America, Romney, and the Middle Class
I realize that Chris linked to this in today’s Grumpy, and I apologize for the redundancy, but it really deserves to be highlighted on its own because it involves a local company – Delphi – and its buyout, bailout, and retirees. Delphi still operates in Lockport, and it has a long history in western New York back to the days of Harrison Radiator. Like Trico, it has taken advantage of Mexico’s maquila system, whereby American companies send parts to Mexico for assembly, and can repatriate the finished products duty-free thanks to NAFTA. Despite taking advantage of cheap Mexican labor, Delphi still found itself in deep trouble.
When in the midst of the global financial meltdown of 2008, GM was facing imminent collapse, the liquidation of Delphi would have been catastrophic. To replace Delphi’s supply pipeline would have cost GM tens of billions of dollars and many years. Had Delphi been allowed to go under, GM’s rescue would have been impossible – bailout or no.
Rattner could not believe that Delphi’s management—now effectively under the hedge funders’ control—would “want to be perceived as holding GM hostage at such a precarious economic moment.” One Wall Street Journalanalyst suggested that Singer was treating Delphi “like a third world country.” Rattner likened the subsidies demanded by Delphi’s debt holders to “extortion demands by the Barbary pirates.”
Romney has slammed the bailout as a payoff to the auto workers union. But that certainly wasn’t true for the bailout of Delphi. Once the hedge funders, including Singer—a deep-pocketed right-wing donor and activist who serves as chair of the conservative, anti-union Manhattan Institute—took control of the firm, they rid Delphi of every single one of its 25,200 unionized workers.
Of the twenty-nine Delphi plants operating in the United States when the hedge funders began buying up control, only four remain, with not a single union production worker. Romney’s “job creators” did create jobs—in China, where Delphi now produces the parts used by GM and other major automakers here and abroad. Delphi is now incorporated overseas, leaving the company with 5,000 employees in the United States (versus almost 100,000 abroad).
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.”
This article goes into excruciating detail about what happened with the auto bailout and Delphi retirees. It explains how the auto bailout was far from being a sweetheart deal for labor, but instead ended up being a winning lottery ticket for predatory hedge funds, which profit off of destitution and failure. It is vulture capitalism at its cruelest, and revolutions have been fought for less.
Mitt Romney has personally – likely knowingly – profited from this particular series of events, and he and his billionaire allies are trying to expand their financial profit into political benefit. If the interests of the vulture capitalists can be married to the federal government, the sky’s the limit. It was under the Reagan Administration that growing the middle class took a back seat to tax breaks for the wealthy – trickle down, supply-side economics has been an utter disaster for middle income Americans. The notion that helping the rich would benefit everybody has been a colossal failure at satisfying those aims; the economy has thrived when the very rich were taxed more.
So, please read this story, as it has a local effect, it’s shocking, it’s depressing, and it should make you very, very angry. Here’s a taste:
Mitt Romney’s opposition to the auto bailout has haunted him on the campaign trail, especially in Rust Belt states like Ohio. There, in September, the Obama campaign launched television ads blasting Romney’s November 2008New York Times op-ed, “Let Detroit Go Bankrupt.” But Romney has done a good job of concealing, until now, the fact that he and his wife, Ann, personally gained at least $15.3 million from the bailout—and a few of Romney’s most important Wall Street donors made more than $4 billion. Their gains, and the Romneys’, were astronomical—more than 3,000 percent on their investment.
By the end of June 2009, with the bailout negotiations in full swing, the hedge funds, under Singer’s lead, used their bonds to buy up a controlling interest in Delphi’s stock. According to SEC filings, they paid, on average, an equivalent of only 67 cents per share.
Just two years later, in November 2011, the Singer syndicate took Delphi public at $22 a share, turning an eye-popping profit of more than 3,000 percent. Singer’s fund investors scored a gain of $904 million, all courtesy of the US taxpayer. But that’s not all. In the year since Delphi began trading publicly, its stock has soared 45 percent. Loeb’s gains so far for Third Point: $390 million. The gains for Silver Point, headed by two Goldman Sachs alums: $894 million. John Paulson’s fund, which has already sold half its holdings, has a $2.6 billion gain. And Singer’s funds and partners, combining what they’ve sold and what they hold, have $1.29 billion in profits, about forty-four times their original investment.
Yet without taking billions in taxpayer bailout funds—and slashing worker pensions—the hedge funds’ investment in Delphi would not have been worth a single dollar, according to calculations by GM and the US Treasury.
The Randian John Galt fantasy in America is just mythology. The makers and captains of industry would never withdraw from the American economy and go live in a gulch to let the moochers and takers fail. They have the system stacked in their favor; they have the most compliant government money can buy. They have successfully changed the American narrative so that a great many middle-class and working poor will happily vote against their own interests.
I don’t think this is how America was meant to work. I don’t think that this is the sort of country the Founders envisioned – where the super-rich get richer at the direct expense of the bourgeoisie; where an idle vulture class exploits everybody with the purchased assistance of the political elite, and the whole thing goes largely unnoticed thanks to a lowest-common denominator news media.
Our country’s founding was a revolution of the bourgeoisie, overthrowing the shackles of feudal royalty based not on political legitimacy, but on fictional divine providence.
Disingenuous or ignorant Republican hacks can question Obama’s patriotism, birth, and faith, but truth be told, Romney’s America isn’t.