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The Auto Industry Bailout -- A Classic Case of Crony Capitalism


Business  (tags: Auto Bailout, Crony Capitalism, Obama Administration, Bankruptcy, Barack Obama, Misuse of Public Funds, Obama, Ineffective, Misuse of Public Funds, Obama, Chicago-Style Politics, Boondoggle, Ineptitude )

Paula
- 2079 days ago - powerlineblog.com
Peter Schweizer, in the Washington Times, helps expose the auto industry bailout for what it was -- "a classic tale of cronyism, in which the well-connected sped away with big bucks."



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Paula M (39)
Monday November 5, 2012, 9:59 am
From the article:





The GM bailout was handled by Evercore Partners, an investment firm in New York headed up by former Assistant Treasury Secretary Roger Altman. Before the bankruptcy, GM paid Evercore $46 million in advising fees to help GM find a buyer. Then, when the government came in and bailed out GM, Evercore turned around and asked for an additional $17.9 million “success fee.” Never mind that Evercore never found a purchaser or a funder — the company still called it a “Government Funded Sale Fee” in court documents.

Indeed, Evercore also took over the lucrative position of handling the General Motors Special Hourly-Rate Employees Pension Trust and the General Motors Special Salaried Employees Pension Trust. Those new pension funds were financed courtesy of more than 60 million shares of common stock, diluting the taxpayer stake in the company. The trustee for both of those new pension funds is Evercore Trust Co., a subsidiary of Evercore Partners.

Mr. Altman is also an Obama bundler, bringing in up to $500,000 so far. Evercore Partners CEO Ralph Schlosstein hosted a $38,500 per plate fundraiser at his home, raising a total of $2.1 million for President Obama and the Democratic National Committee.

The other big winners were the lawyers and government bureaucrats who handled the bailout. Mr. Bloom has returned to the investment house of Lazard Freres as vice chairman of U.S. investment banking, where he worked from 1985 to 1990. “I do think that my time in government can help to open that door a little bit,” he told Bloomberg Businessweek. He’s now advising mail carriers as the U.S. Postal Service undergoes restructuring.

When it came to making financial decisions affecting the automotive bailout, insiders and favorites made out well and outsiders were left outside. Nonunion workers saw their pensions go bust. The financiers on the Auto Task Force in Washington shafted 22,000 salaried retirees out of their pensions. Why? Those salaried retirees of the former Delphi Corp. (a longtime GM parts supplier) had a fairly solid pension fund, which was 85 percent funded. What they didn’t have was the political clout of the United Auto Workers. The Treasury Department urged the Pension Benefit Guaranty Corp. to seize the Delphi pension plan. This was not a financial decision — it was a political decision.
 
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