[Vision2020] Romney’s Top Funders/Vultures Made Billions on Auto Bail-Out

[Nicholas Gier]

*Romney’s Top Funders Made Billions on Auto Bail-Out*

By Greg Palast, Nation of Change, Feb. 23, 2012


Republican Presidential candidate Mitt Romney called the federal
government’s 2009 bail-out of the auto industry, “nothing more than crony
capitalism, Obama style... a reward for his big donors to his campaign."
In fact, the biggest rewards ­­– a windfall of more than two billion
dollars care of U.S. taxpayers ­­­–– went to Romney's two top contributors.

 John Paulson of Paulson & Co and Paul Singer of Elliott International,
known on Wall Street as “vulture” investors, have each written checks for
one million dollars to Restore Our Future, the Super PAC supporting
Romney’s candidacy.

 The two hedge fund operators turned a breathtaking three-thousand percent
profit on a relatively negligible investment by using hardball tactics
against the U.S. Treasury and their own employees.


Gov. Romney last week asserted that the Obama Administration’s support for
General Motors was a, “payoff for the auto workers union.” However, union
workers in GM’s former auto parts division, Delphi, the unit taken over by
Romney’s funders, did not fair so well.  The speculators eliminated every
single union job from the parts factories once manned by 25,200 UAW
members.


Under the control of the speculators, Delphi, which had 45 plants in the
U.S. and Canada, is now reduced to just four factories with only 1,500
hourly workers, none of them UAW members, despite the union agreeing to cut
contract wages by two thirds.


It wasn’t supposed to be quite so bad.  The Obama Administration and GM had
arranged for a private equity investor to provide half a billion dollars in
new capital for Delphi, but that would have cut the pay-out to Singer and
Paulson.  The speculators blocked the Obama-GM plan, taking the entire
government bail-out hostage.  Even the Wall Street Journal’s Dealmaker
column was outraged, accusing Paul Singer of treating the auto company,
“like a third world country.”


But it worked. Singer and Paulson got what they demanded.  Using U.S.
Treasury funds:

·         GM agreed to pay off $1.1 billion of Delphi’s debts,

·         Forgave $2.15 billion owed GM by Delphi (which had been spun off
as an independent company)

·         Pumped $1.75 billion into Delphi operations, and

·         Took over four money-losing plants that the speculators didn’t
want.

 If those plants had been closed, GM factories would have shut down cold
for lack of parts. Then there was the big one:  The U.S. government agreed
to take over $6.2 billion in pension benefits due Delphi workers under U.S.
labor law.



Governor Romney, while opposing the bail-out of GM, accused Obama of
eliminating the pensions of 21,000 non-union employees at Delphi.  In fact,
it was Romney’s funders who wiped out 100% of the pensions and health care
accounts of Delphi salaried retirees­­.


Paulson and Singer paid an average of about 67 cents a share for Delphi.
In November, 2011, Paulson sold a chunk of his holdings for $22 a share.
Paulson’s gain totals a billion and a half dollars ($1,499,499,000), and
Singer gained nearly a billion ($899,751,000) –– thirty-two times their
investment.


One-hundred percent of this gain for the Paulson and Singer hedge funds is
accounted for by taxpayer bail-out support.

 But, unlike the government loans and worker concessions given to GM, the
U.S. Treasury and workers get nothing in return from Delphi.


>From GM, the U.S. Treasury got warrants for common stock (similar to
options) that have already produced billions in profit. And Delphi?  It’s
doing well for Paulson and Singer.  GM and Chrysler, still in business by
the grace of the U.S. Treasury, remain Delphi’s main customers, buying
parts now made almost entirely in China and other cheap-labor nations.



And exactly who are Paulson and Singer? Billionaire John Paulson became the
first man in history to earn over $3 billion in a single year –– not for
his hedge fund, but for himself, personally.  At the core of this huge
payday was a 2007 scheme by which, via Goldman Sachs, he sold “insurance”
on subprime mortgage loans.  According to a lawsuit filed by the Securities
Exchange Commission, Goldman defrauded European banks by pretending that
Paulson was investing in the insurance.  In fact, Paulson was, secretly,
the beneficiary of the insurance, reaping billions when the mortgage market
collapsed. Goldman paid half a billion dollars in civil fines for the
fraud.  While the SEC states that Paulson knowingly participated in the
scheme, he was not fined and denies he defrauded the banks.


Multi-billionaire Singer is known as Wall Street’s toughest “vulture”
speculator.  Vulture fund financial attacks on the world’s poorest nations
have been effectively outlawed in much of Europe and excoriated by human
rights groups, conduct Britain’s former Prime Minister Gordon Brown
described as, “morally outrageous.”

*
*

*Greg Palast has been investigating vulture speculator Paul Singer for BBC
Television Newsnight and Britain’s Guardian for five years.  The
investigative reporter is author of Vultures’ Picnic:  In Pursuit of
Petroleum Pigs, Power Pirates and High-Finance Carnivores and the New York
Times bestseller, The Best Democracy Money Can Buy.  For reports on Singer
and vulture funds, go to www.GregPalast.com and www.VulturesPicnic.org.*
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