Grand Theft Auto: How Stevie the Rat bankrupted GM...
by Greg Palast
Monday, June 1, 2009
gregpalast.com
Screw the autoworkers.
They may be crying about General Motors' bankruptcy today. But dumping 40,000 of the last 60,000 union jobs into a mass grave won't spoil Jamie Dimon's day.
Dimon is the CEO of JP Morgan Chase bank. While GM workers are losing their retirement health benefits, their jobs, their life savings; while shareholders are getting zilch and many creditors getting hosed, a few privileged GM lenders - led by JP Morgan and Citibank - expect to get back 100% of their loans to GM, a stunning $6 billion.
The way these banks are getting their $6 billion bonanza is stone cold illegal.
I smell a rat.
Stevie the Rat, to be precise. Steven Rattner, Barack Obama's 'Car Czar' - the man who essentially ordered GM into bankruptcy this morning.
When a company goes bankrupt, everyone takes a hit: fair or not, workers lose some contract wages, stockholders get wiped out and creditors get fragments of what's left. That's the law. What workers don't lose are their pensions (including old-age health funds) already taken from their wages and held in their name.
But not this time. Stevie the Rat has a different plan for GM: grab the pension funds to pay off Morgan and Citi.
Here's the scheme: Rattner is demanding the bankruptcy court simply wipe away the money GM owes workers for their retirement health insurance. Cash in the insurance fund would be replace by GM stock. The percentage may be 17% of GM's stock - or 25%. Whatever, 17% or 25% is worth, well ... just try paying for your dialysis with 50 shares of bankrupt auto stock.
Yet Citibank and Morgan, says Rattner, should get their whole enchilada - $6 billion right now and in cash - from a company that can't pay for auto parts or worker eye exams.
Preventive Detention for Pensions
So what's wrong with seizing workers' pension fund money in a bankruptcy? The answer, Mr. Obama, Mr. Law Professor, is that it's illegal.
In 1974, after a series of scandalous take-downs of pension and retirement funds during the Nixon era, Congress passed the Employee Retirement Income Security Act. ERISA says you can't seize workers' pension funds (whether monthly payments or health insurance) any more than you can seize their private bank accounts. And that's because they are the same thing: workers give up wages in return for retirement benefits.
The law is darn explicit that grabbing pension money is a no-no. Company executives must hold these retirement funds as "fiduciaries." Here's the law, Professor Obama, as described on the government's own web site under the heading, "Health Plans and Benefits."
"The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits."
Every business in America that runs short of cash would love to dip into retirement kitties, but it's not their money any more than a banker can seize your account when the bank's a little short. A plan's assets are for the plan's members only, not for Mr. Dimon nor Mr. Rubin.
Yet, in effect, the Obama Administration is demanding that money for an elderly auto worker's spleen should be siphoned off to feed the TARP babies. Workers go without lung transplants so Dimon and Rubin can pimp out their ride. This is another "Guantanamo" moment for the Obama Administration - channeling Nixon to endorse the preventive detention of retiree health insurance.
Filching GM's pension assets doesn't become legal because the cash due the fund is replaced with GM stock. Congress saw through that switch-a-roo by requiring that companies, as fiduciaries, must
"...act prudently and must diversify the plan's investments in order to minimize the risk of large losses."
By "diversify" for safety, the law does not mean put 100% of worker funds into a single busted company's stock.
This is dangerous business: The Rattner plan opens the floodgate to every politically-connected or down-on-their-luck company seeking to drain health care retirement funds.
House of Rubin
Pensions are wiped away and two connected banks don't even get a haircut? How come Citi and Morgan aren't asked, like workers and other creditors, to take stock in GM?
As Butch said to Sundance, who ARE these guys? You remember Morgan and Citi. These are the corporate Welfare Queens who've already sucked up over a third of a trillion dollars in aid from the US Treasury and Federal Reserve. Not coincidentally, Citi, the big winner, has paid over $100 million to Robert Rubin, the former US Treasury Secretary. Rubin was Obama's point-man in winning banks' endorsement and campaign donations (by far, his largest source of his corporate funding).
With GM's last dying dimes about to fall into one pocket, and the Obama Treasury in his other pocket, Morgan's Jamie Dimon is correct in saying that the last twelve months will prove to be the bank's "finest year ever."
Which leaves us to ask the question: is the forced bankruptcy of GM, the elimination of tens of thousands of jobs, just a collection action for favored financiers?
And it's been a good year for Señor Rattner. While the Obama Administration made a big deal out of Rattner's youth spent working for the Steelworkers Union, they tried to sweep under the chassis that Rattner was one of the privileged, select group of investors in Cerberus Capital, the owners of Chrysler. "Owning" is a loose term. Cerberus "owned" Chrysler the way a cannibal "hosts" you for dinner. Cerberus paid nothing for Chrysler - indeed, they were paid billions by Germany's Daimler Corporation to haul it away. Cerberus kept the cash, then dumped Chrysler's bankrupt corpse on the US taxpayer.
("Cerberus," by the way, named itself after the Roman's mythical three-headed dog guarding the gates Hell. Subtle these guys are not.)
While Stevie the Rat sold his interest in the Dog from Hell when he became Car Czar, he never relinquished his post at the shop of vultures called Quadrangle Hedge Fund. Rattner's personal net worth stands at roughly half a billion dollars. This is Obama's working class hero.
If you ran a business and played fast and loose with your workers' funds, you could land in prison. Stevie the Rat's plan is nothing less than Grand Theft Auto Pension.
It doesn't make it any less of a crime if the President drives the getaway car.
