Earlier this month, the Treasury Department quietly hired three law firms and a consulting firm for advice on restructurings and potential bankruptcies in the auto industry.
Treasury did not issue a press release announcing the hirings, even through the contracts with the law firms were among the biggest yet for work on the government's $700 billion Troubled Asset Relief Program. The deals drew scant coverage beyond trade publications.
Reports that the Treasury Department has directed Chrysler LLC to prepare a bankruptcy filing might explain what those firms have been doing for the past few weeks. But the lack of full disclosure about the contracts raises additional questions regarding the openness and transparency of the TARP initiative.
In addition to keeping the awards out of the spotlight, Treasury deleted the hourly rates it is paying the firms from copies of the contracts that it posted on its web site. In at least one instance, it also blacked out the names of key personnel on the assignments.
Treasury has routinely redacted that information from the public copies of its agreements with outside contractors on TARP. Without those details, it is impossible for the taxpayers who are paying for the TARP efforts to know whether they are getting a good deal.
However, the redactions in Treasury's agreement with Sonnenschein Nath failed to completely obscure the financial information. It appears to BailoutSleuth that the government is paying $645 an hour for the time of that firm's senior partners, and $355 an hour for its associates.
The contracts with all three law firms run from March 30 to Sept. 30. Two of the firms, Sonnenschein Nath and Cadwalader Wickersham, already worked for Treasury under other TARP deals.
Treasury also hired Boston Consulting Group Inc. to analyze economic and competitive conditions in the auto industry -- including the relative strength of General Motors Corp. and Chrysler, and the government's options with respect to those firms. The six-month contract is worth a maximum of $2 million.
GM has received $13.4 billion in TARP aid since December, and is seeking an additional $5. Chrysler got $4 billion in loans, and has asked for an additional $500 million.
Chrysler is facing an April 30 deadline to complete a previously announced alliance with Fiat SpA, come to terms with its unions on concessions and get lenders to restructure its debt. If it meets those goals, it could get an additional $6 billion in government financing.
If it fails, the alternative is likely to be a reorganization through bankruptcy proceedings.