This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

The Real Story Behind the U.S. Auto Bailouts

Stock quotes in this article: GM, F

NEW YORK (TheStreet) -- Detroit's relationship with local boy Mitt Romney is ... complicated.

The son of a former Michigan governor and automobile industrialist finds himself in a critical battle to gain trust among American blue-collar voters that perceive him as a wealthy, private-equity businessman who was open to letting an icon of American manufacturing take an unprecedented fall.

Mitt Romney must cure his auto-sector headache

"Regardless of what Mitt Romney may try and say, if we took his route the industry would have most likely been liquidated resulting in economic devastation across the Midwest," an Obama campaign official said on background.

10 Worst-Off State Pension Funds >>

The auto issue is a delicate middle ground for two campaigns that have struggled to convince middle-class voters that its candidate can save them from lethargic economic conditions.

On the left, the middle class sees president who has overseen a period of high unemployment, moderately slow GDP growth and a host of other tepid economic indicators. On the right, they have a former governor who earned success by cutting jobs and gutting companies in order to turn things around.

To make things worse for Romney, critics blasted the former Massachusetts governor this week after he took credit for the industry's comeback.

Romney's justification has some truth, but the infamous headline attached to his 2008 New York Times op-ed, "Let Detroit Go Bankrupt," is the sound bite that's stuck.

So while Obama claims victory for reviving the American automotive industry and Romney defends his bankruptcy argument, we're here to cut through the vagaries and explain what Romney suggested versus what Obama did.

DIP Financing, Say What?

Forget the first sentence of Romney's op-ed and jump towards the end.

10 Forces Conspiring Against Your Savings >>

This was less about "If General Motors, Ford, and Chrysler get the bailout ... you can kiss the American automotive industry goodbye," and more about "The federal government should provide guarantees for post-bankruptcy financing."

He was referring to debtor-in-possession financing , which usually involves a private lender putting up the cash to restructure a company during Chapter 11 bankruptcy proceedings.

Lenders typically rush in for DIP financing in bankruptcies because there is a high interest rate and they're one of the first creditors to be paid back by the restructured company.

1 of 6

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,804.71 -238.19 -1.40%
S&P 500 1,946.16 -26.13 -1.32%
NASDAQ 4,422.0850 -71.3050 -1.59%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs