Grand Theft Auto: How Stevie the Rat bankrupted GM

[bigron]

Grand Theft Auto: How Stevie the Rat bankrupted GM

by Greg Palast
http://www.uruknet.info/?p=m54772&hd=&size=1&l=e



June 1, 2009

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  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 replaced 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.

******

Economist and journalist  Greg Palast, a former trade union contract negotiator, is author of the New York Times bestsellers The Best Democracy Money Can Buy and Armed Madhouse.  He is a GM bondholder and card-carrying member of United Automobile Workers Local 1981. 

Palast's latest reports for BBC Television and Democracy Now! are collected on the newly released DVD, "Palast Investigates:  from 8-Mile to the Amazon - on the trail of the financial marauders." Watch the trailer here.

 

[John Gault]

What they have done to GM is basically dismantle a company for pure greed and the little guy is the one taking the fall. Only this government would use your tax dollars to bailout a company and then ensure whatever money you invested in the company to go to the wealthy bankers. While of course you go broke and then have the audacious president go on TV to tell you there will be a LITTLE pain involved. My God this country is being torn down brick by brick and the sheeple just stand there. Our fellow citizens have become nothing more then casualties of a bloodless war. The bloodlust of the Obama administration has just begun, they will not stop until every U.S. citizen is beholding to them. What is really profoundly sad is these people are accepting their fate and will probably vote for these vampires again in 2012.
 
As for Chrysler, buzzards have been circling them since Daimler raided its coffers. Daimler took everything that was remotely good with Chrysler and drained them of their working capital. Then Cerberus took money from Daimler for a company that was then on life support. Installed the keystone cops, masquerade them as a management team and then proceed to suck the last of its blood. Then low and behold they have the hapless U.S. government bail them out. Fiat then comes in without any money of course and percedes to be a partner with the U.S. government.

Turn out the lights our republic is dead and we have ourselves to thank. The socialist/fascists have taken over many of the U.S. industries and made them wards of the state. You and I are next. 

[barndoor77]

How many people are going to lose their livelihoods in this?

We need to make a documentary about it, and make sure that EVERY former GM worker sees it.

[John Gault]

How many people are going to lose their livelihoods in this?

We need to make a documentary about it, and make sure that EVERY former GM worker sees it.

GM was such a huge company it touched every facet of industry and this bankruptcy will not just effect the auto workers, many many other workers will lose their jobs. Just to illustrate my point, most of the cow leather produced was being made for car seats. Now this is going to effect ranchers/farmers and the garment industry, most people wouldn't associate GM effecting ranchers. GM bankruptcy is one true horrific event that will have devastating results on our already crippled economy. 

Now saying all this, I still believe the U.S. shouldn't have bailed them out. Given now they went into bankruptcy, it was a huge waste of money. Now where did most of the bailout money go to? It went to the creditors (mostly the banks) and was funneled to many over seas interests. It is my belief GM and Chrysler really became conduits for a huge con game run on the American taxpayer. Because you cannot tell me you give a company 30 billion dollars and they still cannot fix their problems. This has become the worst decade in American history, from the economy to losing many bill of rights our fore fathers fought for.     

[Geolibertarian]

http://www.globalresearch.ca/index.php?context=va&aid=13917

The Money System Triggered the Bankruptcy of General Motors

by Arian Nevin



Global Research
June 9, 2009


Thomas Friedman believes G.M. is a “giant wealth-destruction machine.” He’s dead wrong. General Motors was, is and will be a giant wealth-production machine. Industry produces wealth, and G.M. is the victim of an unsound money system.

The abysmal state of the world economy has no physical cause. We have not run out of resources, factories, people, or suffered a cataclysm. All over the world, the unemployed are willing and eager to work, but are prevented from earning a livelihood because they cannot find work. An upside down notion of national economic wealth and an unsound monetary system are at fault.

The wealth of a nation is fundamentally based on the physical wealth it creates. Physical wealth consists of things that are beneficial to human life such as food, houses, clothes, cars, etc. The foundation of a nation’s wealth is the industries that create physical wealth: raw material extraction, energy, agriculture, and manufacturing. To become wealthy, a nation must produce and consume wealth. A nation is not made wealthy through banking, finance, litigation, or insurance.

Individuals correctly regard the money they possess and the money they are owed as part of their wealth. But, while debt and money are ultimately ways for individuals to obtain wealth, they are not wealth in and of themselves. Money is simply the medium by which we exchange physical wealth. Money and debt are simply human conventions having no intrinsic value in themselves. Thus, for a nation to be wealthy, it must produce physical value. A nation should not and cannot consider the money and debt it holds as wealth. If a nation were to have ten times as much money as it does now, physically it would not have any more wealth than before. Thus, though an individual can be made very wealthy by accumulating money, a nation cannot.

Nobel laureate, Frederick Soddy, distinguished between individual economics and national economics. Economists conflate the two and ruinously apply the principles of individual economics to the nation. In individual economics, outsourcing jobs, work, and entire industries is beneficial. With lower costs a company is able to increase its profits. However, from a national perspective we are worse off, because we are producing less and have fewer jobs. Individual profits are increased, while the nation is impoverished. Applying the principles of individual economics to the nation results in a steadily declining standard of living and increasing unemployment.

The mentality of economists such as Friedman is outdated and wrong. Vincent Vickers, former director of the Bank of England, described their mentality thusly: “Without money, nothing can be bought and nothing sold. Therefore nothing matters but money.” Thereby, G.M. becomes a “wealth-destruction machine” because it is not making a profit. But, in Friedman’s eyes Google, which he lauds, is creating wealth because it is profiting, although it produces nothing and profits by selling ads. By regarding money rather than production as the primary factor that drives a nation’s economy, economists have mistaken the shadow for the substance.

The bankrupt ideas of economists are ruining our nation. American industry can produce far more than the public can purchase. If everything produced could be purchased, we would have more jobs because more production requires more employees. We would be wealthier and have a higher standard of living. Americans want to work and are capable of producing. All that is missing is the power to purchase.

The power to purchase is limited because the supply of money is completely controlled by the private banking system. We have bank-made rather than government-made money, and banks only create money for the purpose of receiving interest. Today, money is only created so that debt can be created and interest charged on that debt. Money is lent into existence by banks rather than spent into existence by the government. Only an insignificant amount of money is cash, and the rest exists solely as data entries in bank computers. Banks create and destroy money simply by modifying entries in a spreadsheet. While it is commonly believed that banks lend their depositors’ money, this is false. Whenever banks loan money, they create entirely new money that didn’t exist before.

[Continued...]