The Steven Rattner Scandal And The Obama White House

It appears the man the Obama White House put in charge of the takeover of Chrysler and GM was already up to his hips in seriously unethical dealings with public pension funds.

It's a convoluted story, but at heart it was a 'pay-to-play' scheme, in which it is alleged Rattner obtained a $100 million dollar public pension fund investment for his firm by unethical means. He made a series of unrelated deals on behalf of people who made the decision to steer the investment in his direction. Wanna bet he landed a handsome bonus at year's end for his efforts?

He then went on to be put in charge of the 'rescue' of two dead auto firms, which by the way, are still....not viable. But tens of billions of dollars changed hands in the process, and deal after deal after deal were made along the way. That's what the man does, you know, make deals. It's his way of life, how he makes his living.

The obvious question has to be raised:  What sorts of deals were made, and what small slices of those tens of billions ended up flowing in his direction? It all happened very quickly, all very confused, lots of smoke and mirrors, and massive skirting of bankruptcy law occurred, if memory serves.

Another obvious question: Before assigning him to the task, didn't the Obama White House vet this guy? Or did the fact that he was a major Democrat fund-raiser help them decide? Did these things matter, or did they hire him because of who he was, knowing the manner of the man?

In the meantime, back to this week's account:

"Mr. Rattner does not agree with the characterization of events released today, including those contained in Quadrangle's statement," said Jamie S. Gorelick, an attorney for Rattner. "He looks forward to the full resolution of this matter."

Standard lawyer boilerplate. But the name of the lawyer rings a bell! Why, OS scratches his gray head in wonder? Where has he encountered the name of Jamie S. Gorelick?


Here's one place.  From the Washington Post, April 6, 2005:

Fannie Mae employees falsified signatures on accounting transactions that helped the company meet earnings targets for 1998, a "manipulation" that triggered multimillion-dollar bonuses for top executives, a federal regulator said yesterday.
 
Armando Falcon Jr., director of the Office of Federal Housing Enterprise Oversight, said the entries were related to the movement of $200 million in expenses from 1998 to later periods. The result of the changes was an increase in Fannie Mae's 1998 earnings per share and the release of a $27.1 million bonus pool for senior executives.

Fannie Mae reported paying the following executive bonuses in 1998: chairman and chief executive James A. Johnson received $1.932 million; Franklin D. Raines, chairman-designate, received $1.11 million; Chief Operating Officer Lawrence M. Small received $1.108 million; Vice Chairman Jamie S. Gorelick received $779,625; Chief Financial Officer J. Timothy Howard received $493,750; and Robert J. Levin, an executive vice president, received $493,750. 

That's one reference...there are more, not difficult to find.  

OS does not believe in conspiracy theories. No one was passing envelopes of cash to the President, or wiring vast sums to his offshore accounts. But the best thing one can say about having Rattner on board is that the White House staff were reckless and gullible.

This is not another Watergate.  But it is indicative of attitudes. And as businesses and families struggle through The Great Recession, stories like this are demoralizing.

The Unanticipated Obvious Question

The Wall Street Journal chronicles the continuing self-destruction of the once grand Chrysler Corporation.

In May, Randy Painter and his nine siblings were taken aback to learn their 65-year-old family business—two Chrysler Group LLC dealerships in Nephi and St. George, Utah—would be terminated as part of the auto maker's restructuring. The dealerships, opened by their grandfather and father, respectively, were historically profitable and had long been an integral part of their small communities. Since June, they have struggled to convert their stores into used-car dealerships—and, like many rejected dealers, they still question the logic behind Chrysler's decision. 

Let's remember Spring 2009:  President Hopey-Changey and company rammed a pre-packaged 'bankruptcy', which violated much of the federal code, through the court of a willing judge, and what remained of Chrysler was handed to Fiat, in a no-cash transaction.  The bondholders, who held bonds that told them in black-letter type they were first in line in the event of a bankruptcy, were shoved to the end of the line, behind the UAW.  Many of the dealers, the ones tasked with selling the vehicles, were told that their franchises were being revoked arbitrarily, and in some cases, handed arbitrarily to other dealers; in one case, the franchise was handed to a dealership ACROSS THE ***!!!*** STREET from the former dealership.

Without notice. Without compensation. They were simply told to take a hike. Hope and Change have spoken.

Many of these dealers were multi-generation family businesses in smaller cities around the country. You know, the people who for eighty years had provided jobs, funded the local charities and churches, sponsored the softball teams, etc. etc.

All gone. You guys go away, even if you were making good money. Hope and Change have arrived, and your services are no longer needed. TV screens across the land were filled with the images of devastated family business owners standing in front of their empty dealerships sporting Chrysler signs, some of them freshly purchased a few months before, at the insistence of Chrysler Corporation.

Then comes Cash-for-Clunkers. Toyota wins, Ford wins, even GM sells some, and Chrysler sales barely move.  Then things got worse.

Even the press release hacks at Chrysler had to admit the truth at the bottom of the page after several paragraphs of optimistic verbiage.

Did anyone, anywhere in President Hopey-Changey's staff ever anticipate the potential car buyer's obvious question:

If they'll do this to their dealers, what will they do to me?

Why We Should Pay Attention to the Chrysler Bankruptcy

This makes for interesting, if worrisome reading.


The Chrysler 'bankruptcy' has turned into a giant 'taking' by the Federal government.

First it was the bondholders, who were promised they were first in line to be paid. They were tossed out into the cold, the UAW was handed a majority stake, and Fiat was handed(without investing a penny of cash) managerial control.

Now it's the dealers, joining them on the street. Many of them are profitable firms, doing good business for decades, even in this downturn. Their businesses are being taken away from them, without compensation, and handed to the 'preferred' dealers in the region.

This is in clear defiance of both federal and state law.

Next up, General Motors, then?

The bigger, and more sobering questions are:

Do only the politically favored survive?

Is this the sort of America we have worked for?

Is this the legacy we wish to hand our children?

Does this make you want to run out and buy your next car at a Chrysler dealership?