Cerberus Still Seeking to Privatize Profit, Pass on Risk?


Cerberus appears to be seeking to capitalize on the woes of the auto industry to do two things: first help its Republican buddies break the UAW, and after doing so, pawn off its unwanted "investment" in Chrysler onto the same union. I’m not sure I understand all the steps in this process, yet, but here are three data points.

Cerberus Protects Client Retirees But Not Chrysler Retirees

Let’s start with Cerberus’ statement on Friday in response to the bridge loan announcement. It celebrates the bridge loan as an opportunity to wring concessions from two stakeholders: bond-holders and union labor.

In addition to this, Cerberus believes that concessions by all relevant constituencies will be required to facilitate a full restructuring and recapitalization of Chrysler. In order to achieve that goal Cerberus has advised the Treasury that it would contribute its equity in Chrysler automotive to labor and creditors as currency to facilitate the accommodations necessary to affect the restructuring. Unless Chrysler’s labor costs can achieve parity with the foreign transplants, and without the restructuring of Chrysler’s debt, Chrysler cannot be restored to long-term health and the government loan will be unlikely to be fully repaid.

As seems to be true of all Republicans talking about concessions from stake-holders, Cerberus fails to mention any concessions from dealers, a critical requirement for any successful restructuring.

But what I like best about Cerberus’ statement (as in, like not at all) is the way it excuses its unwillingness to put any Cerberus money into Chrysler by appealing to America’s retirees.

Cerberus’ investors are comprised of pension and retirement plans (including funds invested for teachers, organized labor and municipal employees), charitable and educational endowments, fund-of-funds, and individual family savings. Cerberus is, therefore, entrusted with the life savings of many retirees, teachers, municipal workers and ordinary citizens.

As I’ve suggested, one of the two ways the UAW can meet Bob Corker’s Cerberus’ demands is to agree to allow Chrysler to renege on its promises to Chrysler retirees.

In short, Cerberus is pleading that it may require UAW retirees to give up their pensions because it must protect the pensions of other retirees. For some reason, Cerberus must have thought that logically inconsistent argument would nevertheless be more persuasive than admitting it might demand UAW retirees to give up a piece of their retirement so as to protect the current earnings of John Snow and Dan Quayle.

Cerberus Hopes to Use "Bailout" to Bail Out of Bad Investment?

Note, meanwhile, Cerberus’ agreement to put up equity in Chrysler in exchange for the concessions from labor and bold-holders. Now, we should have anticipated this. After all, Bush’s loan offer required that the UAW accept half of its VEBA payment (VEBA is the fund negotiatied in the last UAW contract that the union will use to pay for retiree healthcare) as stock and it required that bond-holders accept equity for renegotiating the debt.

Targets: The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:

  • Reduce debts by 2/3 via a debt for equity exchange.
  • Make one-half of VEBA payments in the form of stock.

Chrysler, of course, has no publicly traded stock, so the only way the UAW can accept "stock" in Chrysler is by taking an equity share of it. (Can some financial whiz explain how the UAW is going to use equity in a company that no one wants to buy to pay healthcare costs?)

But, as this article CTuttle linked to makes clear, Cerberus is thinking big.  It doesn’t want to give just some of its stake in Chrysler to the UAW and bond-holders. It wants to give all of it away.

Cerberus Capital Management LP, Chrysler LLC’s majority owner, said it plans to give its stake in the Auburn Hills automaker to unions, debtholders and other stakeholders in exchange for concessions, paving the way for Cerberus to exit Chrysler’s automotive business — though it is unclear if labor and banks would want the company.


Aaron Bragman, an industry analyst with IHS Global Insight, said there is no indication that unions or banks holding Chrysler’s debt would want an ownership stake in the automaker.

"It looks like Cerberus is washing their hands of Chrysler’s automotive business," Bragman said.


The move to give up its equity in Chrysler could be a sign of just how difficult it would be to successfully sell Chrysler, which earlier this year had been in merger talks with General Motors Corp.

"Given this market, nobody has the cash to spend on it. Not only that, Chrysler is a company that is at risk. Their scope is very limited," Bragman said. "They have North America and basically nothing else. Their North American share is shrinking.

