By Ken Thomas ASSOCIATED PRESS
The Treasury Department failed to consider the economic fallout when it told General Motors and Chrysler to quickly shutter many dealerships as part of government-led bankruptcies, a federal watchdog found.
A report released Sunday by the special inspector general for the government’s bailout program raised questions about whether the Obama administration‘s auto task force considered the job losses from the closings while pressuring the companies to reduce costs.
Treasury didn’t show why the cuts were “either necessary for the sake of the companies’ economic survival or prudent for the sake of the nation’s economic recovery,” said the audit by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, the $787 billion stimulus program known as TARP.
“Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses,” investigators said.
Those decisions resulted in “potentially adding tens of thousands of workers to the already lengthy unemployment rolls all based on a theory and without sufficient consideration of the decisions’ broader economic impact,” the report said.
Treasury officials said they strongly disagreed with many of the findings and said the companies have rebounded because of the government’s efforts.
Herbert M. Allison Jr., Treasury‘s assistant secretary for financial stability, said the administration‘s actions “not only avoided a potentially catastrophic collapse and brought needed stability to the entire auto industry, but they also saved hundreds of thousands of American jobs and gave GM and Chrysler a chance to re-emerge as viable, competitive American businesses.”
The report, sought by lawmakers critical of the dealership closings, was seized upon by Republicans who have questioned the administration‘s dealings with private industry during the economic downturn.
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