- Screw the autoworkers.
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- They may be crying about General Motors' bankruptcy today.
But dumping 40,000 of the last 60,000 union jobs into a mass grave won't
spoil Jamie Dimon's day.
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- Dimon is the CEO of JP Morgan Chase bank. While GM workers
are losing their retirement health benefits, their jobs, their life savings;
while shareholders are getting zilch and many creditors getting hosed,
a few privileged GM lenders - led by Morgan and Citibank - expect to get
back 100% of their loans to GM, a stunning $6 billion.
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- The way these banks are getting their $6 billion bonanza
is stone cold illegal.
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- I smell a rat.
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- Stevie the Rat, to be precise. Steven Rattner, Barack
Obama's 'Car Czar' - the man who essentially ordered GM into bankruptcy
this morning.
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- When a company goes bankrupt, everyone takes a hit: fair
or not, workers lose some contract wages, stockholders get wiped out and
creditors get fragments of what's left. That's the law. What workers don't
lose are their pensions (including old-age health funds) already taken
from their wages and held in their name.
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- But not this time. Stevie the Rat has a different plan
for GM: grab the pension funds to pay off Morgan and Citi.
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- Here's the scheme: Rattner is demanding the bankruptcy
court simply wipe away the money GM owes workers for their retirement health
insurance. Cash in the insurance fund would be replace by GM stock. The
percentage may be 17% of GM's stock - or 25%. Whatever, 17% or 25% is worth,
well ... just try paying for your dialysis with 50 shares of bankrupt auto
stock.
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- Yet Citibank and Morgan, says Rattner, should get their
whole enchilada - $6 billion right now and in cash - from a company that
can't pay for auto parts or worker eye exams.
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- Preventive Detention for Pensions
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- So what's wrong with seizing workers' pension fund money
in a bankruptcy? The answer, Mr. Obama, Mr. Law Professor, is that it's
illegal.
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- In 1974, after a series of scandalous take-downs of pension
and retirement funds during the Nixon era, Congress passed the Employee
Retirement Income Security Act. ERISA says you can't seize workers' pension
funds (whether monthly payments or health insurance) any more than you
can seize their private bank accounts. And that's because they are the
same thing: workers give up wages in return for retirement benefits.
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- The law is darn explicit that grabbing pension money
is a no-no. Company executives must hold these retirement funds as "fiduciaries."
Here's the law, Professor Obama, as described on the government's own web
site under the heading, "Health Plans and Benefits."
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- "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."
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- Every business in America that runs short of cash would
love to dip into retirement kitties, but it's not their money any more
than a banker can seize your account when the bank's a little short. A
plan's assets are for the plan's members only, not for Mr. Dimon nor Mr.
Rubin.
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- Yet, in effect, the Obama Administration is demanding
that money for an elderly auto worker's spleen should be siphoned off to
feed the TARP babies. Workers go without lung transplants so Dimon and
Rubin can pimp out their ride. This is another "Guantanamo" moment
for the Obama Administration - channeling Nixon to endorse the preventive
detention of retiree health insurance.
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- 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
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- "...act prudently and must diversify the plan's
investments in order to minimize the risk of large losses."
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- By "diversify" for safety, the law does not
mean put 100% of worker funds into a single busted company's stock.
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- This is dangerous business: The Rattner plan opens the
floodgate to every politically-connected or down-on-their-luck company
seeking to drain health care retirement funds.
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- House of Rubin
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- Pensions are wiped away and two connected banks don't
even get a haircut? How come Citi and Morgan aren't asked, like workers
and other creditors, to take stock in GM?
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- As Butch said to Sundance, who ARE these guys? You remember
Morgan and Citi. These are the corporate Welfare Queens who've already
sucked up over a third of a trillion dollars in aid from the US Treasury
and Federal Reserve. Not coincidentally, 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).
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- 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."
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- 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?
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- And it's been a good year for Señor Rattner. While
the Obama Administration made a big deal out of Rattner's youth spent working
for the Steelworkers Union, they tried to sweep under the chassis that
Rattner was one of the privileged, select group of investors in Cerberus
Capital, the owners of Chrysler. "Owning" is a loose term. Cerberus
"owned" Chrysler the way a cannibal "hosts" you for
dinner. Cerberus paid nothing for Chrysler - indeed, they were paid billions
by Germany's Daimler Corporation to haul it away. Cerberus kept the cash,
then dumped Chrysler's bankrupt corpse on the US taxpayer.
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- ("Cerberus," by the way, named itself after
the Roman's mythical three-headed dog guarding the gates Hell. Subtle these
guys are not.)
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- While Stevie the Rat sold his interest in the Dog from
Hell when he became Car Czar, he never relinquished his post at the shop
of vultures called Quadrangle Hedge Fund. Rattner's personal net worth
stands at roughly half a billion dollars. This is Obama's working class
hero.
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- If you ran a business and played fast and loose with
your workers' funds, you could land in prison. Stevie the Rat's plan is
nothing less than Grand Theft Auto Pension.
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- It doesn't make it any less of a crime if the President
drives the getaway car.
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- ******
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- Economist and journalist Greg Palast, a former trade
union contract negotiator, is author of the New York Times bestsellers
The Best Democracy Money Can Buy and Armed Madhouse. He is a GM bondholder
and card-carrying member of United Automobile Workers Local 1981.
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- Palast's latest reports for BBC Television and Democracy
Now! are collected on the <http://www.gregpalast.com/PalastInvestigates/>newly
released DVD, "Palast Investigates: from 8-Mile to the Amazon - on
the trail of the financial marauders." Watch the trailer <http://www.gregpalast.com/PalastInvestigates/>here.
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