The only thing Cerberus had to give, apparently, was to backstop the government loan with $2 billion in proceeds from Chrysler Financial (and note that Chrysler–not Cerberus–is the recipient of the loan).

Cerberus is pleased that the Department of Treasury has delivered its proposal to provide assistance to Chrysler in the form of a $4 billion secured loan to Chrysler Holdings, LLC the proceeds of which will be made available to Chrysler LLC.


In connection with the loan to be provided by Treasury, Cerberus has agreed to utilize the first $2 billion of proceeds from Chrysler Financial to backstop the loan allocated to Chrysler automotive.

Again, I could use the help of financial whizzes in understanding this, but did Cerberus basically offer to risk $2 billion in exchange for freeing itself of its crappy investment?

Retaining Nothing But the Finance Arms

Of course, Cerberus doesn’t want out of Chrysler entirely: it still intends to keep Chrysler Financial.

Cerberus is not putting up its stake in Chrysler Financial.

Meanwhile, GMAC–which is 51% owned by Cerberus–is working overtime to get rid of its mortgage arm, while at the same time tapping into taxpayer funds.

 As a crucial deadline nears, GMAC LLC may be using complex financial instruments in a daring gambit with bondholders.

If the gambit pays off, it could mean that GMAC will succeed in raising the amount of capital it needs to become a bank holding company. A bank registration by GMAC, co-owned by General Motors Corp. (GM) and an investor group led by Cerberus Capital Management, would give the lender access to federal funds at a time when it has no alternative funding source.

Moreover, even if the gambit were to fail, GMAC would succeed in severing links between its ailing mortgage unit and GMAC Bank, GMAC’s prized possession.

Now, given the work that masaccio has done on Credit Default Swaps (here, here, here, and here), you may be alarmed to know this is a big game with CDS. I’m hoping that masaccio shows up before the Stillers beat his Titans so he can explain the rest of the article. Best as I can decipher it, GMAC (that is, Cerberus with some help from GM, led by Ezra Merkin, who is tied to the Madoff swindle) is trying to use the CDS market to split off the crapp(ier) part of GMAC and keep the rest.

Upping the US Taxpayer Stake in Finance in the Guise of Restoring Our Manufacturing Base

Before I try to grasp what all this means (and I’m really not sure I get it), let me just say that I asked some people who should know what the bridge loan means financially, yet they have no clue as of yet. In other words, no one outside of Bush and his cronies–which just happens to include top Cerberus stakeholders–really know what this means or how it will be implemented.

With that reassuring point in mind, here’s what I understand this to mean:

  • After some high-level lobbying from his buddies at Cerberus, Bob Corker crafted a deal that will legally force the UAW to both agree to cut members’ wages and then take Cerberus’ unwanted investment off its hands. The resulting company will be even less able to attract new credit than it was earlier this year, which means after it survives into the first months of Obama’s Administration, it’ll be faced with an even greater crisis. And, it will no longer have one entity (like Cerberus) working to sell it whole to some other entity, which needs to happen to save it. In short, the UAW and bond-holders will basically be forced to cannibalize it Chrysler to try to suck some value out of it.
  • Cerberus, meanwhile, will take at most a $2 billion hit (which is not all that much, considering), while still being able to keep the profits on the outstanding loans from Chrysler car owners and dealers.
  • Meanwhile, an entity that is majority-owned by Cerberus is making a wild gamble to be able to suck more from the federal teat. The move itself–making GMAC a bank so as to be able to free up some credit–makes sense on paper. But it will be done by a company whose majority owner appears to be conducting a massive scam on taxpayers.

Like I said, I could be totally misreading this. But it sure looks like Cerberus is in the middle of conducting a massive scam on the federal government.

71 replies
  1. PJEvans says:

    Cerberus’ investors are comprised of pension and retirement plans (including funds invested for teachers, organized labor and municipal employees), charitable and educational endowments, fund-of-funds, and individual family savings. Cerberus is, therefore, entrusted with the life savings of many retirees, teachers, municipal workers and ordinary citizens.

    [my bold]

    So every other group whose pension plans include Cerberus is entitled to protection, but not the UAW?
    I think I’d start yelling ‘discrimination’.

