[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF THE SIGTARP REPORT ON
TREASURY'S ROLE IN THE DELPHI PENSION BAILOUT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT OPERATIONS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 11, 2013
__________
Serial No. 113-60
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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85-115 WASHINGTON : 2013
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas MARK POCAN, Wisconsin
DOC HASTINGS, Washington TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky PETER WELCH, Vermont
DOUG COLLINS, Georgia TONY CARDENAS, California
MARK MEADOWS, North Carolina STEVEN A. HORSFORD, Nevada
KERRY L. BENTIVOLIO, Michigan MICHELLE LUJAN GRISHAM, New Mexico
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Government Operations
JOHN L. MICA, Florida, Chairman
TIM WALBERG, Michigan GERALD E. CONNOLLY, Virginia
MICHAEL R. TURNER, Ohio Ranking Minority Member
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
THOMAS MASSIE, Kentucky MARK POCAN, Wisconsin
MARK MEADOWS, North Carolina
C O N T E N T S
----------
Page
Hearing held on September 11, 2013............................... 1
WITNESSES
The Hon. Christy L. Romero, Special Inspector General for the
Troubled Asset Relief Program
Oral Statement............................................... 10
Written Statement............................................ 12
Ms. Barbara D. Bovbjerg, Managing Director, Education, Workforce,
and Income Security Issues, U.S. Government Accountability
Office and Ms. A. Nicole Clowers, Director, Financial Markets
and Community Investment, U.S. Government Accountability Office
Oral Statement............................................... 71
Written Statement............................................ 73
Mr. Matthew A. Feldman, Partner, Wilkie Farr & Gallagher, LLP
Oral Statement............................................... 95
Written Statement............................................ 97
Mr. Steven Rattner, Chairman, Willett Advisors, LLC
Oral Statement............................................... 102
Written Statement............................................ 105
Mr. Harry J. Wilson, Chairman, CEO and Founder, The Maeva Group,
LLC
Oral Statement............................................... 108
Written Statement............................................ 110
Mr. Harvey R. Miller, Partner, Weil, Gotshal & Manges, LLP
Oral Statement............................................... 114
Written Statement............................................ 116
APPENDIX
The Honorable John L. Mica, a Member of Congress from the State
of Florida, Opening Statement.................................. 186
The Honorable Elijah Cummings, a Member of Congress from the
State of Maryland, Opening Statement........................... 188
The Honorable Gerald G. Connolly, a Member of Congress from the
State of Virginia, Opening Statement........................... 190
The Honorable Paul Ryan, a Member of Congress from the State of
Wisconsin, Opening Statement................................... 192
SEC Charges Steven Rattner in Pay-to Play Scheme Involving New
York State Pension Fund........................................ 193
Response to Questions from Barbara D. Bovbjerg................... 211
Questions for the Record: The Hon. Christy Romero................ 214
OVERSIGHT OF THE SIGTARP REPORT ON TREASURY'S ROLE IN THE DELPHI
PENSION BAILOUT
----------
Wednesday, September 11, 2013
House of Representatives,
Subcommittee on Government Operations,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 1:30 p.m., in
Room 2154, Rayburn House Office Building, Hon. John Mica
[chairman of the subcommittee] presiding.
Present: Representatives Mica, Turner, Amash, Connolly,
Pocan, and Cummings.
Also Present: Representatives Brooks, Tiberi, and Ryan of
Ohio.
Staff Present: Molly Boyl, Senior Counsel and
Parliamentarian; John Cuaderes, Deputy Staff Director; Linda
Good, Chief Clerk; Tyler Grimm, Senior Professional Staff
Member; Christopher Hixon, Deputy Chief Counsel, Oversight;
Michael R. Kiko, Staff Assistant; Mark D. Marin, Director of
Oversight; Laura L. Rush, Deputy Chief Clerk; Scott Schmidt,
Deputy Director of Digital Strategy; Matthew Tallmer,
Investigator; Sarah Vance, Asistant Clerk; Jaron Bourke,
Minority Director of Administration; Jennifer Hoffman, Minority
Communications Director; Adam Koshkin, Minority Research
Assistant; Julia Krieger, Minority New Media Press Secretary;
Jason Powell, Minority Senior Counsel; and Cecelia Thomas,
Minority Counsel.
Mr. Mica. Good afternoon. I would like to call the
Subcommittee on Government Operations to order.
Today we are conducting a hearing entitled ``Oversight of
the SIGTARP Report on the Treasury's Role in the Delphi Pension
Bailout.'' Given a few minutes for the minority to appear, but
I want to go ahead with the proceedings. It appears that there
will be votes and they will probably be the last votes of the
day, beginning at a little after 2 o'clock. So we want to try
to get through at least part of the witnesses and the opening
statements, but welcome everyone today.
I guess I can't start without remembering that today is
September 11th. We did a memorial, a small service on the steps
of the Capitol, and remembered those who lost their lives and
others on the day that many of us were alive and have a memory
we'll never forget. So I, too, remember them.
I will remember, too, Barbara Olson, who was killed on the
plane that crashed into the Pentagon, who worked for this
committee, a wonderful young professional. We have lost her and
lost a number of staffers, the 11 who worked with Senator
D'Amato, who was head of the New York Port Authority. I left
him in a room in the World Trade Center in a hearing I
conducted there about a month before September 11th, and he and
everyone who helped us during our hearing, none of them
survived except for one.
And then remember Terry Lynch, who was an aide to Senator
Shelby, was in the Pentagon. I left the Pentagon from Secretary
of Defense office September 11th with a breakfast meeting there
just a few minutes before he and others were killed, Terry
Lynch. So we remember him today and others that we lost on that
fateful day. So remember him.
And then Members of the Florida delegation also mourn today
the loss of our recent member of the delegation, E. Clay Shaw,
who passed away last night. So a day that we do remember both a
former Member and the tragic events of September 11th.
In just a minute I will yield to the minority, but I want
to again welcome everyone. Today we are conducting the business
of the people, and part of the responsibility of this
subcommittee and our committee is to look at various operations
of government, Federal Government, make certain that Americans
see that their taxpayer dollars are properly spent, that we
conduct thorough oversight of the legislative and executive
process as we intend it and as we pass them, as things are
executed. So that is an important responsibility that we share
today in this committee and part of our business here.
The order of business will be opening statements, I will
give mine. We will recognize other members as they appear. And
we may be joined with some Ohio members, I think we have, and I
would like to ask unanimous consent that our colleague from
Indiana, Mrs. Brooks, be allowed to participate in today's
hearing. Without objection, so ordered.
So we have one member from Indiana, and I think we may have
some from Ohio joining us, too, who have interest in this
hearing.
So with that, then, we will recognize our panel of
witnesses, hear from all of them, and then we will move to
questions. So I will start with my opening statement.
Again, welcome. Today's hearing concerns a very important
issue that this committee has been working on for over 3 years.
In June of this year, our subcommittee convened a hearing in
Dayton, Ohio, an area hard hit by the substantial losses of
pensions to the Delphi retirees. At that hearing, we heard from
retirees who are, unfortunately, feeling the pain of some of
the Obama administration's decision to pick very distinct
winners and losers in the context of the GM bailout. As part of
that, unionized Delphi retirees were made whole because they
just happened to be a politically favored group and,
unfortunately, the salaried, non-unionized pensioners were left
out in the cold.
This is somewhat sad because we used Federal money to which
all these folks had contributed in their tax dollars to bail
out these activities. And some were treated, again, we believe
very unfairly. In fact, some 23,000, I think Mr. Turner has a
great number in his district, and others that are affected.
In addition to this financial hardship, non-unionized
Delphi retirees feel betrayed by their government, and also by
their former employer. While the unions, we find out from a
special investigator general report, the unions, we find out,
were pretty heavily involved in the negotiations surrounding
the GM and Delphi bailout, the salaried employees did not have
a seat at the table and unfortunately were left in the dark.
This whole mess could have been avoided were GM to pursue a
traditional bankruptcy route and not be subject to the
political whims of the administration. The traditional
bankruptcy route would have been better for GM in the long run
and would have mitigated the risk of politicized decision
making, such as what not just our committee found, but also
confirmed now by the Special IG report that verifies the way
this was conducted and how the Delphi salaried retirees'
pensions were affected.
The bankruptcy proceedings that occurred were simply a
legal vehicle for delivering ownership shares in the auto
companies to the government. In the words of one legal scholar,
instead of a traditional bankruptcy, and let me quote, that
scholar said, ``The Obama administration, working with the
automakers, patched together a process without precedent, a
bankruptcy without a bailout incorporating the worst elements
of both.''
The recent release of an audit by the Special Inspector
General for the Troubled Asset Relief Program sheds light on
the facts and circumstances surrounding this decision. We know
that despite the Treasury's pledge not to be involved in the
day-to-day operation of GM, that, in fact, Treasury and the
auto task force played a major role in the decisions concerning
GM operations.
As you may know, just for the record, we tried for several
years to get data and information which was withheld from this
committee. I'm pleased that we have had the cooperation both of
the pension guaranty fund now supplying the committee
information we requested that was denied, and also we've gotten
information from Treasury and others that I demanded that this
committee have. And I appreciate now the compliance that's 2
years overdue.
Finally, from the report, and this is not my opinion, this
is the Inspector General, Special Inspector General said, and
let me quote, that ``despite the assurances that Treasury's
role, as well as the Presidential task force for the auto
industry, was purely advisory,'' and this is what SIGTARP
found, the four Treasury auto teams, and I again quote,
``played a direct role in GM's decisions and operations up to
and through bankruptcy,'' including replacing the then-chief
executive officer with Treasury's choice. So it shows a story a
little bit different than we have been told and confirms,
unfortunately, some of our worst suspicions.
Today we will hear from key members of the President's
automotive task force about the decisions they made, what took
place, how those decisions led to, unfortunately, some very
gross inequity between certain classes of employees, some with
unions and some non-unionized Delphi employees. We will also
hear from SIGTARP and the Inspector General--Special Inspector
General--and GAO, both of whom conducted thorough audits
relating to this issue.
Lastly, I can't help but thank Mr. Turner of this panel for
his unyielding dedication, determination, to get to the bottom
of these issues. With his assistance, we are getting more of a
complete picture and the information we requested and the
taxpayers deserve in what took place in this whole process. Mr.
Turner has tirelessly pursued justice in the area, he
represents many of the folks who were affected, and our
committee is, in fact, committed to finding out exactly what
happened, when, who was involved, why, and particularly why
there was unfair treatment with taxpayer dollars for some and,
again, the unfairness of the whole process. These decisions
were made on the basis of politics and not prudence. Those
responsible need to be held accountable for their actions.
I am now very pleased to recognize the distinguished
ranking member, the gentleman from Virginia, Mr. Connolly, for
an opening statement.
Mr. Connolly. Mr. Chairman, I do have an opening statement,
and I thank you. But I was running a little bit late. And out
of courtesy, if the ranking member of the full committee wishes
to go I would defer to him,
Mr. Mica. Mr. Cummings, then, is recognized.
Mr. Cummings. Thank you very much, Mr. Chairman. I want to
thank the ranking member for his courtesy.
Mr. Chairman, I want to thank you for convening what common
sense would suggest will be the capstone on this committee's
five-hearing inquiry into GM's decision making on Delphi
pensions during the extraordinarily successful rescue of the
United States automotive industry.
In 2009 the administration's auto team members came from
the private sector, took up the mantle of public service, and
assumed responsibility of managing the investments that the
Bush and Obama administrations made to save the United States
auto industry from collapse. Thanks to their work, America's
automotive industry today directly employs 1.7 million people,
and indirectly this industry accounts for roughly 8 million
jobs nationwide. That represents 4.5 percent of all private
sector employment. It also accounts for roughly $500 billion in
wages being paid to workers and $70 billion in personal income
tax revenue.
I thank the former auto team officials for their work to
protect this industry and the American economy. You did a
critical job, and you did it exceedingly well.
It is unfortunate that, regardless of these impressive
results, Republicans continue to criticize the successful
rescue of the American auto industry. The majority, including
members of this Committee, has perpetuated the narrative that
government officials made the decision that the salaried
retirees of Delphi would not get top-ups. We know now that that
narrative is inaccurate. SIGTARP's report makes clear that a
high-ranking GM official made that decision, not the
administration. SIGTARP also found that at the time of the
Delphi's spinoff from GM in 1999, the pensions of Delphi's
salaried workers were fully funded. That is why the high-
ranking GM official believed that giving the salaried workers a
top-up in 2009 would have been tantamount to paying that group
of workers twice.
SIGTARP also found that the unionized workforce did not
receive fully funded pensions when Delphi was spun off. To the
contrary, their pensions were underfunded. But their union
negotiated contracts with GM to top up their pensions in the
future, and when the union insisted that those contracts be
honored in the bankruptcy process they were honored without
question. SIGTARP found that, ``No person SIGTARP interviewed
could recall any discussion of the top-up agreement at the
negotiations.''
The facts found by SIGTARP are consistent with GAO's
review, completed more than a year and a half ago. GAO detailed
the business reasons for GM to honor previous agreements with
certain unions. A failure to honor those agreements would have
jeopardized the company's ability to move forward.
I feel bad for the Delphi employees who did not receive
top-ups. There will be hard days ahead for them. They were
betrayed by Delphi's management, which did not make pension
payments for years after spinoff. But none of that is the fault
of the government's effort to save GM. The investigation into
this matter has been thorough.
As an investigative body it is critically important that we
follow the facts wherever they need. And it is equally
important that when we get answers we accept those answers. We
now have the facts. We now have the answers. And I ask that the
majority accept them.
And with that, Mr. Chairman, I yield back.
Mr. Mica. Thank the gentleman.
Yield now to the gentleman from Ohio, Mr. Turner.
Mr. Turner. Thank you, Mr. Chairman.
I am just astonished. And I'm sorry, Mr. Cummings, I
usually don't respond directly to what someone else is saying
in their opening statement, but all of that has absolutely
nothing to do with this hearing whatsoever, and I hope that you
actually sit down and read this report. There is nothing in
this report that says that they were not involved in the PBGC's
decision making with respect to Delphi's salaried retirees. In
fact, this report is about the hourly, not the salaried, and
you are going to see that when we have this discussion.
In fact, it does say on the hourly the opposite of what you
just said--again, if you'd read the report. Page 38 says, ``The
Auto Team's role in the decision to top up the pensions of
Delphi's UAW's workers was not advisory. Consistent with the
Auto Team's practice, as with any liability, it would have been
Treasury's decision as the buyer to assume or reject the
liability to top-up the pensions of Delphi hourly UAW
employees. The Auto Team actively negotiated and made the
overall deal.''
Now, there is partisan politics that shouldn't be happening
here in this hearing. And the GAO report was not as extensive
as this SIGTARP report has been. And I want to thank Ms.
Romero, thank you for your in-depth review. This is the first
time we have ever really had an insight into what the auto task
force did. And I must tell you, it is just shocking, because
remember the last hearing that we had, Mr. Cummings, Mr.
Cummings, the last hearing we had, we had to have it because
these gentlemen refused to even talk to the Inspector General.
They said, we've left the government, we no longer have to
answer questions on the work that we did. We have had to
subpoena Treasury just to get to the bottom of what happened in
these things.
So now I want to give some context of what we are doing
here today because this really, really is important. And this
is the fact, that in the TARP process what occurred was not
just the tragedy of the Delphi salaried retirees getting their
pensions cut unjustly and I believe illegally, and the courts
will determine that, but what we had with the entire process
was thwarted, because of TARP. Normally when you have a
bankruptcy each of the parties who have an interest in either
the new entity that is coming out of the old entity that is
going through the bankruptcy process sits in a chair and
represents their interests or they have someone who sits there
in a fiduciary capacity representing their interest.
