; you are asking what?
    Mr. Kelly. Well, we are saying, we are willing to write 
off----
    Mr. Kochan. I don't think anyone is willing. I think Mr. 
Ikenson explained it; the real issue would be if the stock 
value rises to the level to recoup the full investment, then 
you would get it. But we can't control the stock market. I 
think that's where the losses come.
    I think the direct loans have been paid and there was a 
debate about, you know, where those dollars----
    Mr. Kelly. Where those dollars came from, right. I 
understand that.
    Mr. Kochan. The loans will be repaid, or have been repaid. 
It's--the loss on the direct investment may come if the current 
value of the stock stays the same. I think that's the 
situation.
    Mr. Kelly. And I would go back to the original purpose of 
the hearing today was to talk about the government injecting 
itself into a free market; and, again, whether we determine 
right or wrong, it's up to the American people to determine was 
their money spent properly, was it spent the right way. And at 
the end of the day, did it do what it was supposed to do? And a 
lot of it, there's differing opinions on both sides. And I can 
appreciate that.
    But I do know one thing. At the end of the day, every 
single penny came out of the taxpayers' wallet, and that's my 
main concern. And I just have this undying belief that free 
markets really do determine where we are going to end up, and 
things are going to rise and fall depending on conditions which 
we don't really have the ability to do. And there's nothing 
more dangerous than to, you know, project--figure out what the 
future forecast, what the future is going to do.
    Things do change, and they change very rapidly. And I know 
in the automobile business, what looks like a really smart move 
one day can turn around very quickly. A little thing like 
Katrina blows in off the coast and all of a sudden gasoline 
that was $2.39 or $2.49 goes to $4.09, and a market that was 
one time stable goes completely upside down. So there's unseen 
things in the future.
    The question really does come down to the investment in 
taxpayer dollars and the benefit, and I think there's something 
to be said for both sides. And having said that, and I know 
it's been a very long day, I really do appreciate your 
appearing here.
    And in the future I would appreciate also if you weigh in 
and let us know, because it's really important to the American 
people to understand this process and how their government does 
make decisions and the consequences of those decisions. So I 
want to thank you for appearing.
    With that, we are going to adjourn. Thank you.
    [Whereupon, at 5:06 p.m., the subcommittee was adjourned.]

                                 
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