  2. BooRadley says:

    If anyone knows of any progressive blogs in Indiana, Quayle’s home state, please forward this to them. It would be terrific to get big dailies in Indiana covering Dan’s pillaging of the taxpayers.

  3. Arbusto says:

    I’m confused on your take of GMAC Bank. I thought they were already constituted as a bank. I wonder how much they got from TARP or the FED and how that figures in GM’s future?

  4. Gerald says:

    Off Topic, though commented on before.

    ”Internet cables out again from US to Asia this time.”


    ”Interoute, the internet networks company, reports that three of the four internet sub-cables that run from Asia to North America have been damaged, according a post just published to the Times Online’s Tech Central blog.

    The cables carry more than 75 percent of traffic between the Middle East, Europe and America. Clearly, if you’re reading this, it hasn’t reached you yet — but the AP is reporting mass outages in Egypt as of an hour ago…”

    My own comment is once again: no US Submarines were involved.

  5. scribe says:

    EW, you note:

    But it sure looks like Cerberus is in the middle of conducting a massive scam on the federal government.

    Sounds about right. If they keep it complicated enough, they can make it look good.

    Let’s just remember – Cerberus got into owning Chrysler when Daimler had to dump it because they couldn’t make the merger go. IIRC, that was largely because of … the legacy costs, which issue has not been resolved. This proposal looks to stick the legacy costs onto the people to whom the legacy costs are owed, without giving them any means of paying those costs.

    In other words, it is just like what often happens in serious-injury cases, where someone who caused the injury is uninsured. The plaintiff sues, the uninsured defendant defaults (i.e., allows judgment to be entered without a fight), a huge judgment is entered against the defaulting, uninsured defendant, and the plaintiff gets a piece of paper saying he’s owed a large number, by some guy who doesn’t (and will make sure he won’t, ever) have two nickels to rub together. That, of course, is no help to the injured plaintiff and is, in reality, an insult.

    In passing EFCA, we need to repeal Taft-Hartley. Period. Nothing less. And then the unions need to ram their organizing down Cracker Corker’s throat.

    • bmaz says:

      when Daimler had to dump it because they couldn’t make the merger go. IIRC, that was largely because of … the legacy costs, which issue has not been resolved.

      Well, that, and the fact that nobody, and I mean nobody, was buying their cross platform vehicles (really, you ever see Crossfires on the road?). The whole idea was to get some of Chrysler’s mass production capability and integrated parts suppliers involved in Mercedes, and some of Mercedes quality involved in Chrysler. Turned out that Mercedes couldn’t use any of the production engineering and the Chrysler parts were shit; and on the other end, they did get some extra quality into Chrysler lines but still nobody was buying them. Epic Fail.

      • earlofhuntingdon says:

        Agreed. I would add that few inside Detroit bought the pablum that Daimler-Chrylser was a “merger of equals.” That was intended for a few middle managers that couldn’t be made redundant, for Wall Street, and for the communities that would be most directly affected by Chrysler becoming Kreissler.

        It was always a takeover, full stop. Chrysler would have become the US marketing arm of DB, with local assembly, marketing and distribution, plus responsibility for a few, “local market” vehicles, most legacies. Design and engineering, finance, and all other big ticket decisions were moved to Germany. DB couldn’t make it happen, always a problem when trying to do what you promised you wouldn’t, and walked.

  6. MadDog says:

    …Again, I could use the help of financial whizzes in understanding this…

    You and me both!

    …Like I said, I could be totally misreading this. But it sure looks like Cerberus is in the middle of conducting a massive scam on the federal government.

    The scamsters would say that they’re merely taking advantage of US rules and regulations as a due diligence requirement to their shareholders.

    Translation: We don’t steal from the poor ’cause they ain’t got no money.

    So that statement of:

    …Cerberus has advised the Treasury that it would contribute its equity in Chrysler automotive to labor and creditors as currency…

    Can be translated as the equity is worth zero (and perhaps less than zero), but out of the cold black ice of our Scrooge-like heart, we’ll give these poor orphans this second-hand toilet paper gratis.

    Now when it comes around to tax time, be sure that Cerberus will claim the equity given away as worth tens of billions, and will use the charity donation/loss line item as a means to shelter massive amounts of profit just like all their other corporate brethren do.

    Nextly, I particularly like this part:

    …In connection with the loan to be provided by Treasury, Cerberus has agreed to utilize the first $2 billion of proceeds from Chrysler Financial to backstop the loan allocated to Chrysler automotive…


    Cerberus has agreed to take half of the TARP money given to Chrysler Financial (Cerberus itself) by the Federal government and loan it at exorbitant interest rates to Chrysler Automotive (Cerberus itself) and should Chrysler go belly up (as Cerberus expects) and be unable to repay the loan, the Federal government will step in as insurer of the loan and repay Cerberus at its usurious interest and then Cerberus will take the interest profits for itself and use the remainder to repay the Fed loan.

    Scam you say? Conning free money out of the Federal government and all the while pretending to be helping while you strip the corpse naked? Only the reality-based community cynical would ever think so.

  7. earlofhuntingdon says:

    A foolish consistency is the hobgoblin of the Left, not those spending their own money. Cerberus is a predatory lender. It maximizes its wealth the same way the owner of the Tribune attempted to do so: by making its targets pay for the costs of their own destruction. It overloads them with debt, which becomes “profit” in Cerberus’ jaws. It persuades others, typically governments and other stakeholders, like unions or managers, to immunize it from or to pick up the costs and liabilities for the depressed businesses it buys on the cheap.

    Bankruptcy is its friend, because it assists in that process of offloading liabilities onto others. That is, when the system works and the overall economy is functioning well. That’s not happening now, so it’s time for Cerberus’ creative thinkers to put on their thinking caps.

    Key to that strategy of offloading liabilities (including emissions, mileage targets and environmental clean-ups) is having Washington in your pocket. Big Auto used to be one of the most GOP-committed and friendly industries in existence. Bush’s former White House chief of staff, Andrew Card, was GM’s former Washington lobbyist. Based on Rick Wagoner’s reception in DC and with the MSM, I’d say those days are over.

    But Cerberus remains heavily invested heavily in Big Auto legacies. Apart from Chrysler and GMAC, it owns a de facto controlling interest in Delphi, the former GM subsidiary, and the once and future king catfish of automotive suppliers. It’s has been in bankruptcy three years and counting, a history that might shed light on Cerberus’ strategy now.

    That purchase might have started out as a typical buy, “fix” (i.e., gut) and sell back to a weary management and ignorant public. But it ended up down the rabbit hole, twisting among UAW negotiations, a general and specifically automotive downturn, and a global financial meltdown. That makes its investments harder to reorg or sell, and their liabilities harder to offload. The near-collapse of all of Big Auto turns it into a cat’s cradle: the whole thing needs to be dealt with or unwound, or it becomes an unusable, unsellable knot.

    So to add to EW’s list of possibilities: If Chrysler has no future, who better to blame for its demise, who better to own it as it goes down, than the UAW? Who would suffer most if it were sold to Shanghai’s SAIC for a few hundred RMB and a few jobs promises than the UAW?

    If Chrysler were to restructure as a going concern, would it be more likely to get government funds as a Cerberus/GOP-backed business or one owned by the UAW and few DFH’s? If the UAW can’t get government money, that leaves more for Cerberus. So, too, winding up Chrysler would be messier than Robert Maxwell’s bankruptcy. Tax revenue and employment promises to hundreds of communities would go fffft. It would be excruciating and costly; its administration would consume whole management careers. Not a productive use of Cerberus’ talent or “badwill”.

  8. dakine01 says:

    Like I said, I could be totally misreading this. But it sure looks like Cerberus is in the middle of conducting a massive scam on the federal government.

    And conducting that scam with the full support of the current administration it appears.

  9. GabrielOak says:

    Thanks for the usual excellent post on the state of play of the Car World and the same goes for your other posts. I haven’t been reading FDL, EW, or other blogs nearly as much as I used to, but it’s nice to know you are doing the same excellent work as always. Merry Christmas!

  10. emptywheel says:

    You know what really fries my ass about this?

    Cerberus is NOT saying, “We want to give up our equity in lieu of paying our debts to the UAW and to bond-holders.”

    It is saying, “we want to give up our equity in exchange for concessions.”

