Obama filled UAW Bosses’ slush fund at expense of children’s education fund

Crony_Capitalism_in_America_cover1-370x565What do forced-unionism and forced-dues funded political war chests create?  Super citizens known as union bosses that get special favors that no other citizen will ever receive, but you are forced to pay for these government gifts to union bosses.  From Crony Capitalism in America 2008-2012 by Hunter Lewis:

Why did the George W. Bush administration pour $17.4 billion into rescuing General Motors and Chrysler? 241 Why did the Obama administration then increase the total to $85 billion? The decision was politically unpopular at the time. The idea of taxing school teachers earning $25 an hour or borrowing from China to rescue $60 an hour unionized auto workers did not seem fair, much less economically defensible. Economist Timothy Kehoe, a self-described “lifelong Democrat” and “Obama voter,” remarked at the time:” It was scandalous. ..

In its auto rescue, the Obama Administration made a deliberate decision to ignore bankruptcy law. General Motors and Chrysler had filed for bankruptcy. The shareholders were already wiped out. Normally assets would have been sold off with proceeds going first to secured lenders (those with specific collateral behind the loan) and then to unsecured creditors of all sorts. The United Auto Workers, as an unsecured creditor, would have gotten little. And in any case, union contracts are usually voided in a bankruptcy proceeding.

The Obama Administration changed all the rules. Consumer warranty contracts from the past were voided, but union contracts were not.

Secured creditors of Chrysler and General Motors got about 28% of their money back, much less than they would have received if the union had not received such unprecedented and seemingly illegal special treatment. Why did they not sue? … under the “sovereign immunity” doctrine, the government can only be sued when Congress has passed legislation allowing it.

Who were these people? Some of them were Wall Street firms, although often these firms held the bonds on behalf of average Americans. About 20% of all the General Motors bonds were directly owned by “mom-and-pop” investors who had entrusted their retirement savings to a company they thought they could trust.

For example, there was

  • David Tuckerman, 84, of Arlington, VA who lost $20,000 of retirement savings;
  • David Talbot, 24, a camp counselor who lost what had been a $5,000 gift from his grandfather;
  • Bill Zastrow, 58, a single father who lost $240,000 in college and retirement savings; and
  • Richard and Willa Woodard, a retired couple who lost most of their retirement savings, $170,000.247

How could the US government divert money to a major political ally, the union, at the expense of small investors or warranty owners, the people who had trusted GM enough to buy a bond or a car from it?

All of this amounted to what legal scholars call a “sub rosa” reorganization, which is forbidden, as well as a violation of the most fundamental tenets of bankruptcy law. It also violated property rights, some of the most basic rights under Common Law. As commentator Lawrence Kudlow noted, it essentially replaced “the rule of law” with “political decisions.”

General Motors also had some non-union workers and plants. As the company restructured, it was these plants that were shut down, even the highly productive non-union plant in Moraine, Ohio, a suburb of Dayton. Under terms of the reorganization, workers at this location were barred from transfer to other


The Obama Administration also fired the chief executive of General Motors, named his successor,
and took majority ownership of the company. Would General Motors executives now become a reliable source of campaign donations? At first, no. But by 2010, the donations were starting to flow to politicians again, despite the company’s new status as a ward of the government.255

The donations were already flowing from Evercore Partners, an investment firm that received $64 million in fees for arranging a government bail-out that would have happened anyway. Roger Altman, a former assistant treasury secretary under President Clinton and key Evercore principal, was a close ally of the president and bundler for his campaign. His partner, Ralph Schlosstein, gave a $38,500-a-plate fundraiser for the president and raised $2.1 million for the president and the Democratic National Committee.

Right at the end of the US presidential campaign in 2012, Chrysler, having been bailed out by the US government but now an Italian company, hinted it might move the production of Jeeps, the prototypically American vehicle, from Ohio to China. The Romney campaign pounced on this and ran an ad about it in Ohio, where one in eight jobs are connected to the auto industry. The ad backfired because Chrysler promptly denied the story and the press claimed it was all a fabrication. The company then gave its employees election day off to be sure they voted for the candidate who had saved their jobs. Not long after came the company announcement that it was indeed thinking of moving some Jeep production to China.

The Little Guy

Some people will no doubt justify the seemingly illegal actions that the US government took to bail out the United Auto workers and its rich store of swing state voters by arguing that unions are on the side of the “little guy” and provide important protections against the selfish actions of predatory corporations. But they should look more closely at what and whom they are supporting.

It is usually taken for granted that unions raise worker pay and, and by so doing, reduce income inequality and poverty, but none of this is true. Economists have long acknowledged that union wage gains do not come at the expense of owner profits, taken as a whole. They come at the expense of other, non-unionized workers. To see why this is true, we need to realize that unions are government-protected monopolies. That is, they seek to create a monopoly of the labor force for any given industry. Like any monopoly, they may be able to raise the price (in this case of labor) in one industry or industry segment, but as the price rises, employers naturally respond by reducing the numbers hired. The workers not hired because of monopoly prices increase the supply of labor in other industries, which reduces wages there. The result is not an increase in workers’ wages overall, just an increase for some and a decrease
for others.

Even workers who seem to benefit from the labor monopoly in a given industry may be enjoying illusory gains. The rich wages paid by General Motors and Chrysler over the years not only led to fewer and fewer hires; it also meant higher and higher car prices. These car prices in turn attracted the foreign competition that eventually destroyed the unionized auto makers. In addition, it meant that US workers had to pay higher prices for their own cars. The result of Detroit union gains in the end was impoverishment for everyone, even the union workers. (to read the full article click here)