The General Motors Bailout: When Corporate Fiscal Responsibility Collides with Black Interests

Reading Steve Rattner’s Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry  brought about a politically explosive revelation that has been completely ignored in the whole TARP narrative. With the bailout of General Motors by the US tax payer continuing to grow in cost (the Detroit News reports the cost will now put the bailout of GM in the red to the tune of $25 billion), Rattner’s revelation regarding a plan that would have potentially kept GM from receiving TARP money–that was shot down because of a devotion to political correctness–must enter the discussion.

But first, a quick history lesson.

GM, the company that was bailed out with your tax-dollars through the Troubled Asset Relief Program (TARP), is headquartered in the GM Renaissance Center (RenCen), which at 73 stories is the tallest building in Detroit. Built in 1977 as part of the effort to revitalize the downtown area amid growing urban decay after the disastrous Black Riots of 1967 led to the abandonment of the city by white people (white flight had rebuilt Detroit in the suburbs, with the remaining Black population under Mayor Coleman Young busy bringing ruin to what was left behind), the Renaissance Center complex never lived up to its name. Built for $350 million, but sold for a mere $76 million to GM in 1996 (The New York Times reported there were absolutely no takers at $125 million) was an abysmal failure from the start.

With the white abandonment of Detroit to the suburbs (which thrived, while Black-run Detroit slipped into a coma–kept alive by generous infusions of cash by the white tax-payers) the RenCen was built as a “fortress of solitude” for whites commuting to the city, where they could be safe from ‘scary Black people’. Francis Desiderio, writing in the Michigan Historical Review noted (“A Catalyst for Downtown”: Detroit’s Renaissance Center):

The Renaissance Center’s development was the result of private interests working to create a built environment in downtown Detroit that was comparable to the malls and office parks offered by the suburbs. Businesses that supported the development wanted to create a private space that could easily be controlled and monitored to fashion a safe, crime-free place for shopping, work, and nightlife. People could park, work, eat, shop, and see a movie all at one site, and the result was the creation of a minicity within Detroit. It was not only physically separated from the rest of the city–making pedestrian access difficult-but also the stores inside catered to a middle- to upper-class clientele. Some critics came to see the center as a “fortress” for the middle- and upper-class whites who still wanted a downtown experience. Symbolically, the center brought the suburbs to downtown Detroit. It was not only physically separated from the rest of the city–making pedestrian access difficult-but also the stores inside catered to a middle- to upper-class clientele. Some critics came to see the center as a “fortress” for the middle- and upper-class whites who still wanted a downtown experience. Symbolically, the center brought the suburbs to downtown Detroit.

Even this minacity within the dying Black-run city of Detroit wasn’t enough of a “Fortress of Solitude”–quickly, the building depreciated in value but still remained a viable tax-revenue producer for the terminally ill city.

Before the TARP was passed, a conversation took place where the COO of GM, Fredrick Henderson, discussed moving out of the GM RenCen and having all operations be based out of the Tech Center in suburban Warren. It should be pointed out that Warren was one of the first Whitopias where the fleeing white population from Detroit set up shop:

In 1970, whites made up 99.5% of the city’s total population of 179,270; only 838 non-whites lived within the city limits. Racial integration came slowly to Warren in the ensuing two decades, with the white portion of the city dropping only gradually to 98.2% in 1980 and 97.3% as of 1990. At that point integration started to accelerate, with the white population declining to 91.3% in 2000 and reaching 78.4% as of the 2010 census.

The Black population of Warren is now 13 percent; in time, as that percentage grows, the city will come to resemble Detroit.

The move would have saved billions for GM and helped restructure the company, potentially keeping GM from receiving TARP money and becoming known as “Government Motors.”

But this couldn’t happen in Black-Run America (BRA); though terminally ill, 90 percent Black Detroit can’t be allowed to die.

As stated, Overhaul reported this conversation Fredrick “Fritz” Henderson, then COO, initiated about the possibility of moving from the GM Renaissance Center to a suburban location. On p. 237-238:

The politics around GM, with its great size and complexity, not to mention its iconic status, promised to be even more intense. Our loving to-do list was full of pitfalls. One day Fritz called me to propose moving GM headquarters from the Renaissance Center to GM’s Tech Center in suburban Warren, where we had driven the Volt back in March.

The move would cuts costs, he said, as well as symbolize the leadership’s determination to become more to down-to-earth and hands-on. I thought the idea was great, just the kind of action I was hoping to see from Fritz. But when I described it to [Brian] Deese (who served on President Obama’s Economic Policy Working Group), he went nuts. “Are you out of your mind?” he said. “Think what it would do to Detroit!”

Though small in financial implications for the company–the headquarters was worth perhaps $165 million–compared to the $626 million that GM had paid for it just a year earlier [Ed: Sic . . . GM spent only $76 million to buy the building in 1996, but spent $500 million renovating the complex]–GM’s departure would be a major blow to Detroit. In a one-year period, the once proud city was already suffering with one of the worst unemployment rates in the country, and among the worst murder rates, would see two of its biggest employers go bankrupt, its flamboyant ex-mayor Kwame Kilpatrick convicted of perjury, and its NFL franchise, the Detroit Lions, become the first in football history to go 0-16.

Deese had some people analyze what a mostly vacant RenCen would mean to Detroit real estate. The estimate: a double-digit hit on already deflated real estate prices. Fritz proposed donating the RenCen to the city- though who actually would use it was unknown.
Leaving the RenCen made strategic sense, however, and was supported by Harry and David. The Tech Center had lots of empty space and much larger floors, so more departments and people could sit near each other, improving teamwork and communication in a culture that desperately needed more of both.

The debate, not surprisingly, soon moved beyond Team Auto. Gene Sperling was one of the many to fight the move. “It’s over for Detroit if you do this,” he yelled in a meeting at [The United States] Treasury. “Don’t do this to Dave Bing” – the city’s new mayor, a former NBA star and successful auto-supplier entrepreneur. “He’s a good man trying to do a good thing.” The city relied on GM for $20 million a year in tax revenue, Gene pointed out, and the blowback would be fierce. Deese checked with Larry, who in turn spoke to Rahm [Emmanuel], and word came down that the move would be a bridge too far.

Fortunately, this unique intervention into a specific GM matter was never leaked to the press, saving us from having to explain how it comported with our policy of letting GM and Chrysler manage their own affairs.

Rahm Emmanuel is now the mayor of Chicago, who pleads with the middle class to stay in what many believe to be the most violent city in the world. For those wondering, Chicago is on pace to be Detroit-ed as well.

Why does any of this matter? Because Investors Business Daily reported this on August 14, 2012 (Obama’s $25 Billion Government Motors Lemon):

As the Obama campaign continues to tout the GM bailout as an industrial policy success, the Treasury Department continues to revise upward the staggering losses inflicted on U.S. taxpayers.

On the day Government Motors, aka GM, announced it was recalling at least 38,000 of its vehicles — Impalas used by police nationwide and in Canada — due to a crash risk, a new Treasury report said it now expects to lose $25 billion on the bailout, $3.3 billion more than forecast earlier.

As the Detroit News reported, this loss was based on GM’s stock price at the time of the report, which was 15% higher than the previous report. Because the stock price has fallen since then, the latest report likely understates taxpayers’ real losses.