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.