October Surprise! Romney benefits $15 million from Obama auto bailout
We Americans have come to expect extraordinary events to occur before an important election day. When a National election is in play, however, the attempts to sway voter opinions assume more demonstrative proportions, whether from without or within, becoming what has euphemistically been called an “October Surprise."
Both political parties will typically withhold their most precious “bullets” until the final days for maximum effect, but occasionally the “firepower” comes from true investigative reporting. Greg Palast, an economist and financial investigator turned journalist, supported by the Nation Institute, the Puffin Foundation, and by others, recently published a revealing article in “The Nation," detailing how former Massachusetts Gov. Mitt Romney and his donors held the auto industry hostage after President Obama’s auto bailout. These “opportunists” raked in billions from their underhanded shenanigans.
The article, entitled “Mitt Romney's Bailout Bonanza,” is a testament to how money moves in the “shadows," far from public scrutiny, to enrich special interest groups, private equity funds, and material contributors to political campaigns. The central figure in this “expose” is Paul Singer, who has been labeled by the press as a “vulture investor” for preying on distressed companies and countries by buying their debt for pennies on the market and then demanding full payment from the issuers. Fortune magazine goes further to describe him as a “passionate defender of the 1%," earning his reputation by “strong-arming his way to profit.”
Singer, hardly a household name, has contributed more personally to the GOP, some $2.3 million, than any other person on Wall Street. He was influential in adding Paul RyanPaul Ryan to the Republican ticket and getting his colleagues to pump another $1.1 million into GOP campaign coffers. He directs a number of hedge funds, most notably in this instance, the Elliott Management fund, which has profited to date by some $1.28 billion from Obama’s auto bailout program. He also manages a portion of both Mitt and Ann Romney's so-called “blind” trusts, which has produced a reputed $15 million in gains on their behalf.
How can such a chain of events lead to such “astronomical” profits, estimated to be an obscene 3,000 percent return on their investments? The story starts with Delco Auto Parts, once an esteemed division of General Motors that spun off as a separate entity back in 1999. The firm, however, did not prosper independently, seeking bankruptcy protection in 2005. Nevertheless, the company was still a key component in the auto assembly line for GM, so to speak. Imagine building a car without a steering column. Delco, now “Delphi," may have had its financial woes, but its value to GM was unmistakable.
Singer and his accomplices saw the value in Delphi and began buying its bonds on the market for pennies, eventually converting that leverage for control in the company’s stock pool. With “control," the hedge funds successfully warded off a local bid to resurrect Delco on GM’s behalf, allowing them to proceed with more lucrative plans. The employee pension fund was dismantled, and 20,000 jobs were moved overseas to China, where the majority of Delco parts are manufactured today. What remained in North America? Unions were sent packing, but 5,000 non-union jobs were retained.
The pension liabilities are another story. The Pension Benefit Guaranty Corporation, a government agency that provides a “safety net” for employees when their firms fail to live up their obligations, stepped in to the tune of $5.6 billion in taxpayers’ money. In cases like these, the pensions are not returned at full value. Singer and his cronies could have made up the difference, nearly $1 billion, but chose to buy another Asian subsidiary instead. To add insult to injury, pensioners in political ads have been “persuaded” to blame the Obama administration for their losses, when hedge fund greed was the culprit.
After dispensing with unions, other legal entanglements, and relocating the majority of manufacturing to China, the new “Delphi” was taken public for $22 a share, thus delivering the outrageous 3,000% return previously noted. Profits have not ended here. Delphi stock has also appreciated some 45% since its initial public offering, making every participant from the beginning an excessive profiteer, made possible by taxpayer money and what many have called outright “extortion."
How did “extortion” become part of the game? GM, knowing full well the importance of Delco, had arranged a deal with another investor to keep the parts rolling. The bankruptcy judge, however, was forced to take Singer’s bid instead because the law allowed his bid to be the “face value," not the market value, of the bonds in his possession. Afterwards, Singer demanded $2.8 billion in GM’s bailout funds or they would shutdown their parts supply, which would have taken years to replace. In this high-stakes game of “chicken," GM “blinked," and the rest is history.
Are these facts or distorted renderings from the liberal media? Many of the filings and depositions made in Delphi bankruptcy hearings have found their way into the public domain. Interviews and at least one book have dealt with this topic in more detail. The extent of the Romneys’ interest in the “escapade” has been ascertained from his tax return disclosures for 2010. Details from 2009 and 2011, however, remain in doubt.
What is not in doubt is that Romney needs both Michigan and Ohio to have a chance at winning the election. No matter how he tries to rewrite, re-interpret, or “Etch-a-Sketch” away his op-ed piece in the New York Times, his first sentence still haunts his every move. “IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye.” The opposite is true, and President Obama deserves the credit for his courage to step beyond political rhetoric and take decisive action to save our auto industry.
Romney and his investment managers have laughed all the way to the bank at the taxpayers’ expense, yet the American people, especially “low-information” voters, know little about these transactions. Vote for “Integrity” on Election Day! Lean Forward!