Mitt Makes Millions In Detroit Bailout

The November 5th issue of The Nation features an article by Greg Palast titled "Mitt Romney's Bailout Bonanza."

Palast points out that Romney has to date successfully concealed the fact that he and his wife Ann made at least $15.3 million on the offshoring of GM parts manufacturer Delphi Automotive-- and more than four billion dollars for his friends and fellow investors.

Delphi, an American operation, was closed by hedge funds which had gained control and shipped entirely offseas. There is no more Delphi Automotive in the United States of America.

Delphi Automotive was once part of General Motors. It was spun off in 1999 as a separate entity and continued to provide GM with critical parts. Without Delphi, General Motors could build no cars.

Delphi did not do well on its own, and in 2005 declared bankruptcy. Vulture hedge funds, led by Silver Point Capital, began buying Delphi's debt for pennies on the dollar. Paul Singer of Elliott Management was one of the flock. Another was John Paulson & Co.

It all starts with Delphi Automotive, a former General Motors subsidiary whose auto parts remain essential to GM’s production lines. No bailout of GM—or Chrysler, for that matter—could have been successful without saving Delphi. So, in addition to making massive loans to automakers in 2009, the federal government sent, directly or indirectly, more than $12.9 billion to Delphi—and to the hedge funds that had gained control over it.
One of the hedge funds profiting from that bailout—
$1.28 billion so far—is Elliott Management, directed by 
Paul Singer. According to The Wall Street Journal, Singer has given more to support GOP candidates—$2.3 million—than anyone else on Wall Street this election season. His personal giving is matched by that of his colleagues at Elliott; collectively, they have donated $3.4 million to help elect Republicans this season, while giving only $1,650 to Democrats. And Singer is influential with the GOP presidential candidate; he’s not only an informal adviser but, according to the Journal, his support was critical in helping push Representative Paul Ryan onto the ticket.

Singer, whom Fortune magazine calls a “passionate defender of the 1%,” has carved out a specialty investing in distressed firms and distressed nations, which he does by buying up their debt for pennies on the dollar and then demanding payment in full. This so-called “vulture investor” received $58 million on Peruvian debt that he snapped up for $11.4 million, and $90 million on Congolese debt that he bought for a mere $20 million. In the process, he’s built one of the largest private equity firms in the nation, and over decades he’s racked up an unusually high average return on investments of 14 percent.

Other GOP presidential hopefuls chased Singer’s endorsement, but Mitt chased Singer with his own checkbook, investing at least $1 million with Elliott through Ann Romney’s blind trust (it could be far more, but the Romneys have declined to disclose exactly how much). Along the way, Singer gained a reputation, according to Fortune, “for strong-arming his way to profit.” That is certainly what happened at Delphi.

-- Palast

Knowing the importance of keeping Delphi operational, General Motors and the U.S. Treasury proposed a bailout deal they had hammered out with the help of the United Auto Workers union. Knowing this, the hedge funds accelerated their purchases of Delphi debt, deliberately torpedoing the GM/government deal.

In June 2009 the hedge funds used their combined bonds to buy enough Delphi stock to control the company. Two years later they took Delphi public, with stock opening at $22 per share, a profit of 3000%-- and that was before the stock began to rise in price. Thanks to U.S. taxpayers ( for the U.S. had loaned the troubled Delphi $12.9 billion), Elliott Management's investors made $904 million, Third Point $390 million, and Silver Point $890 million. and Paulson (which has sold only half it's stock) $2.6 billion. And the Romneys? They made millions.

Altogether, in direct and indirect payouts, the government padded these investors’ profits handsomely. The Treasury allowed GM to give Delphi at least $2.8 billion of funds from the Troubled Asset Relief Program (TARP) to keep Delphi in business. GM also forgave $2.5 billion in debt owed to it by Delphi, and $2 billion due from Singer and company upon Delphi’s exit from Chapter 11 bankruptcy. The money GM forgave was effectively owed to the Treasury, which had by then become the majority owner of GM as a result of the bailout. Then there was the big one: the government’s Pension Benefit Guaranty Corporation took over paying all of Delphi’s retiree pensions. The cost to the taxpayer: $5.6 billion. The bottom line: the hedge funds’ paydays were made possible by a generous donation of $12.9 billion from US taxpayers.

-- Palast

The hedge fund controllers of Dephi then held GM and Chrysler hostage, threatening to withhold critical components unless they were paid $350 million immediate ("Or we'll shut you down").

Without the Delphi parts, the auto bailout would have utterly failed. GM and Chrysler had no choice but to comply.

Now in control, the hedge funds slashed benefits for workers, stripping them of their pensions. Retirees were stripped of their health fund, saving the hedge funds only $70 million, but devastating millions of retired workers; the latter happened in February, 2009, before the hedge funds gained control, but apparently upon their assistance).

Then the hedge funds fired 25,000 American workers and shipped the entire Delphi operation overseas to China. Today they brag:

Third Point’s Daniel Loeb, whose net worth of $1.3 billion owes much to his share in the Delphi windfall, told his fund’s backers this past July that Delphi remains an excellent investment because it has “virtually no North American unionized labor” and, thanks to US taxpayers, “significantly smaller pension liabilities than almost all of its peers.”

-- Palast

Having made billions of dollars by conniving against American business and the American people, there was only one thing left to do beside count their money-- blame Barack Obama. And that's just what they did.

But there was still a bit of unfinished business: President Obama needed to be blamed for the pension disaster. In a television ad airing in swing states since September, one retired Delphi manager says, “The Obama administration decided to terminate my pension, and I took a 40 percent reduction in my pension.” 

Another retiree, Mary Miller, says, “I really struggle to pay for the basics…. I would ask President Obama why I had no rights, and he had all the rights to take my pension away—and never ever look back and say, ‘Not only did I take it from Mary Miller, I took it from 20,000 other people.’” 

These people are real. But it’s clear that these former workers, now struggling to scrape by, were hardly in the position to put together $7 million in ad buys to publicize their plight. The ads were paid for by Let Freedom Ring, a 501(c)(4) nonprofit advocacy organization partially funded by Jack Templeton Jr., a billionaire evangelical whose foundation has sponsored lectures at the Manhattan Institute (the anti-union think tank whose board of directors includes not only Singer but Loeb). The ads also conveniently leave out the fact that the law sets specific ceilings on what the PBGC is allowed to pay retirees—regardless of what they were originally owed.

-- Palast

I'm infuriated by that those bastards have done-- they should be in prison, in my book-- and aghast that this has until now gone unreported by the media. As Palast says:

So, where is the New York "Paper of Record?" Or, for that matter, MSNBC?
Bill Press explained it to me when I was on his show this morning: "Sorry, Greg. There's no more investigative reporting in America. No reporters, just repeaters."
That's why I fear Jimmy Carter's statement that, "The American people deserve a president as good as they are." Now I'm afraid that's exactly what we'll get.

I'll soon talk more about Mitt and Ann Romney's involvement in all this.

Greg Palast's book Billionaires & Ballot Bandits: How to Steal an Election in 9 Easy Steps is free with a donation of $35 to the nonprofit Truthout and at booksellers.

Sources

Palast, Greg. (2012, 23 October). Romney & Co. shopped every single Delphi UAW job to China. Huffington Post. Read it here.

Palast, Greg. (2012, 5 November. Mitt Romney's bailout bonanza. The Nation. Read it here.