Grand Theft Auto Bankruptcy Pension Grab - Bankers Win Again

By Denis Campbell

Steve Rattner is President Obama’s Car Czar. This morning he essentially forces General Motors into a “quick and painless” bankruptcy and the President will announce it from the White House. I love oxy-morons (two words that do not go together). In this case there are three: quick, painless and bankruptcy. 

While we’re all grateful there is a point at which the haemorrhaging stops and the death watch vultures circle another carcass, this means it’s theoretically over so everyone is happy right? Well the bankers are ecstatic, they don’t have to take a stock stake and they get paid back fully… out of worker pension funds. 

The workers (up to 40,000 more jobs are to be lost), shareholders (almost completely wiped out, sorry that’s market risk), bond holders (.15 cents back on the dollar) and executives (buh-bye golden parachutes and oh, by the way meet your new majority owners and bosses – the taxpayer and UAW) will still all take a huge beating. 

The biggest part of this Grand Theft Auto Robbery is that JP Morgan Chase and Citibank are ecstatic. The banking lobby has delivered again and the TARP boys at Treasury, all disciples of Robert Rubin and the Clinton crowd that created the mess by gutting the Glass Steagall Act and other deregulation measures, have ensured that big banks don’t take a trim let alone a haircut. 

Even after getting $300 billion dollars in TARP funds, they will get their entire $6 billion dollars back lock, stock and loaded barrel.

The problem, it’s illegal. 

Greg Palast is an investigative journalist with the BBC and author of the book: “The Best Democracy Money Can Buy”. He’s apoplectic with rage over both this development and the crowd that currently runs Treasury, TARP and the auto czar office under the new Geitner administration. 

As he pointed out in an e-mail this morning, the Department of the Treasury is acting like the Nixon Administration and is in direct violation of the ERISA (the Employment Retirement Income Security Act). It passed in 1974 because several well-connected companies did the same thing, robbing the retirement kitty, under President Richard Nixon.

From Palast’s e-mail this morning:

• Rattner demands that the bankruptcy court wipe away the money GM owes workers for retirement health insurance by cashing in the insurance fund and replacing it with GM stock(!) Even if the percentage is 17% or 25% of GM’s stock just try paying for your dialysis with 50 shares of bankrupt auto stock.

• Citibank and Morgan should get their $6 billion right now and in cash from a company that can’t pay for auto parts or worker eye exams.

• Under ERISA you can’t seize workers’ pension funds (whether monthly payments or health insurance) any more than you can seize their private bank accounts because they are the same thing: workers give up wages in return for retirement benefits. 

• Company executives must hold retirement funds as “fiduciaries.” “The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits.” (From US Govt. website on pension law.) Simply, a plan’s assets are for the plan’s members only. Filching GM’s pension assets doesn’t become legal because the cash due the fund is replaced with GM stock. 

• Congress saw through that switch-a-roo by requiring that companies, as fiduciaries, must “…act prudently and must diversify the plan’s investments in order to minimize the risk of large losses.” By “diversify” for safety, the law does not mean put 100% of worker funds into a single busted company’s stock.

While Morgan and Citi have already sucked up over a third of a trillion dollars in aid from the US Treasury and Federal Reserve, it is no surpise to learn that Citi, the big winner, has paid over $100 million to Robert Rubin, the former US Treasury Secretary. Rubin was Obama’s point-man in winning banks’ endorsement and campaign donations (by far, his largest source of his corporate funding).

With GM’s last dying dimes about to fall into one pocket, and the Obama Treasury in his other pocket, Morgan’s Jamie Dimon is correct in saying that the last twelve months will prove to be the bank’s “finest year ever.”

Which leaves us to ask the question: is the forced bankruptcy of GM, the elimination of tens of thousands of jobs, just a collection action for favored financiers?

Nice work if you can get it.