Economic Treason

Chrysler logo

How did Chrysler, its employees, retirees, and suppliers become Wall Street’s slaves?

It began with a bad match. Daimler-Chrysler was an incompatible hyphenate, suffering from vastly different management styles, impossible-to-fuse dealer networks and very few sharable commonalities in technology, which led to Daimler’s willingness to unload Chrysler for a huge loss in 2007: Enter the three headed dog: Cerberus.

Background: Cerberus Capital Management, the very private Private Equity Fund was begun in 1994 by Drexel Burnham Lambert alumnus Steve Feinberg. Feinberg had avoided prosecution when so many of his supervisors and colleagues at that notorious Beverly Hills bond trading firm led by Michael Milken went down. (Milken, has spent most of his post-prison time on philanthropic work). Shoveling piles of cash to Republicans, Feinberg assembled a boardroom consisting of the compost heap of fetid Republican politics: Bush Sr.’s VP Dan Quayle, amongst others, is a director on the board, and Bush Jr’s Treasury Secretary John Snow is the Chairman of the Board ).

Republican über-donor J. Ezra Merkin joined Cerberus to facilitate their disastrous investment in GMAC. Merkin is good at disastrous investments, having run the Gabriel Fund, for which he is presently under indictment for steering $2.4billion into Madoff Funds without the knowledge of investors – and that’s a lot of scratch to snuff out! But let’s keep it simple, because the incest between and amongst these financial players and politicians can be mind-numbing (and disease inducing).

Fast forward to the recent troubles of Chrysler. It’s hard to know how bad things were or how badly managed the company has been, aside from the fact that they haven’t put a new model out (other than the very niche-y limited production Dodge Challenger) in several years, because as the largest privately held employer in the country, Chrysler’s books and management have been utterly opaque. That said, they had no shame in coming to the United States government for a handout even though they were a wholly owned entity of Cerberus, which is evidently otherwise flush with cash.

Chrysler has issued billions of dollars of bonds (corporate paper) held primarily by hedge funds, private equity firms, and banks. Citigroup, JPMorgan Chase, Morgan Stanley and Goldman Sachs all holding Chrysler Bonds. Are Merkin - or his funds, Feinberg - or Cerberus itself - holding paper? Go know, but they had no urgency to prevent the bankruptcy of Chrysler because they put their boundless greed way before the economic health of their nation or the hundreds of thousands of people who will suffer for this decision.

Here’s the thing: every one of those bonds was sold with bond insurance (aka: credit default swaps). From the perspective of the bondholder, it was precisely to their advantage to see Chrysler pay nothing on their bonds rather than take 10 cents on the dollar as payment in full, because by Chrysler defaulting, they can claim the insurance and demand full face value. A hundred thousand workers be damned - a few hundred devious investors will get theirs. And from whom?

Why, AIG, of course! The insurance giant – recipient of nearly as much government largesse as the Pentagon at this point – will have to pay up. And this is where a moral decision must be made, and it must be made by Barack Obama (because we certainly can’t look to Wall St. alums Geithner and Summers for ethics). It’s time to end the game. All this incest has caused a system so diseased it’s time to abort. Kill it off.

Solution: As the United States Government is the principal stockholder of AIG, AIG must be directed by the president to deny payment on those claims. Let the hedge funds and banks and Merkin, Feinberg, and Snow – the owners who drove Chrysler into the ground to begin with – sue. Let them show the hubris of the complete ethical vacuum in which they operate.

It’s time these frauds were shown for what they are (beyond “greedy bastards”): They are traitors. For thirty years we have heard the deregulated capitalist cultists conflate spreading “free markets” with spreading “freedom”. They’re spreading neither. They're spreading something else.