On April 5, 2014, in a blog titled "The Role of Government: Regulator or Owner", I wrote about the refusal of General Motors to order a recall of faulty ignition switches from the early 2000's:
"Fast forward to the 2009 government buyout. Now the government ----- the automotive industry regulator ..... owned the company. Accidents continued but still no recall. How much evidence did the regulator/owner need to order a recall? Conflict of interest? You be the judge."
As part of its government-brokered bankruptcy/purchase proceedings, GM was shielded from legal liabilities. This allowed the "New GM" to leave behind all damage claims by accident victims (or their families in the case of the dead) with the "Old GM". The whole issue is clouded by the fact that "normal" bankruptcies don't usually allow the new owners to simply drop liabilities. But with government support, "New GM" may get away with it.
Not only does this again raise the issue of conflict of interest, it opens the door to the moral question: should GM, OOPS! New GM be morally obligated to give claimants their day in court?
Over the last few weeks, a Congressional Hearing has examined these issues. New GM CEO Mary Barra puts forward the "I didn't know, that's Old GM's problem" argument. But now, some lawmakers are coming around to believe that justice should trump legal loopholes. Senator Richard Blumenthal (Democrat, Connecticut) said on April 16: "Whatever GM's lawyers may argue, the judges in these cases should deny GM this shield. Several of my colleagues and I have called on the Department of Justice to insist that the company extablish a compensation fund as part of any settlement of a criminal investigation".
Regardless of the outcome, I stick to my original position that government should be regulator or owner - it can't be both.
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