GM victim to predatory capitalism!

I was listening to the Thom Hartmann radio show a couple weeks back and found out how the economic system in the United States is rigged. Thom explained it's like a slot machine or game that is fixed to only payout when only a certain sequence is plugged into it. General Motors may have been able to make it through even without bankruptcy. The labor union was pitching in, the government was helping out, but millionaires investing in hedge funds stand to make billions if GM fails. What these Wall Street weasels in the hedge fund industry has done, is not only bought up GM debt so now they are major bond holders, but they also bought insurance (or bets) that the bets they own will go bad. As it turns out, the debt that they are holding with GM is twenty-seven billion bucks, but if GM goes down and because of their insurance policy for thirty-four billion (which is bigger than their debt), they stand to make billions of dollars. This is what I call predatory capitalism! What kind of screwed up system do we have, where the blood sucking gamblers on Wall Street who don’t make one damn thing can make money by killing a company and throwing people out of work? The millionaire hedge fund holders have been doing something kind of similar with oil over the last few years and making out like bandits. These filthy, predatory capitalists are destroying this country! This kind of behavior has been going on all through the Bush years and looks like it might linger on for a little while longer, unless the democrats start doing something about it! The good news is, the democratic party is in charge now and we have a chance. The democrats need to start enacting legislation and adopting rules to keep these low life bastardly bastards in check.

A hefty tax bite on these ill-gotten gains would help too. Of course the corporate whores in Congress will never go for that.

Got a clue for you on these Wall Street Bastards. They hedged their fucking bets in both parties.

Granted the GOP is a full subsidiary, but they have been quite successful in opening up franchises in the Democratic Party.

Actually their investment in our party is even better than the one they had in the GOP. They don't have to buy everyone!

Just about 10 or so Senators is enough to muck things up enough to prevent any kind of effective regulation or enforcement from being done.

Deregulation of USURY which created the entire banking / finance industry. Which in turn stampeeded the money out of mfg, and created an addiction to high returns with little work, and little risk (for the finance, not the people). Read more:

http://www.democracynow.org/2009/3/24/thomas_geoghegan_on_infinite_debt_how

“Infinite Debt: How Unlimited Interest Rates Destroyed the Economy.” Geoghegan writes, “We dismantled the most ancient of human laws, the law against usury, which had existed in some form in every civilization from the time of the Babylonian Empire to the end of Jimmy Carter’s term.”


THOMAS GEOGHEGAN: In the article, I talk—that appeared in Harper’s, I’ve talked about the fact that we’ve not focused enough on the big deregulation that precedes all other deregulations, and that’s the ceiling that has existed on the financial sector since time immemorial on the amount of interest that banks can get from their clients, their customers, their depositors. Historically, and even up through movies like It’s a Wonderful Life with Frank Capra and Mr. Potter and George Bailey, the interest rates in this country were capped at eight percent, nine percent. In the 1970s, we began to deregulate this, and then we had a massive big bang with a Supreme Court case that effectively knocked out all the interest rate caps. And we have today, taken as common, that banks can charge 17, 18, 19, 30, 35 percent, not to mention payday lenders charging 200, 300, 400 percent in states like Illinois, California —

Credit insurance hampers GM restructuring
By Henny Sender in New York

Published: May 11 2009 23:33 | Last updated: May 11 2009 23:33

Hedge funds and other investors stand to make billions of dollars on credit insurance contracts if GM de­clares bankruptcy, a prospect that is complicating efforts to persuade creditors to agree to a restructuring plan for the automaker, analysts say.

Holders of $27bn in GM bonds have until June 1 to decide whether to swap their debt for a 10 per cent equity stake in the company as part of an offer that would give the US government 50 per cent of the shares, a United Auto Workers union healthcare fund 39 per cent and existing shareholders 1 per cent.


However, analysts say the chances the proposal will be accepted have been diminished by the large number of credit default swap (CDS) contracts written on GM’s debt.

Holders of such swaps would be paid in the event of a default – but would lose money if they agreed to restructure GM’s debt. For investors who own bonds and CDS, this could create an incentive to favour a bankruptcy filing.

According to the Depository Trust & Clearing Corporation, investors hold $34bn in CDS on GM. Once off-setting positions are considered, the DTCC estimates CDS holders would make a net profit of $2.4bn if GM were to default.

The opposition of 10 per cent of bondholders is enough to derail the proposal, which has already triggered protests from investors who argue it unfairly rewards the UAW at the expense of bondholders.

“You have every incentive not to agree,” said one bondholder, a large credit hedge fund. “You would be locking in a loss if you did. It isn’t only the ‘shark’ capital; it will be the mom and pop mutual funds who will oppose this deal. ”

Prices for GM’s debt and CDS indicate investors believe a bankruptcy filing is highly likely. GM’s bonds are trading at between 6 and 12 cents on the dollar. To insure $100m in GM debt for five years, an investor would have to pay $89m plus another $5m a year over the life of the CDS contract.

The CDS positions mark a crucial difference between GM and Chrysler, which filed for bankruptcy protection as part of what it hopes will be a swift restructuring. Chrysler had $6.9bn in bank loans, on which there were few credit insurance contracts.

“Chrysler looks like a simple two-car funeral compared to the traffic jam of assets and liabilities and contracts at GM,” said the credit research boutique CreditSights. “Chrysler provides limited parallel.”

Copyright The Financial Times Limited 2009

http://www.ft.com/cms/s/0/1e2bf9ea-3e54-11de-9a6c-00144feabdc0.html