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Hans Bader Statement for Regulatory Affairs Subcommittee

Hans Bader Statement for Regulatory Affairs Subcommittee

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Written Statement of Hans Bader Senior Attorney, Competitive Enterprise InstituteU.S. House of RepresentativesCommittee on Oversight and Government ReformSubcommittee on Regulatory Affairs,Stimulus Oversight and Government SpendingHearing Entitled³Lasting Implications of the General Motors Bailout´June 22, 2011
 
2
 
T
hank you, Chairman Jordan, Ranking Member Kucinich, and Members of the Subcommittee,for giving me the opportunity to comment for the record, on behalf of the Competitive EnterpriseInstitute (CEI), which focuses on regulatory issues.SUMMARYRecently, journalists criticized the Administration for deceiving the public about the extent towhich Chrysler had repaid taxpayers for its bailout: ³Glenn Kessler, who writes the Fact Checker column for the
Washington Post 
, recently awarded the President µthree Pinocchios¶ (out of four)for his claim that µChrysler has repaid every dime and more of what it owes American taxpayersfor their support during my presidency.¶´
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 But this is not the first time such deception has occurred. Last year, lawmakers like Senator Grassley, the
T
ARP Inspector General, and financial journalists criticized General Motors¶advertising campaign claiming to have paid back taxpayers for its bailout, noting that GM hadused government bailout money (from a
T
ARP escrow account) to repay $6.7 billion of the $50 billion it had earlier received from taxpayers.
2
Shortly after GM¶s ad campaign began, the
T
reasury Secretary trumpeted GM¶s claim that it had paid back taxpayers,
3
even though former auto czar Steve Rattner later admitted that this claim was somewhat misleading.
4
 From documents recently-released under the Freedom of Information Act,
5
it is now clear thatAdministration officials had advance notice that General Motors would run those deceptive adsclaiming to have paid taxpayers back for its bailout, and did not object to those ads despitehaving the opportunity to do so. In short, Secretary Geithner publicly repeated GM¶s deceptiveclaims, even though the
T
reasury Department had weeks in which to review GM¶s claims anddiscover that they were misleading, and their misleading nature was readily obvious to others,like the
T
ARP inspector general, members of Congress, and business reporters.
T
reasury Department Documents released last week in response to CEI¶s Freedom of Information Act request illustrate this.
6
 
T
hose documents illustrate that GM and the ObamaAdministration conferred extensively on GM¶s PR strategy regarding the company¶scontroversial
TV
and print ad campaign in 2010, in which GM misleadingly claimed to haverepaid what it received from taxpayers. In those ads, GM¶s then-CEO, Ed Whitacre, claimed
1
Cal
T
homas,
Weiner Scandal Makes Lying Key to Term Limits for Congress
, Washington Examiner, June 21,2011, at pg. 20,
quoting 
Glenn Kessler,
 President Obama¶s Phony Accounting On the Auto Industry Bailout 
,Washington Post, June 7, 2011 (http://www.washingtonpost.com/blogs/fact-checker/post/president-obamas-phony-accounting-on-the-auto-industry-bailout/2011/06/06/AG3nefKH_blog.html).
2
 
See
Gretchen Morgenson,
 Repaying Taxpayers With Their Own Cash
, New York 
T
imes, May 2, 2010, at BU1(http://www.nytimes.com/2010/05/02/business/02gret.html) (quoting Senator Grassley, noting that ³the companysimply used other funds held by the
T
reasury to pay off its original loan´ and expressing the view that ³truth seekersthe nation over, therefore, are indebted to Senator Charles E. Grassley´); Editorial,
Geithner and GM Tell aWhopper 
, Washington Examiner, May 3, 2010, at pg. 2 (quoting Inspector general Neil Barofsky)(http://washingtonexaminer.com/opinion/editorials/geithner-and-gm-tell-whopper-updated).
3
 
See Repaying Taxpayers With Their Own Cash
, New York 
T
imes, May 2, 2010, at BU1; Reuters, UPDA
T
E 1-GMfirmly on road to viability -US
T
reasury, April 21, 2010 (www.reuters.com/article/idUSN2118630820100421).
4
 
 Ex-Auto Czar Defends Bailout 
, Detroit News, May 11, 2010, at B6.
5
 
T
hese documents are available on the Internet at http://cei.org/sites/default/files/CEI%20FOIA%20Composite.pdf.
6
 
See
http://cei.org/sites/default/files/CEI%20FOIA%20Composite.pdf (containing these documents).
 
3
 
GM had already repaid its government bailout loan ³in full, with interest, five years ahead of schedule.´
7
 CEI¶S DECEP
T
I
V
E AD
V
ER 
T
ISING COMPLAIN
T
 In May 2010, the Competitive Enterprise Institute (CEI) filed a deceptive advertising complaintwith the F
T
C, and GM stopped running the ads.
8
 CEI¶S FREEDOM OF INFORMA
T
ION REQUES
T
 CEI also filed a Freedom of Information request with
T
reasury for documents on the adcampaign.
9
 
T
hose documents were finally released last month, after a year of delay ± far beyondthe 20-day legal deadline for responding to FOIA requests.
10
 
T
HE GO
V
ERNMEN
T
¶S COLLUSION WI
T
H GM¶S DECEP
T
I
V
E PR S
T
RA
T
EGY
T
he documents show GM coordinating PR strategy with the Obama Administration more thanthree weeks before launching the ad campaign claiming to have paid back taxpayers.
11
 
T
heWhite House received some of those GM materials at least two weeks before the ad campaign began.
T
he communications between the
T
reasury, the White House, and GM on this PR effortwere extensive. Starting on March 30, 2010, Brian Deese from the Executive Office of thePresident and many
T
reasury Department officials began exchanging emails related to theannouncement. (See pages 55-59, 97-102.
12
)
T
hese emails included draft schedules, draftremarks to be given by GM CEO Ed Whitacre, and draft press releases from both GM and the
T
reasury Department. See pp. 9-14; 18-24; 36-39; 83-96.
T
he
T
reasury Department saw themisleading advertisements GM was planning to make in advance, and did not object, despitehaving ample opportunity to do so. Indeed,
T
reasury Secretary Geithner issued a statement atthe start of GM¶s ad campaign, trumpeting its misleading claims, crowing that ³GM had repaidin full the $4.7 billion balance it owed under the government¶s
T
rouble Asset Relief Program.´
13
 But this so-called ³repayment´ was just a deceptive accounting trick.
14
GM used government
7
Matthew Jaffe & Alice Gomstyn,
GM Under Fire for 'Misleading' Bailout Ad 
, ABC News, April 30, 2010http://abcnews.go.com/Business/general-motors-fire-misleading-bailout-ad/story?id=10513568.
8
 
See
Dave Boyer,
Watchdog Questions GM Bailout Repayment 
, Washington
T
imes, June 3, 2011, at A3.
T
he F
T
CComplaint is found athttp://cei.org/cei_files/fm/active/0/F
T
C%20Complaint%20about%20GM%20Bailout%20Ads.pdf . See also
General  Motors Accused of Fraud Over Misleading Claim That It Paid Back Taxpayers; CEI Files FTC Complaint 
,Openmarket.org, May 4, 2010 (http://www.openmarket.org/2010/05/04/general-motors-accused-of-fraud-over-misleading-claim-that-it-paid-back-taxpayers-cei-files-ftc-complaint/).
9
http://cei.org/sites/default/files/CEI_FOIA_request_to_ 
T
reasury.pdf.
10
 
See
http://cei.org/sites/default/files/CEI%20FOIA%20Composite.pdf .
See also
Dave Boyer,
Watchdog QuestionsGM Bailout Repayment 
, Washington
T
imes, June 3, 2011, at A3http://www.washingtontimes.com/news/2011/jun/2/watchdog-questions-gm-bailout-repayment/
11
 
See
http://cei.org/legal-briefs/ceis-foia-treasury-auto-bailout.
12
 
See
 http://cei.org/sites/default/files/CEI%20FOIA%20Composite.pdf (containing these documents).
13
 
See
Reuters,
UPDATE 1-GM firmly on road to viability -US Treasury
, April 21, 2010(http://www.reuters.com/article/idUSN2118630820100421).
14
 
See
Kathleen Pender,
GM Repays Federal Loan With Government Money
, San Francisco Chronicle, April 27,2010, at D1 (
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/04/26/BUS91D55HR.D
T
L).

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