    Or, loosely translated, “We want to pawn off Chrysler on UAW but first we will do the work of Republicans who are intent on breaking the union.”

    If Cerberus is getting out of the auto industry, why should it CARE what the UAW makes? Aside from the fact that it is led by a bunch of ideologues, I mean.

    • readerOfTeaLeaves says:

      Well, if you never sully your hands with what it takes to produce and distribute, and all you’ve ever done is move money, look at balance sheets, and ‘raise capital’, why would you be troubled by lives you neither know about, nor care about?

      These people live in a bubble.
      And they don’t have the stamina nor the balls to face that fact and consider what it means, because it works so well for them.
      Why would they trouble their lovely lives, which they view as inconvenienced by people who (a) “never even went to college”, or (b) do “manual labor”? They don’t think these people have any kind of power to stop them, so why would they pay an instant’s attention?

      • PJEvans says:

        That sounds like the group that was running – and may still be running – the local train station. They didn’t see why we thought keeping the coffee places (and its chairs and tables) was important, because ‘nobody’s up before 9 am’. They got schooled – the then-owner of the coffee place called in a reporter, so it showed up in a local newspaper (we were proposing a sit-in: BYOSeat). The person who was behind the whole thing is now pretty much out of politics: overstepping in that job by a lot, and unable to convince voters to put them on the city council.

    • earlofhuntingdon says:

      One reason is that Cerberus needs “cover” to get out. The three rules of bureaucracy are that there’s no problem; it’s never your or your boss’ fault; it was your internal opponent’s fault, so s/he and her/his department should be cut.

      The stuff left behind in Detroit will smell like the Potomac for years and take longer to clean up. It needs to be seen as someone else’s problem, one that Cerberus tried its darndest to fix. That meme also seems intended for its investors, who need some comfort that walking away from a $2 billion investment is the least expensive end to a bad investment. From their perspective, trashing the union is always a welcome salve.

      I also don’t think Cerberus will walk away from automotive, just from Detroit. It has connections with the Chinese and others and will want to grow them. Besides, if it keeps any auto or auto suppliers, it will need someone to sell to. Not to mention that dissing an “anchor tenant” union like the UAW cripple others. That would depress employee compensation and leverage in any other depressed company it buys, and there are likely to be lots of candidates.

  11. readerOfTeaLeaves says:

    Best as I can decipher it, GMAC (that is, Cerberus with some help from GM, led by Ezra Merkin, who is tied to the Madoff swindle) is trying to use the CDS market to split off the crapp(ier) part of GMAC and keep the rest.

    And then, as EOH points out, use bankruptcy to offload any ‘problematic’ financial problems.
    And as scribe points out, come in at tax time for Part 9 of its financial killing.

    Amazing comments on this thread.
    So sad if masaccio’s Titans go down to defeat (sympathies to JThomason, as well), but I sure would love to get his take on all this — and thx to all here who help to enlighten.

  12. rosalind says:

    OT: for bmaz, and other stevens’ trial followers. h/t mudflats blog:

    “Whistle-blower adds twist to Stevens case.”

    A whistle-blower inside the Justice Department has accused members of the team investigating public corruption in Alaska of official misconduct, according to the judge who presided over Sen. Ted Stevens’ trial in Washington, D.C.

    ADN story

    • MadDog says:

      …when Bradbury wrote…

      Oops, my bad. Twas written by Michelle Boardman, Deputy Assistant Attorney General.

      I jumped the gun in assuming the 1st paragraph mention of “See Memorandum for Steven G. Bradbury, Principal Deputy Assistant Attorney General, Office of Legal Counsel, from Roger C. Adams, Pardon Attorney (June 1, 2005)…” indicated that Bradbury wrote this OLC opinion.

        • MadDog says:

          I have zero clue.

          I’m trying to figure out whether it had to do with a pre-emptive pardon of Scooter in order to allow him to continue to commit crimes for Deadeye and Junya as an executive branch employee, or perhaps the hiring or continued employment of Iran/Contra criminals like Elliot Abrams or John Poindexter.

          And coupled with a pardon, the expungement of their executive branch records documenting the crime.

          This OLC opinion is misleading to a certain extent. While it says that a pardon does not expunge, it does say that the President, as head of the executive branch, may order separately that executive branch records of crimes be expunged.