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More dirt on Obama's Car Czar...
nypost.com
May 18, 2009 --
STEVEN Rattner, the auto industry adviser to Treasury Secretary Timothy Geithner, is flagrantly thumbing his nose at President Obama's call for Americans to make sacrifices in the collapsing economy.
Rattner is moving full-speed ahead with construction of a lavish, $15 million summer home in the Lambert's Cove area of West Tisbury on Martha's Vineyard -- a palatial mansion he's had in the works since 2006. It's caused a furor among wealthy Vineyard residents, who've called the planned 15,500-square-foot project far too big and gaudy, The Post's Mark DeCambre reports.
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Did Rattner & White House Threaten Chrysler Bond Holders
With IRS & SEC Investigations?
kudlow.nationalreview.com
Gangster Government: An Interview with Tom Lauria [Larry Kudlow]
Hat tip to my friend Michael Barone, who coined the term “gangster government” to describe Team Obama’s bullying threats against the senior bondholders in the Chrysler bankruptcy, where constitutionally backed contract rights have been overturned. It shows the corruptive nature of the whole TARP program and the government’s control along with it. This is corroding the animal spirits of democratic capitalism, which rely on the rule of law.
Here’s my interview with Tom Lauria from last night’s Kudlow Report. Lauria represents the senior bondholders who were trampled on by Team Obama... [see transcript at link].
judicialwatch.org
Already connected to a massive kickback scandal involving his New York investment firm, the president’s shady car czar threatened Chrysler creditors when they refused to support the administration’s controversial bankruptcy plan.
Steven Rattner, a top Democratic fundraiser handpicked by Barack Obama to save the nation’s failing automaker, is a pro at abusing political influence to bully for profits. As head of the hedge fund Quadrangle Group he used his power to somehow convince a consultant for New York City’s pension fund to invest in his company. The lucrative arrangement is the subject of recent federal convictions for illegal kickbacks and Quadrangle is under investigation in the scandal.
As the nation’s auto task force leader Rattner personally threatened investment banks to drop their opposition to a plan for keeping Chrysler out of bankruptcy. About 20 lenders had objected to a deal that offered them just 29 cents on the dollar and the White House applied heavy duty political pressure to firms that didn’t sign off on its restructuring plan.
Lawyers for several of the creditors subsequently revealed the controversial White House intervention and one identified Rattner as the guy making the threats. The official White House version, not surprisingly, is to deny that any of it happened. The creditors evidently agreed to bend over and take the huge hit all on their own.
One political columnist points out that, with Rattner in the driver’s seat, Obama’s auto industry policy promises to heighten the influence of lobbyists and open the door to ethical transgressions, even outright corruption. That’s because he’s a financier and Democratic fundraiser steeped in cozy business-government relationships.
Oh, And By The Way: Ratners Manges NYC Mayor Michael Bloomberg's Money!
They even smothered his wife's DUI arrest in the press:
Steve Rattner is the very prominent financier, the man who manages Michael Bloomberg's money, and a leading candidate to fill the post of "car czar" in the Obama administration. The nomination process, however, has stalled in recent weeks, according to today's Journal, and now there's a possible explanation for the delay: Rattner's wife, Maureen White, was arrested for drunk driving in October. Ironic, yes, and probably most unwelcome news for President Obama considering how many controversies have already been stirred up by his nominations over the past few days. But there's another layer of mystery to the story.
It seems the New York Daily News ran the story about White's arrest back in October, but later removed the article from its site. And the Post and New York Times never covered it, which might have just been an oversight or part of some vast conspiracy, suggests Michael Wolff who first revealed news of White's arrest (and who, not coincidentally, has had a running feud with Rattner for years). Whatever the Daily News' reason for pulling it, it's safe to say that it wasn't because the story was wrong. Wolff has the back-up evidence here.
And then there's this...
Car Czar Ratner Implicated In Pension Fund Scandal
nymag.com
As the scandal surrounding former state comptroller Alan Hevesi's aides continues to unspool, the New York Times reveals that private-equity powerhouse the Quadrangle Group has been accused by the SEC of paying state officials for the right to manage massive state pension funds. Quadrangle was founded by Obama's new car czar, Steven Rattner, who is implicated in the complaint as an unnamed executive who set up the deals. It was Rattner, according to a source, who met with Hevesi helpers Hank Morris and David Loglisci, and passed along the more than $1 million in graft. Morris, a Hevesi consultant, received the bulk of the funds through a securities firm that keeps him on contract, but Loglisci, who runs the massive pension fund, received a much more creative reward.
thedailybeast.com
Why did Quadrangle Group, run by Steven Rattner whom the president has chosen as the auto industry’s fix-it man, have a subsidiary buy the DVD rights to Chooch, a movie co-produced by a pension-fund official? It’s among the many things New York's attorney general needs to figure out.
Given such a hefty fee structure, it is clear why private-equity firms want to lock in pension- and endowment-fund money, and, with such fees, it is hardly surprising that their principals, such as Henry Kravis of KKR, Steven Schwartzman of Blackstone, and David Rubenstein of The Carlyle Group, rank among the wealthiest billionaires on the Forbes 400.
Rubin, Rattner, Kravis, Schwartzman and Rubenstein?
The Financial Mafia...
If it was Bonanno, Luchese, Gambino, Colombo, and Genovese,
we'd be talking about a common thread and making a movie
about it, now wouldn't we?
SOTB
PS: Live On CNBC...
Auto Nation's Mike Jackson (largest auto chain in the US) talking
about the banks STILL cutting off credit and that the lack of
financing is the reason car sales are so weak.
They've got buyers, but they're not getting the needed financing.
The banks not lending (your TARP money) and cutting off credit?
...whodathunkit?!?!
Been a good crisis for George Soros, Jamie Dimon and Goldman though... |
