The auto industry bailout — a classic case of crony capitalism

 
by Paul Mirengoff in Auto bailouts, Crony capitalism

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.” In this instance, the “well-connected” can be found mainly in the world of Big Finance:

In his recent book “Bailout,” the former special inspector general for the Troubled Asset Relief Program, Neil Barofsky, points out that when it came to the bailout of GM, no one with auto-industry background was involved in the decision-making process. “Led by Steven Rattner, the head of a Wall Street private equity firm, and Ron Bloom, a former investment banker and head of collective bargaining for the United Steelworkers Union, the auto team had plenty of Wall Street firepower but did not include in its ranks anyone with experience in the automobile industry.” Likewise, when it debated the question of closing auto dealerships, the task force consulted “a bevy of Wall Street analysts.” Little surprise then that the winners are largely relegated to the world of Big Finance.

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.
 

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