          • skdadl says:

            Well, why it was written would be one question. Why it is being released now and to whom is another. Where did you find it? (Am I being thick?)

          • emptywheel says:

            I have to go read the opinion in detail. But I don’t think it has to do with Libby. It came from the pardon attorney, who was not involved in Libby’s case.

            Maybe Abramoff or someone like that? That would work better on timing, too.

            • MadDog says:

              I was checking your list of timelines to see what was going on. The Disappearing White House Emails Timeline has some interesting confluence of dates:

              From the OLC opinion, they mention “Memorandum for Steven G. Bradbury, Principal Deputy Assistant Attorney General, Office of Legal Counsel, from Roger C. Adams, Pardon Attorney (June 1, 2005)” (my bold) in the first paragraph which corresponds with a period when White House emails were mysteriously disappearing/not being archived (expunging records?) and the fact the White House OA did not “discover” the emails were missing until October 2005 (and funny that Scooter was indicted that very same October 2005).

              And wrt Libby and a pardon, it may be that certain parties in the White House, or more probably, the Executive Office of the VP, were contemplating whether a pre-emptive pardon of Scooter would work as a means to pull the irons out of the fire, and secondarily, allow the White House to “expunge” records of certain deeds.

              Just playing here with my tin foil conspiracy hat. *g*

              And lastly btw, did you know that your Ghorbanifar Meetings Timeline link goes to a 404 – page not found?

        • MadDog says:

          And btw, the OLC released 8 previously unknown opinions on 19 December, 2008 as you can see here: What’s New at OLC

          Why the OLC continues to hide all of these opinions, which seem to have no particular reasoning behind their secrecy, is not known other than secrecy itself is considered a virtue by all the denizens of this Administration.

          • skdadl says:

            Sorry. We cross-posted — you’ve answered at least some of my second question.

            The OLC — what an interesting place to work that must be.

  13. masaccio says:

    Part of this has to do with the CDS question. This transaction is a perfect example of what people mean when they say that the CDS market is opaque. No one really knows who holds the things, or what their interests might really be.

    I’m not sure but I think the original deal was the exchange of bonds of GMAC and the Resolution Capital unit (the mortgage unit stuffed with subprime mortgages and other junk) for debt issued by the new bank holding company. For some reason bondholders of both units don’t like the deal. It looks like the change to the deal is that originally the mortgage arm and GMAC would jointly own the new bank holding company. Under the new deal, the mortgage arm gives up its stock in the bank holding company, and gets at least 25% of the bonds exchanged for bank holding company equity.

    If I have a bond of Resolution Capital and a CDS, under this deal, according to the CNN article, I will wind up with a Holding Company bond, and my CDS is “rejiggered” in accordance with its terms, but covering the new bond. This makes the deal sweeter for Resolution Capital bondholders. It also means that the Resolution Capital is more likely to be able to handle its remaining debt. It may be able to limp along for a good while with the lower debt service requirement, and that might mean that the CDS will expire. They typically are written for terms of 5 years. That is additional incentive for some holders of the Resolution Capital bonds to exchange. Also, I still have counterparty risk if I don’t exchange, that is, I have to hope the seller of protection has enough money to pay off if the bonds crash.

    Also, if you are a seller of protection, it may make sense to try to buy up ResCap bonds to tender. If you think you will have to pay off on the ResCap CDS eventually because ResCap will file bankruptcy, the value of the ResCap subprime portfolio will set the amount you have to pay off. If you think the GMAC bonds are likely to be worth more when ResCap fails, you are better off. You might even make a profit.

    But who knows? Maybe the geniuses of Cerebus know something we don’t know.

    • masaccio says:

      I meant to mention that the number of outstanding CDSs on Resolution Capital has dropped from 7,093 in late November to 4003 at Dec 12, according to DTCC. That may mean that a lot of sellers of protection are buying up the bonds to exchange with GMAC, and closing out their contracts. Or it may mean that a lot of the contracts were closed out by netting. Who knows?

  14. masaccio says:

    By the way, what’s all this trash about the Titans losing?

    What was that roar from Nashville?

    13-2! Home Field!

    • emptywheel says:

      They looked great today. