Opinion: Bernie Sanders was for the auto industry bailout before he was against it
Note to Bernie Sanders: John Kerry is not a good model for your presidential campaign.
Sanders and Hillary Clinton are facing off Tuesday in two states: Mississippi, where Sanders is expected to be shellacked, and Michigan, where his chances look increasingly slim. There, in addition to the high percentage of Clinton-friendly African American voters in both states, Sanders has to deal with the accusation that he opposed the federal bailout of General Motors and Chrysler (gasp!) that almost certainly saved the auto industry and the tens of thousands of jobs it provides in the state.
Unfortunately for Sanders, his defense has been a variation of the “I was for it before I was against it” argument that proved so damaging to Kerry in his 2004 campaign against President George W. Bush.
At Sunday’s Democratic presidential debate in Detroit, Clinton surprised and stung Sanders by saying he voted against the auto bailout. That’s because Sanders voted in October 2008 against the Emergency Economic Stabilization Act, which dedicated $700 billion from the federal Treasury to a new Troubled Asset Relief Program to save the U.S. financial industry (and avert a bigger crisis globally).
Not a soul in Congress wanted to vote for TARP. But you would have been hard pressed to find a mainstream economist in October 2008 saying there were any better options.
At the time of its passage, no one saw TARP as the solution to the auto industry’s deepening troubles. There was one connection -- General Motors’ financing arm, General Motors Acceptance Corp., which somehow managed to lose a ton of money on subprime mortgages -- but that wasn’t exactly obvious.
In fact, the first time anyone tapped TARP to save the auto industry was in December 2008, when the lame-duck Bush stretched the rules in order to lend $17.4 billion to GM and Chrysler. Bush did so only after Republicans in the Senate successfully filibustered a bill that would have extended $14 billion in loans to the two companies.
Sanders’ campaign pointed out Monday that he had voted in favor of the $14-billion “aid package.” The campaign went on to say, “When that bill ran a Senate Republican roadblock, the White House turned to a separate Wall Street bailout fund for loans to the auto industry.” (See what they did there? The proposed auto industry measure was an “aid package,” which is good, right? The other was a “bailout,” which is obviously evil.)
What the campaign failed to mention was that Sanders voted the following month with Republicans in a failed effort to cancel the second half of TARP’s funding, which would have stopped the Obama administration from using $350 billion in bailout dollars. That sum had $4 billion earmarked for the auto bailout, but arguably included most of the $80 billion that ultimately was lent to the industry.
So in other words, Sanders was following in the footsteps of Kerry, who famously tried to hold himself out as an opponent of the Iraq War by noting that he’d voted against a bill to fund it -- after previously voting for the measure.
Granted, Sanders isn’t guilty of so blatant a flip-flop. But his position on the auto bailout and TARP illustrates one of the drawbacks of being so ideologically pure (or rigid).
Not a soul in Congress wanted to vote for TARP. It was an undisguised bailout for big financial institutions that had played fast and loose with their investments, and by all rights they should have been allowed to fail. But you would have been hard pressed to find a mainstream economist in October 2008 saying there were any better options. Had the Federal Reserve and Congress not moved aggressively to recapitalize the banking system, the results would have been much, much worse.
So the best course of action for lawmakers was to hold their noses, vote for TARP and then come up with a new regulatory scheme designed to eliminate the likelihood of another bailout. And that’s precisely what Congress tried to do with the Dodd-Frank Wall Street Reform and Consumer Protection Act, although whether it succeeded is a whole ‘nother debate.
You could argue that the effort to slash funding for TARP in January 2009 was really just a protest vote against the design of the program, as other Democrats have said. And admittedly, TARP evolved over the months as federal officials moved away from the original idea of buying up bad bank assets and found more efficient, less costly ways to shore up the financial industry and ease the credit crunch.
But again, protest votes are easy. Coming up with workable policy is hard, and Congress didn’t have the luxury of time in those days. Perhaps Sanders has forgotten how dire things were after Lehman Bros. failed and AIG, Fannie Mae and Freddie Mac all cratered. The economy was sinking fast, dragged down by a financial sector that had lost its ability to price risk and lend money.
Candidates often get torn apart in campaigns for supporting this or that compromise, as their opponents invariably focus on the less savory elements of the package and ignore the overarching reasons to vote for the thing. Here, Clinton is blasting Sanders for the opposite reason: He opposed a compromise that included something widely viewed by Democrats as a good idea (the auto bailout) because other elements of the package were less savory to his anti-Wall Street worldview.
That was his choice. He can say he was for the auto bailout at one point, but that was before he was against it.
Follow Healey’s intermittent Twitter feed: @jcahealey
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