Retirees, Taxpayers Ripped Off to Subsidize UAW

by Hans Bader on May 21, 2009 · 17 comments

in Bailout Watch, Economy, Employment, Labor, Legal, Politics as Usual, Sanctimony, Stimulus to Nowhere, Trade

Obama accused critics of his decision to give control of Chrysler to the United Auto Workers Union of being “speculators.” But it turns out that many of them are pension funds representing the interests of retirees, who are being fleeced to enrich the politically better-connected UAW.

“Indiana Treasurer Richard Mourdock revealed this week that his state’s police and teacher pension funds have lost millions of dollars in the Chrysler ‘restructuring.’ Indiana’s State Police Fund and Major Moves Construction Fund, which finances roads and bridges, together lost more than $1 million. And the Teacher’s Retirement Fund ‘suffered, at a minimum, a loss of $4.6 million due to the action of the Federal government,’ reports Mr. Mourdock. Far from being speculators, these funds represent retired public employees, including cops and teachers. The funds paid a premium to buy ‘secured’ status, only to discover that they were politically outranked by the United Auto Workers in the White House hierarchy. ‘In the past, to be secured meant an investor was first in line in the event of a bankruptcy and ‘non-secured’ creditors would receive value after secured-creditors were paid,’ Mr. Mourdock says. ‘In the Chrysler bankruptcy, however, secured creditors received $.29 on the dollar even as non-secured creditors [the UAW] received higher values and ended up with a 55% ownership of the new company, which is fundamentally wrong and a dangerous precedent to the capital markets.’”

The government is now doing the same thing at General Motors, giving much of the company’s stock (plus $10 billion in taxpayer dollars) to the UAW while refusing to make good on GM bonds, which were purchased by some people to put their kids through college (and by some non-union employees to help fund their own retirement).

When public-employee pension funds suffer, as they did at Chrysler, taxpayers do, too. Public employee pensions are already underfunded by perhaps a trillion dollars, and taxpayers will likely end up being forced to pay for any additional shortfalls through increased taxes.

Jobs will disappear, too, as companies find it more difficult to raise money through bonds and loans. In response to Obama’s ripping off bondholders and lenders to enrich the UAW, hedge funds now say they may not lend to unionized companies, and Indiana’s treasurer says that he will not invest in manufacturing companies or insurers that are participating in the TARP program. Chrysler still faces a difficult future, burdened by excessive wages that even union members were surprised to see stay high.

Obama’s $800 billion stimulus package, which guts welfare reform and contains provisions that keep states from cutting the wages of overpaid public employees, is also harming the economy. The stimulus ignited trade wars with Mexico and Canada that destroyed over 40,000 jobs.

Tom May 22, 2009 at 2:57 am

Well, good. It serves them right for voting for the guy.

bob May 22, 2009 at 4:07 am

'and taxpayers will likely end up being forced to pay for any additional shortfalls through increased taxes.'

WHAT

Hey I've lost 40% of my 401K to date. Can I have a handout?

Yeah, that's what I thought.

Why is my being successful in life being looted like this.

It's my money. Stop Stealing it!

I thought that this was the funniest story I've heard in a while.

A group of people in unions, voted in their 'guy' and he demolished their pensions, pandering to unions. Funny stuff.

They better keep their hands off my money.

They made the bad decision, I didn't, so live with it.

Chris May 22, 2009 at 4:09 am

This is the change voters wanted. I hope they are happy with it. The UAW certainly is. Only a litte more than 3 1/2 years to go. Imagine what is to come if he has pulled this kind of stunt already.

Joe May 22, 2009 at 6:40 am

Who Is John Galt?

javapoppa May 22, 2009 at 6:58 am

He didn't say that the 'Change We Can Believe In' was going to be for the worst.

Don Kicklighter May 22, 2009 at 7:12 am

Hope you can belive in. How is you change.

Steve Boston May 22, 2009 at 10:09 am

They voted for change they won't have left in their pockets.

This is what happens when the Idolizing,Indoctrinated and Indigent flock to the voting booth.

steve May 22, 2009 at 12:27 pm

and they will keep on voting democrat even as the democrats loot their retirement fund, tax them to death and ask them for more

Victor L May 22, 2009 at 4:56 pm

I am glad I am not an American tax payer. It is incredulous that the US government is bailing out the UAW, the prime architect in the downfall of these auto industries. Worse still these unions will be the owners of these companies at the expense of bondholders and investors, the very people needed to keep these companies afloat! I will never buy any UAW owned cars. UAW is and will be the downfall of GM.

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