But what we had with TARP was this perversion of the
process where each and every person sitting around the table
suddenly became the Treasury Department. The banks became the
Treasury Department, the lienholders and bondholders, the PBGC
became the Treasury Department. Each and every one of these
people became the Treasury Department. And what we kept saying
throughout all of this, which is why we are having this hearing
today, is tell us how you made your decisions. Tell us once you
had all of these chairs whether or not you go to the standard
of protecting the fiduciary interests of the people who were
behind you because we don't believe that you did.
What we find now from the SIGTARP report, which is the
first time we have ever had any insight into what occurred in
the decision making, we understand that they have set this
unnecessary and artificial timeline of the quick wash, that
they set the terms and the conditions, they determined who had
leverage and who did not, some political, some not, and clearly
throughout all of this is this concept of exceeding and abusing
authority. This concept of commercial reasonableness that this
group used as a standard for determining their decision making
that had no definition and no legal justification, had people
rewarded and people who were penalized. The administration
picked winners and losers, and that is what this report says.
And that is what we are going to get to today.
Now, this does not decide the issue of PBGC and the Delphi
salaried retirees. It was not intended to. This hearing is not
to determine the end of the PBGC issue and GM issue with
respect to the Delphi salaried retirees. That we will have to
continue. GAO when they did their report only looked at public
sources. They didn't have access to what the Inspector General
did where they looked at the documents and looked at the emails
between these individuals. And the SIGTARP Inspector General
did not check or review the GAO work to determine whether or
not additional documents were necessary or whether or not the
documents that they had needed to have the GAO report amended
or redone.
But it tells us what we didn't see before: The
administration has said they were not involved. They said they
didn't do it, that they only were on the sidecar and watched as
General Motors made the decisions. And what we know now from
this report is the decision making was absolutely being made by
the auto task force individuals themselves, that they were--the
four Treasury auto team officials played a direct role in GM's
decisions and obligations up to and through GM's bankruptcy.
Treasury's auto team had significant leverage and influence on
GM's decisions leading up to and through the bankruptcy first
exerted by replacing the GM chief executive.
So if the document itself is allowed to go through this
hearing, instead of us just reading our own texts that our
staffs have written, I think we will get to what really is the
truth, what really happened, what needs to happen, was there
injustice, and what this committee needs to do in further
investigation, because this is not over.
Thank you, Mr. Chairman.
Mr. Mica. Thank the gentleman.
Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman, and thank you for
holding this hearing.
Let me just say as a member of this committee I would
caution my colleague as to characterizations about what
homework is done or what reading is done or not done by the
distinguished ranking member of this committee. I have known
Mr. Cummings a long time. He does his homework. To suggest that
his opinion is wrong because he didn't read the report I think
crosses the line. If you want to disagree, disagree. But to
impugn the reputation of the distinguished ranking member as
somebody who comes here unprepared I take exception to on his
behalf and on behalf of this side of the aisle. And I urge my
friend from Ohio to restrain from such characterizations.
Mr. Chairman, SIGTARP's report directly and definitively
refutes the narrative we have just heard on this subject. And
we just heard, for example, that this report didn't really
address certain subjects. And I put up this slide.
[Slide].
Mr. Connolly. On Page 29 it most certainly does. It most
certainly does talk about the salary plan and explains what
happened, at least from somebody's point of view, SIGTARP's,
why they didn't top-off the nonunion salaried retired pensions
after the 1999 separation.
This committee has explored in great depth the Federal
Government's unprecedented intervention that not only rescued
our Nation's auto industry, but enhanced the global
competitiveness of the auto sector. Hopefully with the issuance
of SIGTARP's report and today's hearing, we can finally put to
rest the unsubstantiated conspiracy theories about picking
winners and losers to benefit political allies.
Unfortunately, some refuse to acknowledge the sheer
complexity of the challenge then facing the administration in
assisting General Motors to navigate what SIGTARP characterized
as; ``one of the largest and fastest bankruptcies in the
Nation's history.''
It is easy to discount the monumental achievement in light
of current auto industry conditions. Consider, just 2 years ago
GM sold more than 9 million vehicles on its way to posting a
record-breaking profit of $7.6 million, a company on the ropes
that was looking at liquidation in 2009. Just last month GM
posted its best month ever since the great recession.
We must not forget the perilous days in late 2008 when
leading economic think tanks were projecting the bankruptcy of
all U.S. automotive manufacturing and that would trigger a
collapse in the domestic auto industry costing us an additional
3 million jobs while we were shedding 750,000 a month. Indeed,
it was estimated just the liquidation of GM alone would lose
900,000 industry jobs. And, of course, SIGTARP found;
``Ultimately, GM did not fail and the broader systemic
consequences of a GM failure that Treasury had feared were
avoided.''
Yet, the majority narrative continues to appear
disinterested in convening a hearing to examine the lessons
learned from all of that and from the effective Federal
initiative to save the U.S. auto industry. Instead, we find
ourselves holding what is now the fifth hearing to rehash some
hackneyed assertions from the past.
Of course a thorough review of SIGTARP's report enables one
to test, and I think ultimately debunk, those unsubstantiated
claims. For example, did the administration inappropriately
intervene in the decision to deny Delphi's salaried workforce
top-ups as part of the nefarious scheme to use GM's bankruptcy
proceedings as a cover to protect political allies? No. As
SIGTARP itself reports, there was no impropriety, and it was a
sound business decision, from a substantial point of view, for
GM to deny pension top-ups to certain Delphi employees.
According to SIGTARP, more than a decade ago Delphi's
salaried workers received full funding of their pensions when
the firm was spun off from GM, while the unionized workforce
did not. Instead, in exchange for underfunding union pensions
in the spinoff, labor negotiated contractual agreements with GM
legally binding contracts to protect the pensions of certain
unionized Delphi hourly employees, not in the context of TARP,
but 9 years earlier than that. This strategic decision paid off
when the financial crisis hit and Delphi's unionized workforce
emerged with its pensions protected.
Regrettably, Delphi's salaried workforce had not negotiated
similar contracts. And when GM entered bankruptcy, the firm had
no contractual obligations to top-off their pensions. As
SIGTARP noted, a hypothetical GM decision to top-off those
pensions, a cohort that no longer worked for nor had any
association with GM by the time of TARP, would be equivalent to
GM paying for the Delphi salaried pensions twice from their
point of view.
The bottom line is that GM's refusal to top-off the
pensions was a business decision, not a government policy
decision. Nor is GM in the position before a bankruptcy judge
to undertake a new financial obligation while it is trying to
go through bankruptcy. In a perfect world, perhaps GM would
have prioritized fairness over commercial interests and treated
the pensions of all of its former employees at Delphi equally.
But bankruptcy is not a perfect world. It is an unfair and
staggeringly difficult battle for survival itself. And I
believe the record presented by SIGTARP and the witnesses
before us today clearly demonstrates that GM, supported by
Treasury and the auto task force, made those tough decisions
under tremendous pressure, but not political pressure.
Thank you, Mr. Chairman.
Mr. Mica. I thank the gentleman.
Mr. Amash, did you have an opening statement?
Mr. Pocan?
Mr. Connolly. Mr. Chairman, could I ask unanimous consent
to allow our colleague Mr. Tim Ryan of Ohio to participate?
Mr. Mica. Yes. And what I'm going to do then is we've had
Mrs. Brooks, who is not a member of the panel, and we approved
her. I have your request for Mr. Ryan, gentleman from Ohio. And
then we have a request for Mr. Tiberi, also a gentleman from
Ohio. I ask unanimous consent that both of these colleagues be
allowed to participate in today's hearing. Without objection,
so ordered.
Mr. Connolly. Thank you, Mr. Chairman.
Mr. Mica. And our usual rule and procedure for those who
have joined us would be we will recognize the members of the
panel first and then we will go to you. I think what we are
going to do, though, is if we have no further opening
statements, is go right to our panel of witnesses. We are
expecting votes shortly, as I said.
So with that, let me introduce our panel of witnesses. We
have the honorable Christy Romero.
Before I do that let me say that, without objection, the
record will also be open for additional statements to appear in
the record at this point and throughout the proceedings to be
fair to everyone who is now participating.
Mr. Mica. Again, the panel of witnesses, the Honorable
Christy Romero is the Special Inspector General for the
Troubled Asset Relief Program. Ms. A. Nicole Clowers is
director of the Financial Markets and Community Investments at
the United States Government Accountability Office. Ms. Barbara
Bovbjerg is managing director of Education, Workforce, and
Income Security Issues at the Government Accountability Office.
Mr. Matthew Feldman is a partner at the law firm of Wilkie
Farr & Gallagher, and he served as legal adviser to the
Treasury auto team. Mr. Steven Rattner is the chairman of
Willett Advisors and served as the head of the Treasury auto
team. And then we have Mr. Harry J. Wilson is the chairman,
CEO, and founder of MAEVA Group and served as a member of the
Treasury auto team.
And finally, Mr. Harvey Miller is a partner at the law firm
of Weil, Gotshal & Manges and served as lead counsel in the
General Motors bankruptcy case and was the vice chairman and
managing director of Greenhill & Co.
So I welcome all of our witnesses. Let me say that this is
an investigative panel, and it is our procedure to swear in all
of our witnesses. So if you will stand now, all of the
witnesses, raise your right hand. Do you solemnly swear or
affirm that the testimony you're about to give before this
subcommittee of Congress is the whole truth and nothing but the
truth?
All of the witnesses, the record will reflect, answered in
the affirmative. Thank you.
And let me just give you the ground rules here, too. We
give you 5 minutes. If you have a lengthy statement,
information you would like included in the record, just through
the chair or a member, and ask consent, and we will include all
of that in the record. So I would like you to summarize, try to
keep it to 5.
We will also go through the entire panel and then go to
questions. We are going to try to get to as many as you can of
you with the 5 minute. Then we will probably have to recess
for, and the staff will tell us the amount of time the votes
are--actually only one vote, so we will only recess for about
15 minutes. Give you a chance to scoot out but be back. And
then we will proceed immediately until we have heard from all
of you. Then we will begin the questioning. So that is the
order of business.
So, again, thank you. Let me turn to our first witness,
which is Christy Romero, and she is the Special Inspector
General for the Troubled Asset Relief Program.
Thank you for your work, and we recognize you now for your
testimony.
STATEMENT OF CHRISTY L. ROMERO
Ms. Romero. Chairman Mica, Ranking Member Connolly, and
members of the committee, it is my honor to appear before you
today.
SIGTARP was created by Congress to conduct investigations
and audits related to the TARP bailout. In our investigations
we have--we are a law enforcement agency and we have authority
to search, seize, and arrest. So far 151 people have been
charged with crimes as a result of a SIGTARP investigation, 111
of them have been convicted so far, while others await trial or
a guilty plea, and of those that are convicted, so far 58 have
been sentenced to prison while others await sentencing. And the
average prison sentence for a SIGTARP investigated crime is 68
months, which is nearly double the national average for white
collar crime.
We also conduct audits of decisions that were made related
to TARP. And we issue these audits not to criticize for
criticism's sake, but we issue them to ensure that our
government functions at its best. We issue them to bring
transparency, and we issue them so that we can learn from the
past in case the government faces similar situations and
decisions in the future.
Our latest audit reviewed Treasury's role in the decision
to top up, or make whole, certain unionized former GM employees
who worked at Delphi. And Treasury's public statement that its
role in that decision was advisory has caused unnecessary
confusion. It's also inconsistent with Treasury's rights under
the 2008 TARP loan agreement and as the purchaser of GM in
bankruptcy.
Under the TARP contract, there are certain big things, like
the collective bargaining agreement with the union, where
Treasury made the decision. And there are other things where
Treasury could only advise GM. The top-up agreement and the
collective bargaining agreement are not two separate things.
The top-up is in the collective bargaining agreement. The UAW
came to the negotiation with Treasury and GM with a priority
list that included the top-up. There were no negotiations of
the top-up. GM did not come to Treasury later to discuss it. It
became a foregone conclusion that it would be included, with
Mr. Rattner and Mr. Bloom of the auto team telling us that
because it was on the UAW's list, it was clear that the UAW
expected it to be part of the deal.
As the purchaser, known as New GM, it was Treasury who made
the decision on the collective bargaining agreement, because
only the purchaser could define the relationship with the union
and only the purchaser could determine which obligations to
take on. Both GM officials and auto team officials told us that
Treasury was the purchaser who made decisions on which
obligations to take on. GM's lawyer, Mr. Miller, testified as
to that today. Therefore the auto team's role could not be
advisory. Who would they be advising?
It would have been much better if Treasury had been
transparent, saying that we had made the decision with GM to
agree to the top-up because the UAW really wanted it and we are
under time pressure. It would have been much better if Treasury
had simply stated that we were concerned that in addition to
the traditional strike leverage, that UAW had the leverage to
prolong the bankruptcy, that they did not think that GM could
survive a lengthy bankruptcy and that could hurt the auto
industry. They should have explained their decision and trusted
the American people to hear their reasoning. American taxpayers
can either agree or disagree with what the auto team did, but
they are entitled to full transparency, and that is why we put
that report out.
So what was the alternative? Well, one alternative would
have been to actually raise and actually negotiate the top-up
with the UAW. But Treasury conditioned the TARP funds on GM
finishing the bankruptcy in 40 days--which had never been
done--or else they would default. This severely limited the
alternatives available to GM. GM's then-CEO told us they were
under pressure to get the deal done, and that is why the top-up
was not negotiated.
But we found that the pressure came, in part, from the 40-
day time constraint, a timeframe that gave the UAW additional
leverage. GM thought 40 days was unrealistic, that they needed
60 to 90 days. No one will ever know if more time in the
bankruptcy would have allowed for negotiation of the top-up,
but Treasury should take accountability that their 40-day
condition had the effect of limiting GM's options.
Finally, there's an alternative still available today,
which is for GM to consider topping-up, or contributing to, the
Delphi salaried retirees today.
Thank you again, and I'm happy to answer your questions.
Mr. Mica. Thank you.
[Prepared statement of Ms. Romero follows:]
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Mr. Mica. And as I said, we will withhold questions.
Now we have two GAO representatives, and we are going to
recognize, I guess, Barbara Bovbjerg as the witness from GAO.
So welcome, and you are recognized.
STATEMENT OF BARBARA D. BOVBJERG AND A. NICOLE CLOWERS
Ms. Bovbjerg. Thank you so much, Mr. Chairman, Mr.
Connolly, members of the committee. Thank you for inviting me
and my colleague, Nicole Clowers, here today to speak about the
termination of the Delphi pension plans. Our testimony today
will address the timeline of key events leading to the plan's
termination and the role of Treasury in these activities. This
information is drawn from our 2011 reports prepared for Mr.
Turner and others and relies on publicly available documents.
First, the pension plan terminations. In 1999, the Delphi
Corporation, once part of GM, was spun off as an independent
company, and as part of that arrangement GM was required to
bargain with the unions affected by the spinoff. In those
negotiations, GM agreed to provide top-ups to the unionized
employees, meaning that if something went wrong with the
pension plans for these employees under Delphi, GM would make
good on their promised benefits. At the time of these
agreements Delphi's hourly plan was not fully funded. In
contrast, the salaried employees' plan was fully funded.
So fast forward to October 2005 when Delphi filed for
bankruptcy. All Delphi pension plans were underfunded, and
Delphi was not planning to make any contributions to these
plans during the bankruptcy process. Hence, the prospects for
those plans, and for the participants' future benefits, got
substantially worse.
By the fall of 2008, Delphi was still in bankruptcy, and
economic conditions had deteriorated throughout the auto
industry. GM's losses led the company to seek assistance from
the Federal Government. By April 2009, the Department of the
Treasury was working with GM to develop a restructuring plan.
And by June, GM, too, had filed for bankruptcy.
