Romney’s Prescience—a.k.a., The OTHER important point about Romney’s auto-bailout position
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
— Mitt Romney, Let Detroit Go Bankrupt, New York Times, Nov. 18, 2008
The problem for Romney? That the turnaround that Detroit needed could not have occurred without that check.
The solution for Romney? Say that he was proposing a “managed bankruptcy” rather than a liquidation bankruptcy, and pretend that those two things are mutually exclusive. And—voila!—everyone’s focused on whether Romney was or was not proposing a liquidation of GM and Chrysler.
Which, of course, he was, because, well, the turnaround that Detroit needed could not have occurred without that check.
But in that op-ed, Romney said—unequivocally—that receipt of that check by the auto companies would spell the demise of the American automotive industry. He said he could virtually guarantee it.
That’s right, folks. The man who claims that his business savvy means he will, if elected president, cause the creation of 12 million new American jobs didn’t know that there was no private-sector financing available to fund a non-liquidation managed bankruptcy for these companies. And, even more important, he thought that federal funding would spell the demise of the automotive industry.
In other words, even more important than that this guy is the Houdini candidate is that, by his own accounting—by his own words in that op-ed—he economics prowess is an apparition.
Well, it isalmost Halloween.
Good thing that guarantee was only virtual.
Romney & Co Shipped Every Single Delphi UAW Job to China
video links to his site..
More from Greg:
“That leaves one final question: Exactly how much did the Romneys make off the auto bailout? Queries to the campaign and the Romneys’ trustee have gone unanswered.
In their 2011 and 2012 Federal Financial Disclosure filing, Ann Romney’s trust lists “more than $1 million” invested with Elliott. This is the description for all of her big investments—the minimal disclosure required by law. (Had Romney kept the holding in his own name, he would have had to reveal if his investment with Singer had made more than $50 million.)
It is reasonable to assume that Singer treated the Romneys the same as his other investors, with a third of their portfolio invested in Delphi by the time of the 2011 initial public offering. This means that with an investment of at least $1 million, their smallest possible gain when Delphi went public would have been $10.2 million, plus another $10.2 million for each million handed to Singer—all gains made possible by the auto bailout.
But that’s just the beginning. Since the November 2011 IPO, Delphi’s stock has roared upward, boosting the Romneys’ Delphi windfall from $10.2 million to $15.3 million for each million they invested with Singer.
But what if the Romneys invested a bit more with Singer: let’s say a mere 3 percent of their reported net worth, or $7.5 million? (After all, ABC News reported—and Romney didn’t deny—that he invested “a huge chunk of his vast wealth” with Singer.) Then their take from the auto bailout so far would reach a stunning $115 million.
The Romneys’ exact gain, however, remains nearly invisible—and untaxed—because Singer cashed out only a fragment of the windfall in 2011. And the Singer-led hedge funds have been able to keep almost all of Delphi’s profits untaxed by moving Delphi’s incorporation from Troy, Michigan, to the Isle of Jersey, a tax haven off the coast of France.
The Romneys might insist that the funds were given to Singer, Mitt’s key donor, only through Ann’s blind trust. But as Mitt Romney said some years ago of Ted Kennedy, “The blind trust is an age-old ruse, if you will. Which is to say, you can always tell a blind trust what it can and cannot do.” Romney, who reminds us often that he was CEO of a hedge fund, can certainly read Elliott Management’s SEC statements, and he knows Ann’s trust is invested heavily in a fund whose No. 1 stake is with Delphi.
Nevertheless, even if the Romneys were blind to their initial investment in Elliott, they would have known by the beginning of 2010 that they had a massive position in Delphi and would make a fortune from the bailout and TARP funds. Delphi is not a minor investment for Singer; it is his main holding. To invest in Elliott is essentially a “Delphi play”: that is, investing with Singer means buying a piece of the auto bailout.
Mitt Romney may indeed have wanted to let Detroit die. But if the auto industry was going to be bailed out after all, the Romneys apparently couldn’t resist getting in on a piece of the action.” http://www.thenation.com/article/170644/mitt-romneys-bailout-bonanza#
Hey if you think Rmoney’s economics expertise is chimerical, get a load of his advisor. Ladies and gentlemen may I present Glenn “Give it your best shot” Hubbard:
I think he’s available for children’s parties in addition to the whoring out of economics as a discipline…
The prepackaged bankruptcy put together by the Obama administration was corrupt and rigged.
The real test here is what happens to GM and Chrysler in the next economic turn down. Was the restructuring enough to ensure long term viability?
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