Interesting Information: November 8, 2012
“Mitt Romney’s Bailout Bonanza”: The Face of Crony Capitalism
Greg Palast’s story in the November 5, 2012, issue of “The Nation” is important because it allows a picture of how crony capitalism works and why it is so exciting that the 99 percent–Americans of all creeds, colors, and genders–voted for Obama in enough numbers for him to win. They “get” that ultra wealthy people trying to buy an election means even more trouble for the 99 percent.
The full story title is “Mitt Romney’s Bailout Bonanza”: How Mitt and Ann made millions–and Mitt’s hedge fund donors made billions–from the auto-industry rescue that he condemned.”
Greg Palast is an “economist and financial investigator turned journalist whose series on vulture funds appeared on BBC Television’s Newsnight.” This work was “supported by the Investigative Fund at the Nation Institute and by the Puffin Foundation.” Palast’s new book is BILLIONAIRES & BALLOT BANDITS: HOW TO STEAL AN ELECTION IN 9 EASY STEPS.
You can read the whole piece for yourself at http://www.thenation.com/article/170644/mitt-romneys-bailout-bonanza. But, here are the highlights. Be warned: it’s a nasty story. But, one that shows how crony capitalists work, how they are parasitic predators.
Mitt and Ann Romney “personally gained at least $15.3 million from the bailout–and a few of Romney’s most important Wall Street donors made more than $4 billion. Their gains, and the Romneys’, were astronomical–more than 3,000 percent on their investment.” The Romneys invested “at least $1 million…through Ann Romney’s blind trust (it could be far more, but the Romneys have declined to disclose exactly how much).”
The government bailout sent “directly or indirectly, more than $12.9 billion to Delphi–and to the hedge funds that had gained control over it.”
A key player is the super rich, super conservative “vulture investor” Paul Singer–a long time Romney friend and a long time supporter of Paul Ryan, who voted for the auto bailout. (Singer was instrumental likely in putting Ryan on the Romney ticket.) Singer owns one of the hedge funds that gained control of Delphi Automotive–the former General Motors subsidiary “whose auto parts remain essential to GM’s production lines.” Neither GM or Chrysler can operate without these auto parts.
When the auto industry started running into trouble, it spun off Delphi Automotive, which was loaded with debt. Delphi went into bankruptcy and Singer and his crony friends–all of them very rich and all of whom have donated millions to the Romney campaign–bought Delphi stock at “20 cents on the dollar of their face value.” Singer, chair of the “anti-union Manhattan Institute…rid Delphi of every single one of its 25,200 unionized workers” (underline mine). Singer et al closed all but 4 of the 29 Delphi plants and sent the jobs to China. Delphi is “now incorporated overseas, leaving the company with 5,000 employees in the United States (versus almost 100,000 abroad).
Delphi retirees lost their health insurance and life insurance and their pensions were “slashed by 40 percent.” As the hedge funders refused to honor workers’ pensions, the government’s Pension benefit Guaranty Corporation had to take over paying “all of Delphi’s retirement pensions”–which slashed pensions by 40 percent as this organization cannot pay in full. Retirees found they could not get good jobs to replace this monetary loss. Romney’s campaign ran ads blaming Obama for the monetary losses to the workers though it was Singer et al who refused to honor Delphi’s obligations to its workers–a practice began in the leverage buyouts of the 1970s–pioneered by men like Mitt Romney.
In June 2009, with “the bailout negotiations in full swing, the hedge funds, under Singer’s lead, used their bonds to buy up a controlling interest in Delphi’s stock….they paid, on average, an equivalent of only 67 cents per share.”
Two years later, in November 2011, “the Singer syndicate took Delphi public at $22 a share, turning an eye-popping profit of more than 3,000 percent.” This gain of $904 million came from U.S. taxpayer money for the bailout.
Between 2011 and 2012 Delphi’s stock soared 45 percent. These gains came from Delphi’s more stable situation, yes, but this situation was based on Singer et al’s refusal to honor Delphi’s healthcare and pension obligations AND from the bailout, taxpayer money. The various individual crony capitalists in the Singer syndicate have made $390 million (Daniel Loeb), $894 million (two Goldman Sachs alums, $2.6 billion (John Paulson),and $1.2 billion (Singer and his partners).
When President Obama set out to save the failing auto industry, there were at least 25,000 union workers who stood to lose their jobs. The Delphi hedge fund owners held Delphi hostage, telling the government to “hand over $350 million immediately, `because if you don’t, we’ll shut you down’ “–meaning the whole of the auto industry which needed Delphi’s parts.
At one point in 2009, the government and GM tried to “take back control of Delphi via a joint venture with Platinum Equity,” but the hedge funders refused to sell–seeing that they could make a lot more money by holding the company hostage, sending jobs overseas, cutting retirees pensions and insurance, and so forth.
This year, 2012, Singer et al took the money they had “saved” by not honoring obligations to workers and bought auto plants parts plants in Asia–$972 million–“purchased from Bain Capital.”
Romney’s 2009 tax returns would have shown how much he actually made on this deal. He refused to release them.
If Romney had invested as little (for him) as $7.5 million, he would have made $115 million.
Whatever money is involved remains untaxed as Delphi’s incorporation is now in the Isle of Jersey, a “tax haven off the coast of France.”
These men are parasitic predators.
They do not care about workers.
They do not create American jobs.
They did not have any plan for America beyond making it easier for themselves to make these kinds of deals.
There is no such thing as a “free” market. Just look at all the monopoly formation that is in place.
Good business people build things, honor obligations, and conserve what is important in their communities and their nation.
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