In June, as part of an arrangement for GM to emerge from
bankruptcy, GM and the UAW agreed to modify wages, benefits,
and work rules to be more cost competitive and agreed that New
GM would assume all employment-related obligations and
liabilities for any employee benefit plan covered by collective
bargaining agreements. This, in effect, maintained the benefit
guarantees GM agreed to in 1999.
Meanwhile, Delphi and PBGC began the process of what is
called the distress termination of Delphi pension plans. In
accordance with governing statutes, PBGC estimated that Delphi
plans were $7 billion underfunded, with PBGC expected to bear
$6 billion of that shortfall and Delphi plan participants the
remaining billion. However, per the settlement agreement, GM
provided top-up payments to all unionized workers. No such
agreement pertained to salaried workers, and this is where the
situation stands today.
So let me turn to the role of Treasury in these decisions.
As GM's primary lender, Treasury played a significant role in
helping GM emerge from its bankruptcy, which included resolving
the Delphi bankruptcy. However, with regard to GM decisions
about the Delphi pension plans, the court filings and
statements from GM and Treasury officials that we reviewed
suggest that Treasury deferred to GM's business judgment.
According to these records and to Treasury officials,
Treasury agreed with GM's assessment that the company could not
afford the potential costs of sponsoring the entire Delphi
hourly plan itself upon emerging from bankruptcy. Treasury also
agreed with GM's rationale not to assume the Delphi salaried
plan since that plan had been fully funded when GM transferred
it to Delphi in 1999.
As for the top-ups, Treasury officials said that Treasury
did not explicitly approve or disapprove of GM's proposal to
honor previously negotiated top-up agreements with some unions.
Treasury stated that its aim was to ensure that the New GM
would only assume the liabilities of the old GM that were
commercially necessary. Due to New GM's continued dependence on
the UAW workforce and the workforce of the other unions,
Treasury officials felt GM had solid commercial reasons to
agree to the top-up pensions of those retirees.
I'd like to conclude with a few thoughts about these
pension terminations. Under pension insurance laws, when
companies go bankrupt and leave their plans with large unfunded
liabilities, some participants may not get the full benefits
promised to them by their employer. This, unfortunately, is not
unusual. What makes the Delphi terminations different is the
linkage to the GM bankruptcy and GM's role as a pension benefit
guarantor.
Additionally, Treasury's multiple roles in this process, as
SIGTARP just noted, have led to concerns about transparency to
Congress and to the public. Although Treasury has established
policies to separate its multiple interests, we believe the
most effective means of addressing concerns about these
different roles is for Treasury to be as transparent as
possible about its activities.
And that concludes our statement, Mr. Chairman. Ms. Clowers
and I are happy to answer questions.
Mr. Mica. Thank you.
[Prepared statement of Ms. Bovbjerg and Ms. Clowers
follows:]
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Mr. Mica. And as I said, we will get to questions in a
little while after we have heard from the others.
Let's see. We have next Mr. Feldman. Matthew Feldman is a
partner in Wilkie, Farr & Gallagher.
Welcome, and you are recognized.
STATEMENT OF MATTHEW A. FELDMAN
Mr. Feldman. Thank you. Mr. Chairman and members of the
committee, I understand that I have been invited to appear
before you today to discuss my role with the Treasury
Department's auto team, which I joined in March 2009 as legal
adviser and on which I served until August 2009. The Treasury
Department recruited me to join the auto team from my career as
an attorney in private practice where I specialized in
reorganizing and restructuring large businesses, not unlike the
American automobile manufacturers that were in significant
financial distress in 2009.
I believe that the work of the auto team contributed to a
successful effort to avert disastrous consequences to both the
American automobile industry and the American economy as a
whole. Now, just 4 years after emerging from bankruptcy, both
General Motors and Chrysler are selling cars and adding jobs at
a pace most thought unachievable. I remain proud of my service,
and I'm prepared today to assist the committee in reaching a
complete understanding of the auto team's work with respect to
General Motors and in particular its relationship with its
critical supplier, Delphi Corporation, during what was a
difficult time and an unprecedented challenge for all involved.
Although it is wonderful to see the dramatic recovery of
the automobile manufacturers and the thousands of American jobs
that were saved and have been created as a result of our work,
I'm mindful that the restructurings that the auto team worked
on required many Americans to make great personal sacrifices.
As a result of the Delphi bankruptcy, for example, Delphi's
lenders, some of which had purchased Delphi's debt at a steep
discount, exerted significant influence over Delphi, and
ultimately the PBGC, which forced the PBGC to terminate
Delphi's pension plans. As a result of what occurred during the
Delphi bankruptcy, there are Delphi retirees who,
unfortunately, will collect less than their full pension
benefits.
As stated by the Special Inspector General for the Troubled
Asset Relief Program in her August 15 report to Treasury
Secretary Lew, in 1999, when General Motors spun out Delphi as
a separate company, Delphi's pension plan for its salaried
employees was significantly overfunded, but the pension plans
for hourly workers were significantly underfunded. To garner
support and consent from the UAW and other unions for the
Delphi spinoff and to avoid having to make a significant
payment in 1999, General Motors and the UAW entered into a top-
up agreement whereby General Motors agreed to make whole hourly
employees being transferred to Delphi on their pension
obligations in the unlikely but ultimately real event that
Delphi defaulted on its pension obligations.
Following years of mismanagement and malfeasance, Delphi
was forced to file for bankruptcy in 2005 after having allowed
both its salaried and hourly pension plans to become
underfunded, a situation that ultimately led the PBGC to
conclude it needed to take action to terminate both plans.
As stated by the GAO in its March 30, 2011, report to
Congress on the topic, the PBGC reached its own conclusion to
terminate the Delphi pension plans, presumably after concluding
that this was proper action to take under applicable law and
that among the limited options available for these plans, the
termination and takeover by the PBGC was the best choice
available. While I can understand why all parties involved
would have preferred if General Motors had assumed these Delphi
pension plans, taking on these liabilities in full would have
threatened GM's future success as it exited from its own
bankruptcy. While General Motors was not willing to assume all
of the pension plans, as the SIGTARP report makes clear,
because GM viewed a well motivated workforce at its own
facilities and at its largest supplier as critical to ensuring
an uninterrupted supply chain, General Motors made the
commercially reasonable and necessary decision to honor its
legal obligation memorialized in the top-up agreement with the
UAW.
The decision to assume the UAW top-up agreement was
bargained for by the UAW and agreed to by General Motors after
having been extended by the parties once in 2007. As this
committee is aware, unfortunately, many of Delphi's employees
did not have similar top-up agreements with General Motors, and
some of the employees will face a shortfall in their pension
placements.
The auto team agreed that honoring the top-up agreement was
a prudent business decision. We believed that doing so would
protect both General Motors' and the American taxpayers'
collective investment in the company. The desire to limit
General Motors' stay in bankruptcy was purely economic. Every
week of bankruptcy where General Motors continued to carry all
of its costs but generated little or no revenue would cost the
American taxpayers $1 billion. The need for General Motors to
complete a 363 sale in a short time period was intended, among
other benefits, to limit the costs being borne by taxpayers.
While I'm pleased that General Motors and other American
automobile manufacturers have become successful, profitable
contributors to our economy, I recognize that the restructuring
process has resulted in painful but necessary sacrifices on
many of Delphi's stakeholders. As a bankruptcy practitioner and
restructuring specialist, I've seen similar circumstances all
too often. It is without a doubt one of the most difficult,
disheartening aspects of my job, and I have only the deepest
sympathies for everyone affected. I'm here today and prepared
to answer any of the questions of the committee.
Mr. Mica. Well, thank you.
[Prepared statement of Mr. Feldman follows:]
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Mr. Mica. We have 4 minutes left before the vote, so what
we are going to do is we will recess now. Now, I'm told there
will be three votes, so this will be a little bit longer. It
usually takes us 15 minutes, another 5 and 5, probably be back
here about 10 minutes of, to 5--10 minutes of to the hour of 3
o'clock, somewhere there, and we will come back.
Mr. Rattner, you will be the first recognized, Mr. Wilson
and Mr. Miller we will go through. And so you don't want to
wander too far off.
So with that, the committee stands in recess until after
these votes.
[Recess.]
Mr. Mica. I'd like to call the subcommittee back to order.
I appreciate everyone's patience in dealing with the votes. We
ended up with--first they said one, then they said three, and
we ended up with two. So we should have some other members
returning, but we're going to go ahead and take off where--I'm
sorry--take--continue as to where we left off, and I think we
left off with Mr. Feldman and we're going to go to Mr. Rattner
now.
Mr. Steven Rattner is Chairman of the Willett Advisors.
Welcome, sir, and you're recognized.
STATEMENT OF STEVEN RATTNER
Mr. Rattner. Thank you, Mr. Chairman. It is sometimes
difficult to recall that just 5 years ago the American auto
industry was in a severe crisis that threatened its very
existence and the broader American economy. It is
incontrovertible that absent government intervention, both
General Motors and Chrysler would have been forced to cease
production, close their doors, and lay off virtually all their
workers. These shutdowns would have reverberated through the
entire auto sector, causing innumerable suppliers to almost
immediately also stop operating. More than a million jobs would
have been lost, at least for a time. Michigan and the entire
industrial Midwest would have been devastated. Everything we
did in the government at that time was driven by our profound
desire to prevent such an economic calamity while honoring our
responsibilities to the taxpayers, and by any objective
measure, I believe our efforts were a success.
Today, General Motors is once again profitable and healthy.
It has gone from a company that was hemorrhaging money before
the financial crisis to one that turned a $1.2 billion profit
in its most recent quarter, driven by strong North American
sales.
The restructuring of GM's contract with the United Auto
Workers provided the company with new flexibility to use its
workforce efficiently and expanded its ability to hire new
workers at considerably lower costs. And GM has vastly improved
its product lineup so that it is once again selling the kinds
of cars consumers want to buy, and demonstrating the power of
American ingenuity, engineering and manufacturing. At the same
time, the government is successfully winding down its ownership
stake in GM and returning the company to private hands.
Of the $51 billion that the taxpayers invested in GM, more
than $34 billion has been repaid to the Treasury, and Treasury
has stated that further GM stock sales are planned in the
coming year. It makes clear that the government's actions were
a necessary and prudent emergency measure to get GM back on its
feet, not a permanent government takeover of private industry,
as some at the time feared.
This remarkable turnaround could not have occurred without
significant restructuring at GM, a restructuring that
regrettably but inevitably involved painful sacrifices from all
of GM's stakeholders, but particularly its bond holders,
dealers, suppliers, employees and retirees.
It is not easy to make these kinds of decisions under any
circumstances. It was particularly challenging in the crisis
atmosphere that GM was facing at the time. No one wants to get
cents on the dollar of their investment or have their
dealership closed or see their incomes or benefits reduced.
These are personal pocket book issues for those affected, and
unfair almost by definition.
To understand the decisions that were made, I believe it is
important to appreciate that the Auto Task Force had two
overriding goals: to restore a viable and thriving auto
industry while acting as a prudent custodian of taxpayer funds.
To achieve these goals, we were guided by the principle that
Treasury, as GM's partner in bankruptcy, was entitled to set
parameters and provide guidance to GM that was consistent with
what would be commercially reasonable.
In accordance with that principle, the Auto Task Force
helped GM determine the broad strategic policies that would
return the company to competitiveness at the least cost and
risk to taxpayers. Day-to-day management remained the
responsibility of GM.
I know the subcommittee is interested in one of those
decisions in particular, which was GM's decision to honor a
pre-existing commitment to provide supplemental pension
benefits, or top-ups, to certain hourly employees at Delphi, a
critical GM parts supplier that was itself in bankruptcy. Other
hourly employees and salaried employees at Delphi were not
provided similar top-ups.
Although I fully understand that it was painful for the
salaried employees who saw their pensions cut and perhaps made
more painful by the fact that some of their hourly colleagues
did receive top-ups, I believe the Special Inspector General's
report makes clear that GM's decision to honor its top-up
agreement in bankruptcy was consistent with a commercially
reasonable approach.
The Delphi hourly employees who received top-ups were
differently situated from the salaried employees who did not.
For reasons that predated GM's bankruptcy and the work of the
Auto Task Force, GM had fully funded the salaried employees'
pensions, but not the hourly employees' pensions before the
Delphi spin-off in 1999. At that time, the hourly employees
negotiated for a top-up agreement from GM, but the salaried
employees, who were fully funded, did not.
As the Special Inspector General's report explains, GM was
therefore under no obligation to top-up the salaried employees'
pension, and indeed doing so on its own initiative would have
been like paying for the pensions twice. Such an action, while
generous, would not have been consistent with the goals of
restoring the GM--of restoring GM to viability or protecting
U.S. taxpayers' investment.
It is certainly true that in bankruptcy GM had the option
of refusing to honor its agreement to top up the hourly
workers' pensions as well. Again, I think the Special Inspector
General's report makes clear that its decision to honor the
prior agreement was consistent with what was commercially
reasonable.
Those employees were represented by the UAW, the same union
that represented 99--represents 99 percent of GM's unionized
workforce. UAW is an absolutely critical party to bring to the
negotiating table. They had the power to hold up the deal in
bankruptcy or to strike, either of which could have been
devastating to GM's efforts to get back on its feet, and in
turn, to the U.S. economy. This disparity in bargaining
leverage may not seem fair, but it was the reality. And as I
mentioned earlier, GM extracted considerable concessions from
the UAW in order to reduce GM's labor costs going forward and
get it on a sustainable profitable path. Five years later, I
think it is clear that the government's extraordinary
intervention in the American auto industry has been a success.
I deeply wish that the actions we took did not have to be
taken, but I am proud that we avoided a devastating dissolution
of this vital sector of the economy and gave the American auto
industry the opportunity to once again lead and succeed. Thank
you.
Mr. Mica. Thank you.
[Prepared statement of Mr. Rattner follows:]
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Mr. Mica. We will recognize now Mr. Harry Wilson, Chairman
and CEO of the MAEVA Group. Welcome, and you're recognized.
STATEMENT OF HARRY J. WILSON
Mr. Wilson. Thank you. Mr. Chairman, Ranking Member
Connolly, and members of the subcommittee, thank you for the
opportunity to testify before you today on this somber
anniversary of the attacks on 9/11.
I'm here to report, at your request, on the 2009 auto
rescues and the recent SIGTARP report on Delphi pensions. I'd
like to make several comments on the report. First, I believe
the value of the report makes clear that General Motors'
management acted in a commercially reasonable manner in
determining how they would treat various groups of Delphi
retirees.
As the report makes clear, General Motors had a choice:
Option A, they could choose to not provide any funding at all
for Delphi's underfunded pension plan; option B, they could
choose to fully fund, top-up or even assume all of Delphi's
underfunded pension plans at great cost; or option C, they
could choose to fund or top-up only the plans they needed to
preserve the viability of GM's own reorganization process.
As the SIGTARP report clearly shows, Option A was not a
viable option. GM's CEO at the time, Fritz Henderson, indicated
that if the pension guaranty of the UAW was not assumed by New
GM, there would have been a strike, and thus it was: mission
impossible.
On Option B, GM management believed there was no commercial
justification for it, which would have involved assuming the
pensions of nearly 70,000 salaried and hourly pensioners, a
majority of whom GM had never committed to support after the
1999 Delphi spin-off, a group that included 20,000 salaried
employees, 18,675 hourly employees and 2,000 other employees.
At Delphi itself, none of the prospective investors in
Delphi had indicated any willingness to maintain Delphi's
pension funds, so unfortunately there was just no contractual
or market-based support for Option B.
And that left only Option C, the path GM ultimately
pursued, where they agreed to assume existing top-up agreements
only in cases where they felt they needed to in order to
successfully emerge from bankruptcy and operate successfully
thereafter.
The record clearly supports these facts; however, I do need
to disagree with and correct for the record several
characterizations made in the summary and conclusions sections
of the SIGTARP report. First, the report makes several points
criticizing the commercial approach which the auto team was
tasked to utilize. For example, SIGTARP implies the auto team
worked too closely with GM management in developing a viable
plan for GM's restructuring; however, the facts at the time and
the results since repudiate this criticism.
When the auto team was first formed, GM had already failed
multiple times to develop a viable plan on its own, and the
Treasury, and thus the American taxpayer, was funding multi-
billion-dollar monthly losses with no end in sight. Time was of
the essence. And in that spirit, the auto team worked closely
with GM management as they developed their revised viability
plan, offering real time feedback and helping speed along a
process that would normally take months and would have costs
tens of billions of dollars more than it ultimately did.
This was exactly the type of work which the auto team had
been created to do: to determine if there was a path to
viability for General Motors, and if so, work with management
to achieve that path.
The commercial success of General Motors since this work
was completed is beyond dispute. Just last week, a Bloomberg
article on the resurgence of the American auto industry stated,
``Detroit has come full circle, from bankruptcy to boom.''
Those fatter profits come from trimmer companies that radically
restructured operations, shed debts, and overhauled their
lineups.
SIGTARP also argues that Treasury inadvertently created a
negotiating leverage for the UAW due to its aggressive time
line for the restructuring process. Nothing could be further
from the truth. The UAW had enormous leverage because they
represented nearly 100 percent of the GM hourly workers with
the skills to manufacture cars, and they are prepared to use
that clout to press certain key issues. Nothing else in the
restructuring process provided them any additional leverage,
nor did they need more.
Furthermore, the SIGTARP report is silent on what viable
alternatives, if any, there might have been for the path GM
pursued.
Like all choices in the real world, all the difficult
decisions that were made during the auto rescues were about a
series of trade-offs of bad and less bad options. For example,
SIGTARP implies the auto team should not have established such
an aggressive restructuring time line; however, all industry
commentators, GM management and the auto team itself, in fact,
not a single contrary voice that I'm aware of were convinced
that GM could not survive a prolonged bankruptcy. As a result,
there was no viable procedure or alternative to a very rapid
Section 363 sale. Moreover, Section 363 sales like this have
been done at times in the past for exactly these reasons. So in
reality, neither GM management nor Treasury had a practical
alternative, unfortunately, to the course that was followed.
This is not to say that these choices were at all satisfactory.
Sadly, the costs inherent in a restructuring as difficult as
General Motors' are massive and tragic. In a better world, none
of these difficult and painful actions would have been
necessary; however, it is equally clear that for General
Motors, there was not a viable alternative path available to
it, and far greater costs and tragedies were avoided as a
result of the work that was done by both companies, their many
advisers, and the Bush and Obama administrations.
I look forward to discussing these issues with you today.
Thank you.
Mr. Mica. Thank you.
[Prepared statement of Mr. Wilson follows:]
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Mr. Mica. And we will now turn to our last witness, Mr.
Miller. And Mr. Miller is a senior member of an international
law firm. And welcome, and you're recognized.
STATEMENT OF HARVEY R. MILLER
Mr. Miller. Thank you, Mr. Chairman, Mr. Connolly, and
members of the committee for the opportunity to participate in
this hearing.
I acted as the lead attorney for General Motors in
connection with its restructuring under Chapter 11 of the
Bankruptcy Code via a sale pursuant to Section 363 to an entity
sponsored and financed by the U.S. Treasury and the governments
of Canada and Ontario through its Export Development Canada.
During the period preceding the commencement of the Chapter
11 case, General Motors was subjected to substantial adverse
circumstances, beginning in 2007, as the subprime mortgage
crisis began to surface and affect auto and truck sales. That
was compounded by a surge in oil prices in the summer of 2008
and further diminished--that further diminished consumer demand
and caused sales to erode. As a result, GM's liquidity began to
dry up. Conditions worsened with the financial crisis ignited
by the conservatorships for Fannie Mae and Freddie Mac and
ultimately the bankruptcy of Lehman Brothers. The future of the
automotive industry looked bleak and the parts supplier
industry had supplies which were beginning to fail.
President Bush recognized the potential calamity, and
directed the U.S. Treasury to enter into a financing agreement
with General Motors that resulted in the secured loan agreement
to avoid the consequences to the American automotive industry
and the loss of hundreds of thousands of jobs then at stake.
Unfortunately in 2009, conditions continued to erode. The
Obama administration inherited the administration of the
secured loan agreement, and GM needed additional financing. The
auto team was appointed and got involved in the negotiations as
to additional financing.
Central to those negotiations was the protection of
taxpayer monies, and therefore the requirement that GM submit a
feasible business plan that provided the prospect of restored
viability and recovery of monies advanced.
The auto team conducted intensive due diligence in
discharging its functions. The important point is that the auto
team and the government at all times acted in the same manner
as a private secured lender attempting to protect its loan, but
also complicated by the desire to retain an American automotive
industry.
In that context and in the face of the deepening global
economic crisis, it became obvious that without radical
surgery, restructuring its finances and operations, GM would
fail, and that would cause a chain reaction throughout the
automotive industry.
That led to the exploration of alternative issues and
possible solutions. That led to the direction of conducting a
Section 363 sale under the Bankruptcy Code, a process which was
not at least at that point totally novel, and had been used in
many other similar situations.
As it became evident that there was no access to credit for
General Motors and the large amount of debt outstanding to the
United States, the only source of financing and investment was
the U.S. Treasury and the Export Development of Canada.
Integral to the process, as amply described in my written
testimony, was that the end result would be an operating
efficient company capable to compete in its own marketplaces
with a prospect of returning to the purchase of all or a good
portion of its loans and investments. Incidentally, that is the
same objective that ultimately was the objective of the
Unsecured Creditors Committee that was appointed in the Chapter
11 cases to recover some return on claims of unsecured
creditors, which I might say included salaried employees of
both GM and ultimately through Delphi's own Chapter 11 case.
This is the normal process in Chapter 11 cases involving
Section 363 sales, private lenders and investors, and a process
that was used basically in the Bethlehem Steel case. In Section
363 situations, the purchaser is an active participant in the
structuring of the sale and often selects the assets which are
to be purchased and the executory contracts which should be
assumed and leases and along those avenues.
In connection with a 363 sale that anticipates a
operating--an ongoing operations, labor unions have a level of
leverage that other participants don't have. A sale is not
going to be successful if you cannot operate the plant, and to
operate the plant, you have to have workers and labor piece,
and that was what--one of the main objectives in connection
with the Section 363 sale and the restructuring of General
Motors.
As I set forth in the written testimony, the relationship
with Delphi Corporation was very complex. Delphi was a major
supplier to GM, and without those supplies, it would have been
impossible for GM to continue to operate its plant. 60 percent
of steering parts came from Delphi.
The two Chapter 11 cases in some respects were joined at
the hip. It turned out to be a very successful operation. GM is
successful, Delphi is successful, and I think the government
and the GM management did a great job in coming up with a
feasible plan.
Thank you for this opportunity.
Mr. Mica. Thank you.
[Prepared statement of Mr. Miller follows:]
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Mr. Mica. And I thank all of our witnesses for their
testimony, and we will turn to questions now.
First I want to talk to the Special Inspector General, Ms.
Romero. I just about fell out of my chair when you cited the
number of convictions and also the people charged with stealing
from TARP. Could you repeat that again for the record?
Ms. Romero. Absolutely. I really appreciate you raising
this. So SIGTARP's a law enforcement agency, so we conduct
criminal investigations. As a result of our investigations so
far, 151 people have been charged with crimes and 111 of them
have been convicted so far. The others are waiting trial or----
Mr. Mica. 111 convicted.
Ms. Romero. Yep. 58 of those----
Mr. Mica. Let me just say, good work. I don't think any of
the American people--I mean, TARP is always touted as such a
success and everything, but it looks like when you open the
cupboard, the rats find their way to the cheese and steal a lot
of it.
When we talk about this whole topping-up of pensions, this
isn't--this wasn't a normal bankruptcy. It would have been
handled quite differently, wouldn't it, Ms. Bovbjerg, if this
was a regular bankruptcy?
Ms. Bovbjerg. Normally in bankruptcy when plans are being
terminated--and just to be clear, usually PBGC is terminating
plans because there is no viable sponsor and they're
underfunded.
Mr. Mica. But the whole bankruptcy was--it wasn't handled
like a normal bankruptcy, right?
Ms. Bovbjerg. From a PBGC perspective----
Mr. Mica. What's the difference--what was the difference in
this, in how this was handled?
Ms. Bovbjerg. What made these terminations unique was the
presence of GM.
Mr. Mica. Yeah. But, again, the whole difference in what
was done here is the topping-up, and, again, what took place
was that they were using what? That's the question. Can you
answer that? Anyone know? Taxpayer money? Is that the truth?
Ms. Bovbjerg. It's a little unclear, because it's all
fungible. I mean, we were not--we were not looking to track
that, but----
Mr. Mica. I know, but where the hell did the money come
from? Excuse the expression. It came from the taxpayers. Even
Mr. Miller, the minority witness, just said that it was--it was
taxpayer money, and most of it's deficit money, $0.40 on the
dollar, but that's the difference. I have been in business, and
you file bankruptcy and you go through a court proceedings. And
there may be some protection of pensions through a Pension
Guarantee Fund if you're a participant, et cetera, but the
difference here is that taxpayer money was making up the
difference.
Now, some of you all participated in a--it was the
presidential--President's Auto Task Force. Raise your hand if
you participated. Okay. Three here. Okay. Did you all
participate in the Poughkeepsie meeting? Did you participate in
the Poughkeepsie meeting, Feldman? No?
Mr. Feldman. Not familiar.
Mr. Mica. You weren't there. Were you there, Rattner.
Mr. Rattner. I----
Mr. Mica. Were you there, Wilson.
Mr. Wilson. Do you mean the Poughkeepsie Delphi mediation?
Mr. Mica. Yeah.
Mr. Wilson. Yes.
Mr. Mica. But the other two were not. So you're the only
one at the table that was there, right?
Mr. Wilson. I think that's correct.
Mr. Mica. Okay. And I understand there were union
representatives at that meeting, and that was the basis of a
lot of discussion that was taken prior to making a final
decision as to how this was going to all play out, but there
was no one--not--no one from the non-salaried side of the
equation, was there?
Mr. Wilson. Sir, I don't recall that. The primary
participants were representatives of GM and Delphi.
Mr. Mica. But were there union representatives? I was told
there was a union representative. Does anyone know?
Mr. Wilson. There were dozens of people there. I don't know
for sure.
Mr. Mica. Do you know, Ms. Romero, if there were.
There were dozens of union representatives.
Mr. Wilson. No. There were dozens of people. I can't tell
you for sure----
Mr. Mica. Well, I'm told there was no one representing the
non-salaried where a lot of the decisions were made, which
seems a little bit unfair. And, again, I think----
Mr. Wilson. Can I ask you who--who you think was
representing the unions, because I don't recall anyone there
who did.
Mr. Mica. I was told that there was representation.
Mr. Wilson. Was it by a source that was there as----
Mr. Mica. No. By my staff, and they're usually fairly
reliable. Today's only Wednesday. Okay.
Mr. Rattner, to you. You talked about this being a success
and GM and Chrysler wouldn't make it without it, but others
made it without it, Ford and a whole host of others. Isn't that
correct, too?
Mr. Rattner. That's correct.
Mr. Mica. Yeah. And they made good decisions. I mean, I was
in business. I would have loved to have somebody fund me when I
had losses or wasn't making money or was on the verge of
bankruptcy, but here again, I think the principal difference is
that we used taxpayer money for the bailout.
Does anyone have any idea, Ms. Bovbjerg, of how much money
was used for--I heard there was some resolution of liability
for healthcare debt.
Ms. Bovbjerg. We did not look at the VEBA, is I think what
you're asking about, the retiree health.
Mr. Mica. Yeah.
Ms. Bovbjerg. I know that there had been some provision,
perhaps in the settlement.
Mr. Mica. But I was told that that was--that was also part
of the bailout.
Ms. Bovbjerg. It--we did not look at that.
Mr. Mica. You don't know. Do you know, Ms. Romero?
Ms. Romero. I don't know the exact amount.
Mr. Mica. But what I'm trying to do is figure----
Ms. Romero. It's clearly part of the bailout.
Mr. Mica. --figure out how much of the pension top-up cost
and the healthcare, any of the money that probably will not be
paid back to the taxpayers. It won't be paid back as opposed to
some of the other money. Is that correct?
Ms. Romero. The estimated amount--this is what GM and
Treasury were working with at the time for the top-up of the
union employees, this would be all the unions, was $1 billion
to $1.5 billion.
Mr. Mica. And that won't be paid back. There's no mechanism
for that.
Ms. Romero. No. It's not a--it's not separate than the TARP
funds that have to be paid back anyway where Treasury expects a
loss.
Mr. Mica. All right. And, again, we only have one person
that was at the Poughkeepsie meeting, so we will try to find
out exactly who was there.
My last question is, I've only chaired this with--and Mr.
Connolly as my ranking member since the beginning of the year,
however, the inquiry into this matter has gone on for at least
2 years previous. You've been involved for how long, Ms.
Romero?
Ms. Romero. 3 years.
Mr. Mica. And how would you describe the folks from TARP
and Treasury, all the government folks that were involved,
Pension Guarantee, as their cooperation as your investigation
has gone forward?
Ms. Romero. Well, this audit was very much delayed by the
refusal of four auto team members to be interviewed, yes.
Mr. Mica. Well, I made one pledge when I became chairman to
Mr. Turner that all hell would break loose if we did not get a
response. I did think at the beginning that they'd finally
become responsive, but I will not tolerate, as chair of a
subcommittee or participating in this committee, with non-
responsiveness from any of the agencies. And there will be--and
I think Mr. Connolly shares this, too. We expect and demand the
information. I know that's been turned over, it's been late,
and I know that they did everything to delay to keep
information from you. And I think that's a sad commentary,
because the story does need to be told and I think that it's
our responsibility to look into how this unfolded and how
taxpayer money was used and if people were treated fairly with
taxpayer money.
So, again, I thank you for your perseverance and the good
job you did, and I wish you good luck on the conviction of the
balance of those folks that stole out of the cookie jar.
Comment.
Ms. Romero. Thank you. We'll get them.
Mr. Mica. All right. Thank you.
Mr. Connolly. You go get them.
Thank you, Mr. Chairman.
By the way, just to clear up something, Mr. Wilson, you're
under oath, your testimony is you do not recall any union reps
at that Poughkeepsie meeting. Is that correct.
Mr. Wilson. That's correct.
Mr. Connolly. Thank you.
Mr. Wilson. I don't recall that.
Mr. Connolly. Just want to make--get it in the record,
since you were the only one at the table who was there.
Ms. Bovbjerg, you--I think I heard you characterize the
bankruptcy as unusual. Is that correct?
Ms. Bovbjerg. From the perspective of plan termination and
the PBGC, it was unusual. PBG's--PBGC's role in it was as it
has been with other terminations. We were asked to look at the
perspective of PBGC and we looked at the 10 largest
terminations. And, you know, every one, of course, has it's
different twists and turns, but they were all pretty much the
same. PBGC is mainly governed by ERISA, so most of what they do
is in statute.
What was different here were the top-ups and the presence
of GM. If Delphi had emerged from bankruptcy and tried to top-
up the plans, PBGC would have given the plans back.
Mr. Connolly. Gotcha.
Ms. Bovbjerg. Because if they can do that----
Mr. Connolly. Right.
Ms. Bovbjerg. --any employer can do that.
Mr. Connolly. If I may, because I want to explore the
narrative here that some are trying to establish, let's go
back. The top-off GM negotiated at the time of the spin-off of
Delphi was with the unions. Is that correct.
Ms. Bovbjerg. Yes.
Mr. Connolly. At the time, the union workers being
represented, their pensions weren't fully funded. Is that
correct?
Ms. Bovbjerg. Correct.
Mr. Connolly. The salaried workers who now are complaining
about the fact that they didn't get topped off, unlike the
union workers, in fact they were fully funded at the time of
the spin-off. Is that correct?
Ms. Bovbjerg. Yes. Their plan was overfunded.
Mr. Connolly. Subsequently something happened, so they--
okay. So they were fully funded, the union folks weren't. The
union folks negotiated a contract to try to correct that and
get a top-off, salaried workers didn't. No taxpayer dollars
yet. And, of course, no one thinks Delphi goes under, but it
does.
Mr. Turner. [Presiding.] Mr. Connolly.
Mr. Connolly. And----
Mr. Turner. Can I interrupt for just a moment.
Mr. Connolly. I'm sorry?
Mr. Turner. I'm sorry, Mr. Connolly. If I could--if I could
interrupt for just a moment, and I'll give you additional time.
As you're having this discussion, that's not necessarily
the--a complete characterization of what the issue is. As Ms.
Bovbjerg knows, the issue also is on the termination and on the
funding itself----
Mr. Connolly. Right.
Mr. Turner. --and on the dispute of the assets. So we're on
the top-up, and I just want to make certain that her answers
are understood to be limited to just this----
Mr. Connolly. Yes.
Mr. Turner. --issue of the top-up.
Mr. Connolly. Thank you.
Mr. Turner. There are multiple other issues leading up to
termination----
Mr. Connolly. Yeah.
Mr. Turner. --that are at risk.
Mr. Connolly. I thank the chair. Yeah. I'm just trying to
key off on the narrative here to make sure I understand what
happened and when, but you're--obviously there were other
issues that we have to--you're quite correct in addressing.
So subsequently, subsequent to the spin-off, things went
south.
Ms. Bovbjerg. Yes.
Mr. Connolly. And the salaried workers who had not
negotiated a top-off, so there was no contractual obligation to
give them one, sued to try to get one. Is that correct?
Ms. Bovbjerg. Yes.
Mr. Connolly. And what happened to that lawsuit?
Ms. Bovbjerg. They're still in court.
Mr. Connolly. I'm sorry?
Ms. Bovbjerg. They're still in court.
Mr. Connolly. Are you sure about that? They're still in
court? Suit's still pending.
Ms. Bovbjerg. Yes.
Mr. Connolly. Okay. So they can pursue the route of
litigation. But if you're suing GM to get a top-off from a
new--I mean, from a court point of view if you're in
bankruptcy, why would a court--I'm just--I'm talking about, you
know, in theory. Why would a court approve a new obligation.
Mr. Turner. Would you mind if I hop in for a moment again?
Mr. Connolly. Yeah.
Mr. Turner. I'll give you additional time. I just want to
take time out of my time to clear that up.
That's an isolated case. The issue is not a suit for top-
up. The issue is one of valuing asset, the termination of the
pension plan to begin with. The issue of going south, that
actually is in dispute as to whether or not there were
sufficient assets within the plan prior to termination and
whether or not these gentlemen exerted influence on the
termination, and so it's not really just an issue of we're
going to court to get a top-up.
The process of the top-ups was really the discussion of
determining, post Treasury's denial, that they were not
involved or were they involved. And here from the report we
have, they were.
Mr. Connolly. I want to be clear, Ms. Bovbjerg. There were
multiple lawsuits, and the one against GM was thrown out. It's
not pending. Is that correct?
Ms. Bovbjerg. That's correct.
Mr. Connolly. All right. Just because it's a little
misleading to say it's still pending. The GM suit is not. And
that's what I'm getting at. Is there, was there any kind of
implied commitment, certainly there was no contractual
commitment, but was there some implied commitment to keep these
folks whole by GM 9 years after the separation from Delphi?
Ms. Bovbjerg. I'm sorry. I didn't understand your question
completely. Can you--that there was an implied commitment?
Mr. Connolly. Well, that--in some of the conversation,
there seems to be some idea that either GM or the taxpayers
have an obligation to folks who found themselves not whole in
their pensions, but that population is a population that was
not covered under the contractual agreement with the unions,
it's 9 years later, GM is in bankruptcy. They pursued, you
know, their legal route against GM, and that was thrown out.
And what I was going to get at is what court in the land,
bankruptcy court would look at this situation and say even
though this is, you know, one of the largest bankruptcies ever,
it's the largest automotive manufacturer in the world, 900,000
jobs are at stake, and we're looking at is there a plan we can
salvage the company with or do we liquidate--thank God we
didn't go to the route of liquidation, but it was an option--
while we're doing all that, let's take on a new obligation,
that is to say one that you are not contractually obligated to
it right now, topping-off or making whole these--this category
of pensioners.
Mr. Turner. Mr. Connolly----
Ms. Bovbjerg. No. I can't really speak to the intent of the
bankruptcy court.
Mr. Turner. And if I could hop in for just one moment
again.
Mr. Connolly. Yeah.
Mr. Turner. Because I know--and you've been, you know,
incredibly kind and diligent, I know, in the manner of looking
at this. This is one where there are unfortunately members
who've been working on it for 4 years, so the distinctions I
know that you're struggling with, perhaps you can help with.
The issue of contractual obligations, there are no
contractual obligations post bankruptcy. There was a labor
agreement, and, of course, salaried retirees--salaried
employees don't have a labor agreement, so they have no
contractual obligation. So it's the distinction in how they sit
as to whether or not there was a prior agreement, but entering
into bankruptcy, they all sit equally, because bankruptcy voids
all the agreements, they have to be redone, it's--they have to
be renegotiated. So it's not fair to say they didn't have one
and they did. It's how are they treated as they go through the
bankruptcy process. And then--and that is in her report for the
GAO.
Mr. Connolly. Yeah. Well, whether it's fair or not is a
different issue. That's a subjective judgment, but your
distinction is fair. There is a distinction. But I do note for
the record one had a contractual--a contract, one did not. One
was whole at the time of separation, one was not. And there's
no evidence, but correct me if I'm wrong, that somebody from
Treasury or the administration politically decided help this
group, not that group, or is there, Ms. Bovbjerg?
Ms. Bovbjerg. We reviewed public documents. We in fact
separated a bit, and I guess I would ask Nicki to talk about--
--
Mr. Connolly. Yeah. I----
Ms. Bovbjerg. --the methodology.
Mr. Connolly. Fair enough. I'll turn to Ms. Romero. I'm
just asking whether you--if GAO encountered--encountered
anything.
Ms. Romero.
Ms. Romero. I'm a little bit lost. What was the question?
Mr. Connolly. Well, I'm trying to lead us up through this
narrative, with the help of my good friend----
Mr. Turner. Can I reask your question.
Mr. Connolly. Sure.
Ms. Bovbjerg. Excuse me, Mr.----
Mr. Turner. His question was with respect to the top-up. Is
there evidence that you uncovered that established that it was
solely politically motivated.
Mr. Connolly. Or at all politically motivated.
Ms. Romero. Well, just so you know, all of our audits we
look at everything, so what we were interested in is what were
all the reasons, all the factors and considerations that went
in to the decision that GM and Treasury made on the top-up. So
we didn't exclude one factor or focus on one factor, and we did
not find evidence that political clout of the UAW was a factor
in GM and Treasury's decision.
Mr. Connolly. Thank you. Mr. Chairman, I think fairly my
time is probably up, and I thank you for your guidance.
Mr. Mica. [Presiding.] Thank the gentleman, and recognize
now Mr. Turner.
Mr. Turner. Thank you, Mr. Chairman.
First off, thank all of you for your participation in this,
because what we're doing is recreating what occurred so we can
find out whether or not what occurred was proper and how to
address it.
Ms. Romero, there were a number of people who threw
political accusations when this first started, and I wanted to
ask you a question I think should help us in dissolving the
political tension, and that is, you are a President Obama
appointee, are you not?
Ms. Romero. I am.
Mr. Turner. Thank you.
Mr. Rattner, according to the SEC website, November 18th,
2012, the Securities and Exchange Commission charged you--
charged former Quadrangle Group principal, Steven Rattner,
yourself, with participating in a widespread kickback scheme to
obtain investments from New York's largest pension fund.
I'm going to ask consent that the portions of the SEC
website concerning those charges be entered into the record and
the full text of the complaint on the kickback scheme in the
pension fund.
Mr. Mica. Without objection, so ordered.
Mr. Turner. Mr. Rattner, did you pay a settlement in that
matter?
Mr. Rattner. Yes.
Mr. Turner. What was the amount of that settlement.
Mr. Rattner. It was about a little over $6 million.
Mr. Turner. I think it's, according to the website, $6.2
million that you paid to settle that claim of a kickback scheme
with respect to a pension fund.
Mr. Rattner, you indicated that the decisions that were
applied with respect to the pensions were those of commercially
reasonable. Could you define commercially reasonable for me?
Mr. Rattner. Commercially reasonable, in our minds, would
be decisions that you would--that a private actor would make in
order to ensure in this particular case that money that was
being invested was being invested wisely.
Mr. Turner. When you considered that private actor, would
you consider a private actor that was involved in a kickback
scheme for pension funds or those that had not been? You don't
have to answer that, Mr. Rattner.
Mr. Rattner. Thank you.
Mr. Turner. Ms. Bovbjerg, you were in Dayton and you did an
excellent job describing the GAO report, and I greatly
appreciate your distinction that your report is not, as Ms.
Romero's is, a detailed analysis of documents and records
requested from the government and the Treasury Department and
reviewed.
You did in your report specifically dedicate a section to,
I believe it is on page 9, the issue of Treasury's multiple
roles. When I did my opening, I indicated that part of the
concern in all this is that Treasury through TARP became
multiple people. I mean, that Treasury's on the board of the
PBGC, Treasury became new GM, Treasury became the bond holders
and, you know, some of the equity holders.
And you indicated this: You said in previous reports, we
also have examined the challenges posed to Treasury due to its
multiple roles as a private pension regulator and a GM
shareholder as well as having its secretary serve on the PBGC
board.
Now, you testified earlier, which is why I want to clarify
this, you said, well, PBGC viewed this normally. Now, you have
not reviewed all the emails that we have and that Ms. Romero
has, so the word ``normally'' I'm a little concerned about. So
let's just go back to what I recall you having said in Dayton
and end it with this. In Dayton, you said those Treasury's
multiple roles did have the appearance of a conflict of
interest, from which you were concerned and noted in your
report.
Is that still accurate today?
Ms. Bovbjerg. Yes. And I'd like to ask Ms. Clowers to jump
in, because she leads our auto work at GAO and was--probably in
her report was the first place that----
Mr. Turner. Okay. We'll get to that in a minute, because I
only have 5 minutes and I have to get back to Ms. Romero, but
we'll take your answer for the record.
Ms. Romero, in the GAO report they state this sentence
when--their testimony today, they say, as we reported in 2011,
Treasury officials said, which is why the distinction of GAO
looked at public documents, that while Treasury did not
explicitly approve or disapprove of GM's agreeing to honor
previously negotiated top-up agreements with some unions, it
agreed that GM had solid commercial reasons, which is that
distinction that Mr. Rattner tried to explain to us of what the
definition of commercially reasonable is.
In your written testimony today, I believe on page 44, you
state that the auto team made it clear--no. That was another
provision--that they specifically did approve them and played a
role. And could you talk about those two roles? In your report
you talk about two things: one, that as the purchaser, they had
a construct in the agreement that required that issues that
were over $100 million and that related to pensions must be
approved by them; and secondly, from the dialogue that you
reviewed, that you understand that they were involved.
So could you explain those two issues to me as to how that
statement that GAO looked at the public reports is not
accurate.
Ms. Romero. So, yeah, let me talk about what we found. This
is what I opened with in my opening statement. There was no way
for Treasury's role to be advisory. The TARP loan agreement
from 2008 sets up basically two roles for Treasury. For the big
things, like things over $100 million or big decisions like the
collective bargaining agreement, Treasury has the approval
rights. They are the decider. There's other things where
Treasury would just give advice to GM.
The top-up only appears in the collective bargaining
agreement. It's not some separate agreement. And the discussion
of the top-up has been confusing so far, because it's been as
if the top-up was somehow a separate agreement that was
separately negotiated and GM made a decision on it and came to
the auto team and said, we'd like to do this. None of those
facts are what we found to have actually happened. It appears
in the collective bargaining agreement.
The other part of this, not just the collective--not just
Treasury's rights to approve the collective bargaining
agreement, Treasury became the purchaser in bankruptcy, and
that changed everything as well. Mr. Miller in his written
testimony, and he was GM's bankruptcy lawyer, says that the
U.S. Treasury acted in the same manner as other secured
creditors would act in selecting the assets it would purchase
and liabilities it would assume. And that's what Mr. Wilson
told us and that's what GM officials told us. GM officials told
us we weren't in control. We could make recommendations, but
it's ultimately up to the purchaser. An obligation that would
be assumed would be the collective bargaining agreement and all
of the obligations that were in it; therefore, it was
Treasury's role, direct role, to make that decision as the
purchaser, just like they did with any other obligation that
the purchaser took on.
Mr. Turner. Thank you for the additional time. I see my
time has expired. I look forward to the second round.
Mr. Mica. I recognize now Mr. Ryan. Mr. Ryan.
Mr. Ryan. Thank you, Mr. Chairman. Thank you for holding
this hearing, and I appreciate everyone's participation here.
This is obviously for me, representing Ohio, northeast
Ohio, is a bittersweet moment, which is why I'm thankful to be
able to sit here and be able to be on this committee, which I
don't normally sit, because Ohio has benefited greatly from
what has happened in the auto industry in the past couple
years. One in every eight jobs in Ohio is related to the auto
industry, and that makes its way down through the supply chain,
as you all know.
On the other end of this is a group of people who live in
my congressional district primarily, and Mr. Turner's as well
and some in Columbus that are Delphi salaried, who have been
devastated, families devastated. And I think Mr. Feldman
mentioned, you go through this a lot. We go through it a lot
too for those of us who represent older industrial areas. And I
hope as we talk about bankruptcy--this is one or two
bankruptcies that we're talking about, and I hope I get as much
enthusiasm from my friends on the other side about reforming
bankruptcy laws for all Americans, because for me and my
congressional district, this has been going on for a long, long
time. That's not what this hearing is about, but these are
people who have been not made whole and who have been harmed,
and we're here to try to figure out how to help those people,
but there's a broader issue that I'll set on the side about
bankruptcy laws, and I'll be looking forward to support from
the other side of the aisle to reform those laws, like the
Delphi salary folks who sat in my office the other day said
they would be willing to help us make those changes.
To sit in a meeting with these folks, who didn't do
anything wrong, paid money in, had a pension, were ready to go,
worked hard their whole lives, and sit here and hear the
stories as I heard the other day, I walk into a room, you know,
two or three of the eight people sitting there, I call coach,
because they were a former coach or a coach in our community.
These aren't people who make, you know, a kagillion dollars
just because they happen to be white collar; these are
hardworking people who, in my estimation, got a raw deal, and
we're trying to figure out how to make this whole.
I want to make one other point as well. There's a lot of
splinter unions that were involved here. We talk a lot about
Delphi salaried, but there is a list of splinter unions: the
machinists, electrical workers, Michigan Regional Council of
Carpenters, Local 687 and Interior Systems, International
Brotherhoods of Painters and Allied Trade, Sign and Display
Union, Teamsters, boilermakers, operating engineers, catering,
restaurant, bar and hotel workers. Lots of other splinter
unions are in the same position, so I don't want us to forget
anybody as we go through this process.
I also would like to say that the people responsible for
the bankruptcy of a company like Delphi that's having a ripple
effect throughout our community are the ones losing their
pension over this whole thing, and clearly something is
terribly wrong with the bankruptcy system, but let me just say
these guys can't go back. These men and women can't go back 25
years and say, okay, this is what our portfolio's going to look
like because of the bankruptcy. They can't go back and do that.
And I want to say very clearly that I do not believe that
Congress or the retirees still have a complete picture of what
happened in this situation. And if it's determined by--through
the evidence produced here or in the court in the lawsuit that
Delphi salaried retirees and the splinter unions were unjustly
harmed due to politics or favoritism, that they must be made
whole. And I will continue to pursue that.
So let me get to some questions here. First a question is
going to go to Ms. Bovbjerg, who testified a little bit about
the GAO report in 2011. Do you feel that the PBGC was
forthcoming with the documents for the GAO report in 2011?
Ms. Bovbjerg. I did. We had no reason to believe they were
not.
Mr. Ryan. So recently the court has ordered PBGC to turn
over additional documents as well, and communications. And is
it of your opinion that those new documents or that new
communication would somehow influence the 2011 report?
Ms. Bovbjerg. No, because when we approached that report,
we were very clear that there were a number of questions that
the requesters asked, and we took the ones that we could deal
with in public documents. And, you know, we might talk to PBGC,
people at Treasury, people for clarification of a public
document. We did not interview the auto team. We did not look
at emails. That was a question that was about whether Treasury
had exerted political pressure in this process, and GAO did not
feel that we could do that work, that that was more appropriate
for an IG office, hence the split between our methodologies.
Mr. Ryan. If I could take an extra minute here, Mr.
Chairman.
Mr. Mica. Go right ahead.
Mr. Ryan. One of the things I want to ask you is about the
range of recovery ratios with regard to the terminated plans.
And did you feel that the PBGC in any way left monies on the
table with the--with those plans that maybe could have bumped
the value of the plan assets? There's some discrepancy between
the Delphi salary folks. Maybe, Nicole, if you'd like to touch
upon this as well, whoever can answer it best. There's some
discrepancy where our folks, salaried folks are saying, well,
we think we could have gotten a lot more revenue for the plan.
Do you believe, in your participation in this case, that
there were monies left on--possibly left on the table?
Ms. Bovbjerg. We did not see that. We saw that out of $7
billion owed on these plans, PBGC got $700 million in
recoveries. That's not really outside the range of what they've
gotten in the 10 largest terminations. They did better with
airlines. They got up to 38 percent. But on some they got
nothing. They tried to do what they can.
So we did not--we didn't evaluate a particular, you know,
foreign lien or something like that, but we did look at the
process and whether they followed it, and what we saw was that
they followed the process as they have with other terminations.
And most of it is required by ERISA, by the pension law.
Mr. Ryan. I know I'm way, way over my time, so I yield
back, Mr. Chairman.
Mr. Turner. Mr. Chairman, could I have just----
Mr. Mica. Yes. In fact, I'll----
Mr. Turner. Ms.----
Mr. Mica. --my time for----
Mr. Turner. Ms. Bovbjerg, I'm just going to take this and
pass it back, because I think what Mr. Ryan is asking is
incredibly important.
I think the reason why several people are struggling with
your answers today as opposed to the answers that you gave in
Dayton is that they're--you're not giving answers that are in
the context of what you did. I mean, you're--you looked at
public documents, and you were not given the issue of the
influence and how it occurred, but yet your statements today
appear to be a little stronger, and I just want to assist you
in the confines of what I know your report says.
You did not find that PBGC did everything according to
their rules and regulations. You--you don't--you had no
information of that, you had no emails, you had public
documents, you did not interview those who were involved in the
GM bankruptcy. So to state that conclusion, which actually is
the subject matter of ongoing litigation, is far more expansive
than I think you intend, and I think that's how the panel's
hearing it. So I want to give you a chance to confine your
answer back to, I did not find anything that would indicate
those in the things that we--in the documents that we reviewed.
It's not that you can conclusively say that everything was
hunky dory, correct?
Ms. Bovbjerg. We did not do a compliance review.
Mr. Turner. Thank you.
Ms. Bovbjerg. You are correct. What we did look at was how
might this termination have been different from others, and
we----
Mr. Turner. And you found nothing that told you different
in the public domain, but you----
Ms. Bovbjerg. Right.
Mr. Turner. --had no access to the others, and that's why
you were helpful to us, but you can't give a conclusion beyond
that, and I think that's what we've kind of struggled with.
Ms. Bovbjerg. And we can't talk about motivations----
Mr. Turner. Right.
Ms. Bovbjerg. --of people.
Mr. Turner. Right.
Ms. Bovbjerg. That's what we don't know.
Mr. Turner. So I appreciated your work, I appreciate your
dedication through your statements. I just want to make clear
its limitations for today for today's purposes.
Thank you, Mr. Chairman.
Mr. Mica. Mr. Turner, if you want to take an additional 3
minutes, you can just continue and then I'll take----
Mr. Turner. Thank you.
Mr. Mica. I'll yield to Mr.--back to this side and then
myself, so we will do a second round.
Mr. Turner. Mr. Feldman, I believe--and let's hold for a
moment. I believe that--you know, you're under oath and we have
met before in this format.
Mr. Feldman. Yes.
Mr. Turner. And I struggle on the issue of the Auto Task
Force involvement. As you know, GAO does a report that says
Treasury says that they weren't involved in the top-up. Ms.
Romero's report says conclusively that obviously Treasury was
involved in it extensively, because of one, by the terms of
TARP, you were required to be at Treasury, and two, you
actually were, because she looked at the documents and the
like.
I have previously asked you, and I--I'm not saying that you
have misrepresented anything to us, but I have previously asked
you and struggled with an understanding of your role in the
discussion of your role on the termination of pension plans,
because I believe that it's been unclear to people trying to
determine what occurred that you were involved in discussions
with respect to the termination or non-termination of pension
plans of old GM as they went through the bankruptcy process.
Now, you don't deny that, right? You don't deny that you
were involved in discussions with respect to the termination or
non-termination of pension plans from old GM as they went
through the bankruptcy process; is that correct?
Mr. Feldman. Congressman, just to be clear, of old GM?
Old----
Mr. Turner. Well, of GM that's going through the
bankruptcy, of the existing plans as it went--as it went
through with respect to going forward with the bankruptcy and
the new GM.
Mr. Feldman. In contrast to----
Mr. Turner. Let me shorten it.
Mr. Feldman. Sure.
Mr. Turner. Were you involved in discussions with respect
to termination or non-termination of pension plans in the GM
bankruptcy.
Mr. Feldman. Of General Motors as opposed to Delphi? That
was the distinction I was asking you.
Mr. Turner. I see. Give me the distinction if there is one,
then.
Mr. Feldman. Sure. I don't recall being involved in
discussions of termination of pension plans of General Motors.
I don't recall being part of those discussions, to the extent
that there were discussions about that.
With respect to Delphi, certainly I spoke with Joe House
from the PBGC, who communicated to me what the PBGC's thinking
was with respect to the Delphi pension plans both on the hourly
side and the salary side.
Mr. Turner. Okay. Let's stop there. And, yeah. I said mine
was broad pension plans, because I wanted you to give me the--
to walk me here.
So in that speaking with Joe House of PBGC with respect to
termination or non-termination, did you ever advocate or have a
position?
Mr. Feldman. Not that I recall, no.
Mr. Turner. Okay. Well, I'm going to hand you your June
18th email to Joe House, and maybe it'll help you recall. I'll
give you a moment to read it.
Because the question I asked you is specifically structured
with respect to your own email.
Let me reask you the question.
Mr. Feldman, did you advocate with respect to the issue of
termination or non-termination with respect to issues relating
to Delphi pension plans?
Mr. Feldman. I recognize what the email says. I still
would----
Mr. Turner. Okay. Pause----
Mr. Feldman. --disagree with the----
Mr. Turner. --because if you're not going to answer yes, I
will just read it for the record. This is Matt Feldman on June
18th in response to Joe House. He says, Thanks. I'll call you
later today or tomorrow. We'll enter this into the record.
Mr. Turner. We are having a sit-down in the de-hourly plan
in the a.m. There is a split as to what should happen. There
are some wanting to see it terminate. I've--that's you--been
advocating, the next word is ``hard''--I have been advocating
hard for our deal, emphasis on our deal, because that would
include you, and I believe that will be the conclusion, meaning
I've been advocating hard for our deal and I believe that I'm
going to win, I believe that will be the conclusion, but wanted
to give you a heads-up.
Mr. Feldman, you didn't say you didn't do this. You said
you didn't recall it. The email speaks for itself. I'm going to
ask you the question again. Did you advocate with respect to
the termination or non-termination of a Delphi pension plan?
Were----
Mr. Feldman. As part of our broader understanding with the
PBGC, obviously I did. That's what the email says, but it's
very narrow and, frankly, misleading to just say, did you
advocate for a position on the pension plan, which is----
Mr. Turner. I had terminate. I said terminate.
Mr. Feldman. I'd like to put it into a broader context.
Mr. Turner. Mr. Feldman, I'm only using your word, which is
``terminate.'' I'm putting nothing else behind it. So for the
record your answer is, yes, this is your email, and, yes, you
did advocate, as this says, ``hard'' with respect to the issue
of termination or nontermination. I'll yield my time and come
back to Ms. Romero.
Mr. Mica. And to be fair, I yielded you the balance of the
time, so you had the full 5 minutes, and then I had given Mr.
Connolly some extra time. So the other side has about 30, 45
seconds extra coming.
Let me yield to the ranking member, who has arrived. So you
have 6 minutes Mr. Ranking Member.
Mr. Cummings. Can you hold on for a second? Just real
quick, I've been watching this clock. Can you explain that
timing again to me, because I have seen----
Mr. Mica. Well----
Mr. Cummings. I have counted about almost 10 minutes just
since I've been sitting here, and I came in when you gave him 3
minutes.
Mr. Mica. I gave him my----
Mr. Cummings. An additional 3 minutes. Oh, I see.
Mr. Mica. I gave him my time.
Mr. Cummings. Okay. Okay.
Mr. Mica. We are in the second round and I gave him my
time.
Mr. Cummings. I see. Okay. All right.
Mr. Mica. Then he took some of it, and I said, well, go
ahead and take the balance of your time.
Mr. Cummings. Okay. I got you.
Mr. Mica. And then he went over. I keep this pretty good,
Mr. Cummings.
Mr. Cummings. I just want to make sure that----
Mr. Mica. So right now you have 6 minutes.
Mr. Cummings. Thank you.
Mr. Mica. And if you want 10----
Mr. Cummings. Very well.
Mr. Mica. --then I will give him more time.
Mr. Cummings. Very well. Thank you, Mr. Chairman. I know
you to be a fair man. That's why I have always admired you. And
I really mean that.
Ms. Romero, I want to thank you for your thorough audit. I,
for one, I do sympathize with the Delphi salaried workers whose
pensions will not be what they thought and planned on. That is
a very sad situation, a very unfortunate situation. I was
surprised to learn from your report that the Delphi salaried
workers' pensions had been fully funded at the time Delphi spun
off from GM in 1999. Is that right? Is that correct?
Ms. Romero. Yes.
Mr. Cummings. Those pensions were fully funded when Delphi
started as an independent company. Is that right?
Ms. Romero. Yes.
Mr. Cummings. All right. Now, Ms. Bovbjerg and Ms. Clowers,
it is my understanding that the salaried pensions actually
overfunded at the time of the spinoff, they were overfunded at
the time of the spinoff. Do you know the exact figure?
Ms. Bovbjerg. It was close to 120 percent.
Mr. Cummings. So they were overfunded.
Hello? Are you talking? Are you saying something?
Ms. Bovbjerg. Yes.
Mr. Cummings. Okay.
Ms. Bovbjerg. Yes. Overfunded.
Mr. Cummings. So something happened between 1999 and 2009
that caused the fully funded pensions of Delphi salaried
workers to become underfunded by 2009.
Ms. Romero, what happened and who is responsible?
Ms. Romero. Who is responsible for the plan being----
Mr. Cummings. Yeah.
Ms. Romero. --fully funded? That would be Delphi.
Mr. Cummings. Yeah. And so it was Delphi management who did
not continue to make pension payments, and their failure to
make payments resulted in Delphi's salaried workers with
underfunded pensions. Is that a fair statement?
Ms. Romero. That is correct.
Mr. Cummings. All right. Now, Ms. Romero, your audit probed
the decision about what to do about those underfunded pensions.
The question came up in the context of GM's bankruptcy in 2009
during which the United States Government provided a loan and
then a debtor in possession financing to enable GM to survive
as a domestic automaker. Is that correct?
Ms. Romero. That is correct.
Mr. Cummings. Now, the SIGTARP report identifies the
reasons GM officials did not want to top-up the pensions of the
Delphi salaried employees in 2009. Let me read from your
report, Ms. Romero. It says, ``GM's CEO told SIGTARP that Mr.
Borst''--that's GM's treasurer--``had explained that if GM
found a way to fund the top-up during GM's bankruptcy, it would
be as if GM had funded the plan twice. As CEO Henderson
explained, GM had already fully funded Delphi's salaried
pensions at the time of Delphi's spinoff, and there was no
basis to do so again.''
That is part of your report. Is that right?
Ms. Romero. That is correct. That is what GM's CEO told us.
Mr. Cummings. Well, do you stand by that finding?
Ms. Romero. Well, it is not a finding, it is just what a
witness told us in our audit.
Mr. Cummings. Okay. So according to this, had GM commercial
business reasons not to top-up the Delphi salaried pensions--
well, let me go back. Did you find anything that contradicted
the statement that I just read?
Ms. Romero. No, I did not find anything that contradicted
it. There is a bigger context, which is included in the report.
Mr. Cummings. All right. So GM had commercial business
reasons not to top-up the Delphi salaried pensions in 2009.
Those were not the Treasury Department's reasons, those were
not the Obama administration's reasons, those were GM's
reasons. Is that right?
Ms. Romero. Well, this is where I need to add a little
context. So the earlier page of my report right before the
statement talks about had GM taken the position that it was
prohibited under the TARP loan agreement from increasing the--
giving the top-up to the salaried workers without Treasury's
consent. So GM alone took the position that they alone could
not do the top-up, and GM's CEO Mr. Henderson at the time told
us that Treasury's consent would have been necessary, that
Treasury ultimately had to agree under the TARP loan agreement.
So what happened was that Mr. Henderson went to Mr.
Rattner. And according to both of them, according to Mr.
Rattner, he says that GM came to them because: ``GM wanted to
do something for the salaried retirees. Mr. Rattner discussed
it with the CEO, and although he didn't remember the specifics
of the conversation, he told SIGTARP there was nothing
defensible from a commercial standpoint. He says, this is from
Mr. Rattner: ``We didn't think there was anything defensible.
We felt bad, but we didn't think it was justifiable.''
What happened then is Mr. Rattner sends an email to the
rest of the auto team saying that he had spoken to Mr.
Henderson and he wrote in his email with respect to the Delphi
retirees, Walter Borst, who was the treasurer, is apparently
preparing some kind of proposal for how to do something for
them that is defensible.
Mr. Cummings. Well, let me ask you this.
Ms. Romero. Right.
Mr. Cummings. Now, the quote I gave you a little earlier,
Borst had said that it would be like funding it twice. Is that
right?
Ms. Romero. Right. So I'm putting it in context. So Mr.
Henderson talks to Mr. Rattner, goes to him and says, we'd like
to do something for the salaried retirees. Mr. Rattner says
something to Mr. Henderson, we don't know the exact specifics,
but says basically we don't think there is anything
commercially defensible. Then Mr. Borst, who is the treasurer
for GM, goes to look to see if there is something defensible.
He is trying to see if there is something defensible. And he
and Mr. Henderson--because that is the standard that Treasury,
the auto team had given them. It is not necessarily GM's
standard. The commercially reasonable standard is the standard
that the auto team had given, and remember GM took the position
that Treasury had to make the decision on the salaried, that
they did not have authority. So then Mr. Borst goes to try to
prepare something that would fit into Treasury's standard, the
commercially defensible standard, and comes back, and he and
Mr. Henderson can't come up with anything.
Mr. Cummings. Now, explain that commercially, the standard
that you just talked about. Explain that to me.
Ms. Romero. Sure. The commercially reasonable standard
doesn't exist other than through the auto team and through
TARP. It's the marching orders that the auto task force,
through Mr. Summers and Mr. Geithner, give to the auto team as
to how they should be making decisions. And so there is no
definition of it or standard, it is just interpreted, and it is
interpreted by the auto team that that means to act like a
private investor, is essentially how they take it.
They tried to do that every time. What we found in our
audit was they made some decisions that were not what a private
investor would make. So, for example, deciding not to move the
headquarters of GM through Detroit, which would save money.
These are other governmental concerns that come into play that
a private investor wouldn't have. And so that commercially
reasonable standard, commercially defensible, is the auto team
standard. It's not necessarily GM's standard, it is the auto
team's standard. And so that's what they were looking for.
Mr. Cummings. Right. Let me just--I see I'm running out of
time--let me just get to Mr. Miller. GM's treasurer and CEO
made an assessment, GM had already fully funded the salary of
the retiree pensions 10 years earlier when Delphi was spun off
from GM. They got the money, but they had no contractual
agreement that obligated GM to further top-up those pensions,
as I understand it.
Mr. Miller, isn't that how you read the report? Is that how
you read it.
Mr. Miller. Yes, sir.
Mr. Cummings. I can't hear you I'm sorry.
Mr. Miller. Yes, sir.
Mr. Cummings. Mr. Rattner Mr. Feldman, and Mr. Wilson, is
that finding by the SIGTARP about GM's actions and reasons for
not giving Delphi's salaried retirees a top-up consistent with
your memory? Mr. Rattner first.
Mr. Rattner. The reason being that it was not commercially
reasonable?
Mr. Cummings. Right.
Mr. Rattner. Yes, that is my memory.
Mr. Cummings. Mr. Feldman?
Mr. Feldman. My memory as well, sir.
Mr. Cummings. Mr. Wilson?
Mr. Wilson. Yes, sir.
Mr. Mica. Okay. I calculate I have approximately 2 minutes
left in this round. I've not asked any questions. I gave my 5
to him. And then Mr. Ryan would be next.
Do you want to go first, Mr. Ryan, and I'll save my 2
minutes?
Mr. Ryan. Thank you, Mr. Chairman.
Mr. Rattner, there were some discussions about terminating
the plan. Can you talk to us about how those discussions went?
I mean, a lot of this stuff, there's still a lawsuit and things
going on with documents being released. But from your vantage
point, can you enlighten us about what those discussions were
when it came to we want to terminate the plan?
Mr. Rattner. When you say terminate, you're referring to
the salaried plan?
Mr. Ryan. Yes.
Mr. Rattner. The discussions were very much I think along
the lines of what you've heard the last few minutes, which is
that we understood that the failure to provide any financial
support to the salaried plan would leave those retirees with
reduced benefits. We were not happy about that. We didn't think
it was obviously a very good outcome for them. We spent a
considerable amount of time thinking about whether there was
anything that we could recommend be done for them, and we
concluded that it was not commercially reasonable or defensible
as a matter of normal bankruptcy procedures.
Mr. Ryan. You said to SIGTARP in my reading of it that GM
officials had been too generous in the past and the auto team
had to dial that back a little bit, that was in the SIGTARP
report, and that you guys needed to press General Motors to be
less generous in relation to the Delphi and the pensions. Now,
to what extent did the auto team press that issue? And did that
adversely affect even the possibility of the top-ups?
Mr. Rattner. Among the problems at General Motors was that
they did not act in a way that one would call commercially
reasonable at all times. In fact, they often didn't act in a
way that was commercially reasonable, which was a good part of
why they were in bankruptcy or insolvent and Ford, for example,
wasn't. So there were any number of places and times when
General Motors would recommend or suggest doing something that
we did not feel was commercially reasonable, and this was one
of them.
Mr. Ryan. Ms. Romero, you mentioned that at times the
commercially reasonable standard was used and then at times it
was not used. You mentioned one example. Were there other
examples where the auto team did not follow that standard?
Ms. Romero. So let me be very clear here. I think what our
report talks about, and this is what we found, they tried to
use the commercially reasonable standard and act as a private
investor. But in the end, they were still the government. So
there were broader concerns that a private investor would not
have. I will give you a few of them. One, to invest in GM in
the first place when no private investor was investing in GM,
according to what GM's CFO told us. That was done out of
concern about saving GM because of the impact a GM failure
could have on the broader auto industry. A private investor
wouldn't necessarily have those same concerns.
Two, deciding not to move GM's headquarters out of Detroit
for reasons about how it would impact the city of Detroit. Mr.
Rattner talks about this in his book. Those are not
considerations that a private investor would normally have.
Another one was deciding when they made the additional TARP
injection as a loan to fund the bankruptcy, rather than take it
as debt, which is what it would be, they were worried about too
much debt being on GM's books, so they decided to convert that
to an equity interest, an ownership interest in the new
company. That has lower priority in bankruptcy. That had bigger
concerns, broader concerns than a private investor.
And finally on what they decided to pay for GM as the
purchaser, there was information in the bankruptcy court, CEO
Henderson, GM CEO Henderson talked to us about that, that
Treasury ended up paying more than the enterprise value--I
believe this is in Mr. Rattner's book--more than GM's
enterprise value.
All of these decisions are just some examples where the
auto team had to consider other things, other than just dollars
and cents, and not act as just a private investor would. And,
frankly, they shouldn't have, they're the government, and
that's one of the lessons learned out of this.
Mr. Ryan. Well, I guess as my time is winding down I'm
going to argue on behalf of my constituents and these Delphi
salaried folks that they should have been included in some of
these. If we are not following that standard all the way
through, if that is not a hard line standard, and I understand
this is a very, very unique situation, that that should be
considered. We have $57 million a year getting pulled out of
our local economy because of the pensions, and these Delphi
salaried were concentrated in areas like mine, like Mr.
Turner's and others, that that should have been considered as
the whole bankruptcy proceeding was going on, as the
headquarters was, which I think is a good move. But there were
other moves that could have been made, in my opinion, that
could have topped these folks off, and in my estimation if
you're not going to follow that hard line rule when it comes to
commercially reasonable, then there's others who lose out
because of that. And that's ultimately why we're here.
And my time is out, and I just would like to make one final
pitch to my colleagues on the other side, that this happens all
the time. The distinction here is that the government was
involved. But there are bankruptcies every single day in this
country, and we need bankruptcy reform because these workers
that we're talking about are unique to this particular
circumstance, and we're going to advocate as hard as we can for
them, but there are thousands and thousands and thousands of
other workers across this country who end up on the short end
of the stick, who are last in line when it comes to getting
made whole, and they get screwed. In Youngstown, Ohio, in
Akron, Ohio, in Cleveland, Ohio, in Pittsburgh, and all through
the industrial Midwest we have seen this for 30 years. And so I
hope that we get the enthusiasm from the other side when it
comes to bankruptcy reform as well.
Mr. Chairman, I'm very thankful for this hearing.
Mr. Turner, thank you for your work and cooperation on this
as well. And I hope this leads to some situation where these
men and women could be made whole.
Thank you very much.
Mr. Mica. Thank you. I've got about 1 minute and a half,
and my 2 minutes, it is about 3-1/2 minutes, I guess, left from
this side, which I'll take since I've asked no questions in the
second round and yielded my 5.
First of all, Ms. Romero, in the '99 spinoff, you keep
talking about topping-up employees. Was that just salaried
employees or nonsalaried employees, one or both?
Ms. Romero. The discussions in 1999 were an agreement to
top-up the hourly employees, not the salaried employees. The
salaried employees weren't represented at that time and their
pension plan was fully funded.
Mr. Mica. Okay. I just wasn't clear as to what took place,
which was some years previous. But the final decision, I mean,
when you just cut to the chase, there may be problems in
bankruptcy and we may need to do bankruptcy reform, this was
not a typical bankruptcy in a civil proceeding, was it?
Ms. Romero. No. And this wasn't even typical for a TARP
program.
Mr. Mica. Yeah.
Ms. Romero. This is the only situation in TARP where you
have members of Treasury, Treasury officials being so deeply
and significantly involved in the company.
Mr. Mica. Exactly. And again you said it was ultimately
Treasury's decision as the buyer to assume or reject the top-up
liability. Treasury, last time I checked, was the United States
of America public, using public money. I thought Mr. Ryan said,
used the term I try not to use, ``screwed,'' because it gets my
wife upset, but basically that's what happened, some people got
screwed here in this proceeding. And the unfairness is that
those people had also paid their taxes, et cetera, into the
Treasury of the United States and should have been treated
fairly.
Now, probably some of this would never have occurred if
everyone would have cooperated. But before I became the chair,
for 2 years we couldn't even get the documentation nor the
cooperation. Mr. Turner turned to me when I became chair, we
did the hearing in June, and I demanded the documentation, and
you finished your report, and I think you did an admirable job.
You're just reporting the facts. And again this isn't the
typical situation. Mr. Rattner had talked about commercially
acceptable or reasonable process, and I guess they were trying
to cover their bases in all of this.
But, Mr. Wilson, you testified last summer that unions did
not receive special treatment. Is that correct?
Mr. Wilson. I believe so, yes.
Mr. Mica. You did?
And, Ms. Romero, did you say and your report find that
unions received special treatment in the GM bailout and the
bankruptcy proceedings.
Ms. Romero. Well, Treasury gave additional leverage to
certain stakeholders and those were two, the UAW and the
bondholders.
Mr. Mica. But they gave, again, something special to the
union folks, right?
Ms. Romero. They established the hierarchy of who would get
a deal cut prior to the bankruptcy, and those were the two
groups that the auto team picked.
Mr. Mica. Mr. Wilson, any change in light of their
findings?
Mr. Wilson. No, that is just not correct. The UAW and the
bondholders had enormous leverage because they are critical
components of a potential restructuring transaction. That's why
they had leverage and that's why they were important to the
deal. It wasn't because of anything that Treasury did, as I
described both in my written and verbal testimony.
Mr. Mica. And what were the nonunion employees? Chopped
liver?
Mr. Wilson. Unfortunately, anyone who----
Mr. Mica. They were just dumped overboard.
Mr. Wilson. No. That's not----
Mr. Mica. But again, the union side, maybe they were
entitled to this, the top-up, and I have no problem with that.
But what I have a problem with is thousands of people left
behind, and we're using taxpayer money for the top-up. And we
also had a testimony today of a billion dollars that won't be
returned to the Treasury. So I don't view that as fair for all.
And Mr. Ryan, Mr. Turner have to go back and face these
people. I faced some of them at the hearing we held in June.
Mrs. Brooks isn't here. She told me one person that she ran
into this week is basically homeless, who was one of these
employees that she talked to this past week.
And we will leave the record open. Some of the Members
weren't able to return after the votes, and she's one of them,
to cite in the record what this is, how this has affected
folks.
So, again, we're dealing with Federal taxpayer funds and
how they were distributed, and some people were unfairly
treated, according to the report. And Treasury did have the
discretion to make a different decision, wouldn't that be
correct, Ms. Romero?
Ms. Romero. Absolutely it was their decision.
Mr. Mica. Okay. Let me----
Mr. Ryan. Mr. Chairman, if I could just----
Mr. Mica. Go right ahead.
Mr. Ryan. I just want to make a point, that there were
eight or nine other unions. I just don't want to leave anybody
out. So it was the salary, but that list of union members that
I gave were also on, we can't forget them as we're advocating
for this, that there were other, seven, eight, nine unions that
were also included that had been left out. We talk about the
Delphi salary, but it is also these splinter unions as well.
Mr. Mica. And, Mr. Ryan, I think every one of them should
have been treated fairly.
Mr. Ryan. Yeah. Agreed.
Mr. Mica. Again, it is taxpayer money. I've been involved
in business and I have seen bankruptcies and I have seen how
they're settled and there is a lot of unfairness. There are
things that we could do to correct that. This was not a civil
or commercial bankruptcy in any sense of the normal way these
things are conducted. Again----
Mr. Ryan. That's why I'm sitting here with you, Mr.
Chairman.
Mr. Mica. That's my beef. And if there were some way, in a
bipartisan manner, to make people whole, I mean TARP is still
not done. I don't know if legislatively that can be done or
however. But I think it is a great injustice to thousands of
people. And our job is to, again, try to be fair to those
folks. I'd be glad to work with you and others, both sides of
the aisle, to see what we could do.
Mr. Ryan. Well, Mr. Turner and I have been working on this
for a long time and we welcome that opportunity, as well as the
HCTC extension for the next year, because a lot of these folks
are having huge, huge healthcare costs as well. So I appreciate
that, Mr. Chairman, and let's make something happen.
Mr. Mica. Okay. Any additional questions?
Mr. Ryan. No. Just thank you.
Mr. Mica. Mr. Turner, additional questions?
Mr. Turner. Thank you. I have three. And I do want to
acknowledge Mr. Ryan's dedication and just hard work on this.
This has been really a team ball project here and a bipartisan
project. Rob Andrews is being another, of course on the other
side of the aisle, and certainly in the Senate there are a
couple others. And a follow-up to my congratulations to Mr.
Ryan, thanks to Mr. Ryan, I unfortunately had to step out, and
while I was gone Mr. Ryan asked a question to Mr. Rattner. And
so I'm going to paraphrase, not having been in the room, your
answer, and I'm going to ask you to say it again and elaborate
on it so that I could understand it.
He was discussing with you the termination of the salaried
pension plan, and you indicated that you had had considerable
discussion on the termination of the salaried plan. Is that a
correct characterization of what occurred when I was not in the
room?
Mr. Rattner. I'm not sure with whom you are thinking we had
discussions.
Mr. Turner. Well, first off, did you have any discussions
with respect to the termination of the salaried pension plan?
Mr. Rattner. Yes.
Mr. Turner. And those discussions occurred prior to its
termination?
Mr. Rattner. Correct.
Mr. Turner. Who did you have those discussions with?
Mr. Rattner. I had one or more discussions with Fritz
Henderson, who was then the CEO of General Motors, and we had a
number of discussions among the auto team members.
Mr. Turner. So you spoke to Mr. Feldman?
Mr. Rattner. I believe so.
Mr. Turner. So when I asked Mr. Feldman whether or not he'd
had any discussions and he didn't recall it, you do recall
having had a conversation with Mr. Feldman with respect to
terminating the salaried pension plan.
Mr. Rattner. I thought your question to Mr. Feldman was in
the context of the PBGC.
Mr. Turner. Did you recall having discussions with PBGC
with respect to termination of the plan?
Mr. Rattner. I don't recall.
Mr. Turner. Would you deny that you did?
Mr. Rattner. I said I didn't recall.
Mr. Turner. So you don't recall whether or not you did or
didn't, right? You could have.
Mr. Rattner. I could have, but I don't recall.
Mr. Turner. Well, luckily, with the subpoenas that have
been issued, we're going to get even more of the information
because Mr. Feldman had no recollection of his discussion with
respect to termination of the pension plans until I handed him
his own email. And, Mr. Rattner, I look forward to addressing
that issue with you again with perhaps your own emails.
Mr. Wilson, one of the issues in the GAO report is this
concept of the conflicts of interests, the multiple roles of
Treasury, is I think the heading in the report. And we talk
about Treasury having a--the Treasurer on the board of PBGC, we
have Treasury as TARP, purchaser of GM, we have auto task force
Treasury, we have many of those. You've left the auto task
force, you've left any role at Treasury. But it's my
understanding you were subsequently appointed to the PBGC
advisory committee. Is that correct?
Mr. Wilson. I was recommended by Senator Mitch McConnell's
staff to the White House that ultimately decided to appoint me
as a representative of the people at large.
