A Bankruptcy Lawyer’s Blog

First Looks: Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry

The Lowest Price we could find is $27.00 $2.89

In Overhaul,Steven Rattner delivers aninside account of the Obama administration’s bold bid to save the auto industry. From his vantage point at the helm of the intervention, Rattner crafts a tightly plotted narrative of political brinksmanship, corporate incompetence, and personalities under pressure in a high-stakes drama of Washington and Detroit. He also explains the tough choices he and his team made to keep Chrysler and GM in operation — while working against the clock in the face of intense lobbying from staunch Democratic allies and vocal opposition from free market partisans.

Overhaul is a candid, gripping story of one of the most difficult crises of President Obama’s first year in office, with lessons relevant for all managers and executives.

Q: Why did you write this book?

A: I am exceptionally proud of the leadership that President Obama and his senior advisers showed in insisting that we do the right thing, as opposed to the expedient thing, and felt that that story deserved to be told.

Q: Most Washington memoirs tend to be either dry policy books or centered on the authors recollections. How does yours differ?

A: I did not want to write either an unreadable quasi-academic tome or a book about me! So I decided to use my background as a journalist to “report out” the story, extending it to include events before and after my time at the Treasury. I interviewed more than 150 people, covering a period that began with the decision by the Bush administration to provide GM and Chrysler with bridge financing and ended with GMs filing of its initial public offering and its naming of Dan Akerson as CEO. And I also tried to use my journalistic training to write the book in a lively, engaging manner.

Q: Are there any particular ways that you tried to make the book readable?

A: I tried to bring to life the many interesting characters who were part of this extraordinary restructuring. I came away from my time in Washington with enormous respect for President Obama, Rahm Emanuel, Tim Geithner, Larry Summers, and many others, and I thought readers would be interested in human portraits of these exceptional people. I also got to know the CEOs and other key players in the auto industry and worked hard to also bring them to life for readers.

Q: Most Americans these days have a low opinion of Washington and what goes on there. As a newcomer to government, how did you find your experience?

A: It was eye-opening. On the one hand, because of President Obamas leadership and because of the existence of the Troubled Asset Relief Program (better known as “TARP”), we were able to successfully restructure these companies using the bankruptcy process and $82 billion of TARP money. But I also learned that the success of the auto effort was quite unusual by Washington standards because almost any other initiative would require congressional approval, and Congress is every bit as dysfunctional as polls suggest Americans believe that it is. If we had had to secure congressional approval of the auto bailout, I have no doubt that at least one or both of the automakers would have ended up running out of money, going into an uncontrolled bankruptcy, and liquidating, possibly putting a million more Americans out of work and causing a depression in the Midwest.

Q: Some commentators say that the government should not be making these kinds of interventions. They argue that the market should be allowed to work.

A: I agree that wherever possible, the market should be allowed to work. But in this case, we had no alternative. GM and Chrysler were running out of money, financial markets were frozen and there was no possibility of them raising additional funds, either in or outside of bankruptcy. So without government help, the entire auto sector would have collapsed, with disastrous economic consequences.

Q: What was it like to work in Washington on a day-to-day basis?

A: Its certainly different from my previous positions in the private sector. In writing the book, I tried to paint a picture of what working in the worlds largest and most powerful bureaucracy is really like, with revealing, sometimes humorous anecdotes. For example, I ended up paying for beverages and lunch every time we had visitors; the Treasury had no budget for such things. Even getting visitors cleared for entry into the Treasury building could be challengingone guest who had flown in from Detroit ended up having to speak to us from a nearby Starbucks. On the other hand, when you call and say you are from the U.S. Treasury, you get a very different response from when you call from a private investment firm!

Q: What is your outlook for the auto companies?

A: Its too early to say for sure, but the preliminary indications suggest that both GM and Chrysler are on a path to sustained viability. GM has now reported two quarters of significant net income, and with luck it will complete its initial public offering in November. Chrysler still needs to successfully fill out its product line, but its financial results to date are also well ahead of our expectations. The new management teams at GM and Chrysler have already made a huge differencemanagement matters!

Review:

Steve Rattner has three gifts — and the blind spots to prove it.

First, he writes well and, it would appear, quickly. This book was an extended summer project — it cannot have been much more. His account is detailed, with names, dates, participants, settings, conversations all reconstructed with a journalist’s ear for conversation and detail. It helps that before going to Wall St., Rattner was a reporter for the New York Times. The journalistic blind spot is that the book reads like a long newspaper article. Rattner does not reflect on the moral hazard of his enterprise, on what states or other governments should learn, or on what governments should do to stay out of the business of restructuring failing companies.

Second, Rattner is a solid financier. He knows his way around a balance sheet and understands the enormous complexity of a bankruptcy conducted under tough conditions. He has good reason to be proud of his work: the huge, desperate, hail-Mary pass that was the federal government decision to intervene and restructure the US Auto industry looks like it will actually work. As of the publication of this book, it appears that Chrysler will pay back its loans and that GM will go public and repay the public most or even all of its investment. If the Obama administration succeeds in saving two million+ jobs and getting the taxpayer’s money back, that is a hell of an accomplishment. The banking blind spot is that Rattner carved an incredible hole in the US securities landscape. If holders of preferred debt can be forced to give up their claims on assets and accept a junior position to unsecured creditors (as they were in this, the largest of all bankruptcies), why will they lend money again? Loans are secured by a well-tested set of rights and claims that the auto task force trampled. As a banker, Rattner ought to have more to say about this and ought to wrestle more honestly with the implications of his decisions (which, for the record, I think were unpleasant but ultimately justified).

Rattner’s third gift is one he could live without. Like many at the top of Wall St. or Washington, he has an instinctive ability to ingratiate himself with the powerful and to promote himself effectively. In a writer, it makes the book into a brochure on the remarkable abilities of Steve Rattner. It reads like the work of a guy who is determined to quickly write the first draft of history with himself at the center. Rattner mentions repeatedly that he dipped into his Wall St. fortune to buy lunches for people meeting with him at Treasury, that getting confirmed cost him $400 grand, that he worked 18 hour days, and that but for his deft brilliance, the entire “auto caper” would have come a cropper. He repeats his love for his boss Larry Summers ad nauseum, describes Obama in quasi-mystical terms, shares the minimum plausible credit with his obviously talented and committed team (especially Ron Bloom, his talented deputy who played a critical role in structuring deals that all parties could either live with or be forced to live with). Rattner glosses over his “pay to play” ethical improprieties that ultimately forced his resignation and led his partners at Quadrangle to denounce his behavior and pay a $7 million fine. In many ways, this is vintage Washington kiss and tell: Rahm swears, Larry is smart, the President is awesome. It’s a great story told well by an author with an unnatural fondness for the first person voice. Rattner was there — and he never for a moment lets you forget it.

Egos aside however, the American people owe Rattner, Bloom, and the entire task force an enormous debt of gratitude. Working inside the US government (not at all easy), facing an unprecedented economic crisis, and under extraordinary time, financial, and political pressure, a small team pulled off the largest restructuring in the history of capitalism. They forced GM and Chrysler to take medicine that they should have taken years ago. It appears to have worked against all odds and Rattner tells the story well — even if he never lets the action stray far from his self-absorbed gaze.