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

Greg Palast
NationofChange.org/ Original News Report
Published: Thursday 23 February 2012



“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.”

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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.

(important)

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.
(Nexteer of Saginaw os pwned by China)

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.

(important)

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.


This ar­ti­cle is a Na­tionofChange orig­i­nal and is avail­able for re­pub­lish­ing under the Cre­ative Com­mons At­tri­bu­tion-Non­com­mer­cial 3.0 United States Li­cense.

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