Mr. Turner. So was that a yes? I didn't understand it.
Mr. Wilson. Yes.
Mr. Turner. Are you still on the PBGC advisory committee?
Mr. Wilson. Yes.
Mr. Turner. Okay.
Ms. Romero, thank you for the clarity of your answers among
what at times becomes a heated and an obtuse, I don't know,
where the answers here are not always the clearest.
On your report, on page 29, you state that the audit--in
the audit you state that after the decision was made to not
make the salaried retirees whole, Dr. Summers prepared a
briefing memo for President Obama in August of 2009. Can you
tell us who Dr. Summers is?
Ms. Romero. Larry Summers was one of the heads, with
Secretary Geithner, of the auto task force.
Mr. Turner. I know it's in the report. I just wanted for
the clarity of the record for it to be stated. Was this memo
provided to you or your staff?
Ms. Romero. We were provided access, but we were not given
the memo.
Mr. Turner. So you've seen the memo?
Ms. Romero. No, I have not seen the memo.
Mr. Turner. Someone on your team did see the memo?
Ms. Romero. I should say this. Someone on my team saw a
draft of an email that contained the memo.
Mr. Turner. Do you know what was in the memo?
Ms. Romero. Yes.
Mr. Turner. Could you tell us please?
Ms. Romero. Sure. A Delphi salaried retiree had written a
letter to the President to describe his personal situation. The
President had asked his advisers for information about the
situation. The memo discussed how this person would receive
less benefits on their pension, it describes the 1999
agreement, the spinoff of Delphi. It describes discussions
between the UAW and GM in 1999. It then discusses how, as part
of GM's bankruptcy, the top-up for the UAW retirees would be
given, but not for the salaried employees. It discusses that
the salaried retirees did not have leverage because they did
not have current workers at GM. And it also discussed how the
salaried plan was fully funded by GM in 1999.
Mr. Turner. Do you know who briefed the President from that
memo?
Ms. Romero. The memo came from Mr. Summers. I don't know if
there was any verbal briefing to the President.
Mr. Turner. And no action to reverse the decision came from
the President or the White House that you are aware of after
the memo informing the President that the salaried retirees
lacked the leverage of UAW?
Ms. Romero. That's correct. We did not see any change or
any action taken after the memo to the President.
Mr. Turner. Ms. Romero, I'm going to read something from
your written statement that I would like you to elaborate on
because I think it really goes to the issue of the power and
authority that Treasury exerted here. You say, ``An Auto Team
official told SIGTARP that the Auto Team's approach with GM was
to 'push them' and to 'question them.' And another one said we
pushed GM toward making the changes necessary to becoming a
viable company.''
And when asked how is it that this was done, at the bottom
of the paragraph on page 12, which is the third paragraph down,
the auto team official said, ``Well, they could, but then they
couldn't exist. I mean, as I said, as the lender, we had a fair
amount of leverage.''
Now, that's a constant theme throughout your report. Could
you elaborate on that just a moment? Because that is, I mean,
that is fairly ``but for'' GM goes away if they don't do what
Treasury says.
Ms. Romero. Well, I think this goes to the bigger issue and
I think the best way to discuss this is to tell what you the
auto team told us and tell you what GM told us.
So Mr. Bloom told us, from the auto team, that Treasury did
not want to start running the company but when dealing with
taxpayer resources, we, the government, were ultimately holding
the purse strings and we reserve the right to tell GM we would
not back them. So when we asked Mr. Bloom how the auto team
conveyed its preferences or nudged GM to see things the way the
auto team did, given that ultimately GM could do its own thing,
that's when he said, ``Well, they could, but then they couldn't
exist. I mean, as I said, as the lender we had a fair amount of
leverage.''
GM officials told us, there's a just a couple statements,
one, ultimately it is that GM is not in control and GM is
totally dependent. The auto team replacing the CEO was an early
indicator that Treasury as the main investor would have
significant influence over GM's decisions and operations. GM
officials told us the auto team was pushing GM to be tougher
and take more significant actions other than what we would have
done on our own volition, that GM put forward recommendations,
but ultimately the purchaser made decisions, which was
Treasury.
So there were a lot of situations that we found where the
auto team can take the position that they did not intend to
have significant influence on GM's decisions and operations.
But we have GM officials telling us that they felt that they
were not in control and that the auto team did have significant
influence on GM's decisions and operations.
So the auto team may not have intended to have significant
influence, and they may not believe that they had it, but they
did. And if I can just take 2 seconds I want to read one part
in Mr. Rattner's book, which is very much on point. This is
quoting from Mr. Rattner's book, ``Larry''--meaning Mr.
Summers--``Larry had pushed us from the start to play down team
auto's role and keep the emphasis on GM and Chrysler managing
their own affairs. That ended up being partly true of GM in the
sense that Harry''--meaning Mr. Wilson--``and his team tried to
set parameters and assumptions for its executives in the hope
that they then could produce the specifics of a restructuring
plan.''
And he goes on to say, ``In reality the talent and
determination of Harry''--and then he named David and Sadiq,
who were on the auto team--``were what really drove the
process. As we drafted press statements and fact sheets I would
constantly force myself to write that GM had done such and
such. Just once I would have liked to write 'we' instead.'' And
that is what Mr. Rattner wrote, that's consistent with what we
found, that the public statements Treasury made downplayed
their influence, downplayed their role.
Mr. Turner. Thank you.
Mr. Mica. Thank you.
Mr. Connolly, I yield you 10 minutes.
Mr. Connolly. Thank you, Mr. Chairman. I want to come back
to that in a minute.
But, Mr. Wilson, you objected that Ms. Romero was
inaccurate when she said Treasury gave leverage to the union
and bondholders. You weren't really allowed to explain your
objection. Please do so now.
Mr. Wilson. Sure. There is no doubt that UAW and the
bondholders had a lot of leverage, but it was not in any part
as a result of Treasury actions or anyone else's actions. They
had a lot of leverage because they were critical actors in the
restructuring. We needed the UAW to manufacture cars and
therefore they were critical for that, and they would always be
critical. And the bondholders were critical because they were a
large stakeholder. Even though they had no ongoing involvement,
they were critical because they could object and hold up the
proceedings and cost the taxpayers lots of--billions of dollars
in a prolonged bankruptcy that would also imperil the potential
viability of General Motors.
Mr. Connolly. So good point you're making here, that the
leverage they had was self-created by virtue of their power
over many years, it wasn't something conferred upon them by
Larry Summers or Mr. Rattner?
Mr. Wilson. That's correct.
Mr. Connolly. Mr. Miller, Mr. Rattner, Mr. Wilson, Mr.
Feldman, any and all of you, but here's GM facing bankruptcy.
Why would they choose to honor these union contracts? Could
there be a good business reason to do that or is it just
because somebody somewhere said take care of the unions? Is it
at all conceivable there could be a business reason, if you
want to save the industry and save GM through the bankruptcy
process and have them come out whole, that you might want to
honor that contract?
Mr. Miller. The issue is that without honoring the
contracts, there wouldn't be any workforce. And the last time
that GM, I forget the year, allowed a strike to go on, it was
exceedingly expensive and almost destroyed the company.
To operate and become feasible, you must have the workers
who produce the product. And that was a prevailing theme, even
though the negotiations were very difficult with the union in
trying to get concessions. But it's a long history going back
to Walter Reuther of a lot of adversity. But without a labor
force, there is no feasibility.
And as far as the GM management was concerned, if the
United States of America wanted to pay everybody and GM not
file a bankruptcy petition, that would have been perfectly
fine. But from my observation what the auto team was concerned
about is how do you protect taxpayer money? If you're just
going to open up the door and everybody is going to be paid,
well, then you don't need the bankruptcy.
But bankruptcy is a zero-sum game. There's only so much
value, and the fight is who's going to share in that value, and
there are priorities that are commanded by the bankruptcy code
and there are business reasons why, unfortunately, from my
perspective, unions have a lot of leverage. And the question
is, how much money are you going to put in? From my
perspective, again, United States and Canada operated as if
they were secured lenders. They were trying to protect their
investment.
And after all, you're talking about a company which, as
people have described here, prior to bankruptcy was too lax,
they took on too much credit, they gave out too much money.
Well, what this task force was trying to do was to make sure
that GM stayed within the line of what would be feasible to get
to a viable company.
Mr. Connolly. And, in retrospect, and, again, I'd invite
others, would it be fair to say looking back that actually that
kind of worked out?
Mr. Miller. Yes.
Mr. Connolly. That it was a wise business decision not to
vitiate the contract or ignore it?
Mr. Miller. From my perspective yes.
Mr. Connolly. Mr. Rattner, Ms. Romero quoted from your book
a conversation you had with Larry Summers. Would you comment on
her comment?
Mr. Rattner. Yes. Ms. Romero I don't think fully
understands the difference between being involved in day-to-
day operations and being involved in a restructuring. And she
has sort of tossed those back and forth without making the
right distinction.
We had no involvement in the day-to-day running of General
Motors. We did not decide what kind of cars they were going to
make. We did not decide which plants were going to function. We
did not decide how much they were going to discount their new
model, we didn't pick new models, we didn't pick executives. We
didn't do any of the things that one would associate with the:
``day-to-day running of the company.''
The section she read from my book pertains entirely to the
efforts that we made to effect the restructuring of General
Motors in which we were heavily involved. We were investing
ultimately a total of $50 billion, I think $12 billion of it
under the Bush administration, into the company, and we had a
responsibility to the taxpayer to be sure that money was
invested wisely. And if we had not been involved in those
restructuring plans, if we had not pushed back on General
Motors, if we had not insisted on a viable restructuring plan
then I would be relatively confident in saying we would be
sitting here in front of you having a different discussion,
which is, why were you not watching over the taxpayer money?
Why were you not involved in this restructuring? Why did you
not insist that it was being done in commercially reasonable
terms?
Mr. Connolly. Ms. Romero, you have heard Mr. Rattner's
explanation, and from his point of view you perhaps misread
what the nature of that conversation was, namely it was focused
on restructuring, not on day-to-day management and operational
decisions.
Ms. Romero. So earlier when I talked about the actions of
what Treasury's influence was, what I did was I read quotes
from Mr. Bloom, who is not here, on the auto team, and I also
read quotes from GM officials. And I think this is what's
important. This is what I was saying earlier. It may be that
the auto team went into their job not intending to get so
involved or have such significant influence on the decisions
and operations of the company. And it may be that as they sit
there today and look back at what they did that they don't
think that they had that influence. But ultimately the only one
who can say whether they felt that influence was the company
itself. And what the company officials told us in interview
after interview after interview after interview was that they
were not in control, that the leverage was held by Treasury.
And when they talk about we weren't involved in the
selection of executives, one of the first things they did was
Mr. Rattner went to GM and asked the CEO to resign and then put
in his own replacement, his own pick of the CEO. And that CEO
told us that GM's board was very upset by that and said that
the auto team had usurped their authority. And he said to us
that was an early indicator that Treasury as the investor would
have a significant influence on our decisions and operations.
Those are his words.
So when Mr. Rattner talks about our interpretation is
wrong, we aren't interpreting, we are laying out for the public
all of the things that the auto team told us and all the things
that GM officials told us.
Mr. Connolly. All right, Ms. Romero, let me just posit a
little devil's advocate.
Ms. Romero. Sure.
Mr. Connolly. The U.S. taxpayer is pumping tens of billions
of dollars to save this company and try to make sure we don't
lose all those jobs and the whole industrial core of our
economy. And it's not entirely unexpected that the existing GM
management team watching this thinks what a pain in the butt,
who needs their interference, I'll take your money, and keep
your opinion to yourself, thank you very much, because we
really have done nothing wrong, we actually know what we're
doing and you people don't. And they're going to resent any
intrusion, any second guessing, any kind of new leadership
change. That's kind of human nature. And as a taxpayer and as
somebody who oversees taxpayer investments, I'm not entirely
unsympathetic to Mr. Rattner and his team trying to protect my
interests.
Now, maybe from someone's point of view it went too far.
But the fact that you're relying on GM interviews, while I'm
not entirely surprised having mucked it to up to a fare thee
well and forced the taxpayer to bail them or let them go under,
that they resent our exercising some oversight
responsibilities. Couldn't that be the case, Ms. Romero?
Ms. Romero. I think it absolutely could be the case. I do
want to point out it's not just we are relying on interviews of
GM. We interviewed 84 people. We are also relying on the
interviews of the auto team officials who sat here today and
another auto team official, Mr. Bloom, who did not, and the
statements they've said.
But I think you raise a really good point, Ranking Member
Connolly, which is maybe that's in the taxpayer's best interest
and we're okay with that. Our point is just be transparent.
Just say it and let the American people judge, like yourselves,
and all of us who funded the bailout, do we agree or disagree.
But the point is don't hide behind roles or don't try to
downplay your involvement. Just tell the truth. Because you
know what? The American people are pretty smart. We know there
was a crisis. We know something had to be done with GM. And we
understand that their role was monumental and that they had to
do something to restructure GM.
If you'd just be transparent and tell the truth, then the
American people will decide. And that's what we've done. What
we did in our report, as you'll see, there is not a lot of
judgments in our report on this. What there is, is we just told
it like a story, a chronological story, put the facts out
there, so that the American people and all of you can decide
whether you agree or disagree.
Mr. Connolly. Thank you. It's a fascinating story. I know
we will return to it.
And, Mr. Chairman, thank you so much for allowing me to----
Mr. Mica. You have 30 seconds.
Mr. Turner. Okay. Great. Mr. Connolly----
Mr. Mica. You went over your 30 seconds.
Mr. Turner. As usual.
Mr. Mica. I'm going to give him the 30 seconds and then
we'll be exactly even. So reset the clock, give Mr. Turner 30
seconds.
Mr. Turner. Maybe it's the Federal Express deliveryman here
on the 30-second speaking. Could I start while you're setting
it?
What I'm going to say, Mr. Connolly, Ms. Romero once again
has been incredibly articulate about what her position is and
what she has done. And you are absolutely right and you're both
right that she does not conflict with your conclusions or
opinions. What she conflicts with is the public statements that
have been made and the statements by Treasury, and that's the
part that is disturbing, I think, to all taxpayers, is that
there's one story being told and there's one that's being
reality. And it's not as if they relied on interviews. They had
papers and emails.
Mr. Rattner, I want to give you one opportunity because we
all know that your statement about picking executives is not
accurate. Do you want to amend that? Because you're under oath.
And we know when people are speaking sometimes they get a
little carried away. If you'd like to recharacterize that, I
think everybody here would be very pleased.
Mr. Rattner. I was referring to picking executives below
the CEO level. We did, obviously, it's public record, we did
obviously make a decision that there needed to be a new CEO. It
was in the context of a commercially reasonable investment
decision.
Mr. Turner. Great, because I didn't want you to be subject
to perjury for saying something that was wasn't accurate or
truthful.
Thank you.
Mr. Mica. I think everyone's had ample opportunity. I know
we could go on. And there are additional questions. There are
questions from members that are not here that will be
submitted. And with concurrence of the minority, we're going to
leave the record open for a period of 2 weeks. And I will
advise the witnesses, too, that they may submit questions to
you to respond which will be part of the record, made part of
the record.
Mr. Mica. So we have completed this hearing. I thank the
witnesses for their participation. I thank the members for
their involvement. I think it is an important issue. I'm sorry
that it was not resolved before Mr. Connolly and I took over
the subcommittee, but, again, we now have the report of the
Special Inspector General, we have additional information. If
we need additional hearings to resolve pending issues we'll
conduct that. But I promised a field hearing, which we
conducted, and a Washington hearing as we completed and got the
SIGTARP report.
So I thank all of you for your participation. There being
no further business before the Government Operations
Subcommittee this hearing is adjourned.
[Whereupon, at 4:47 p.m., the subcommittee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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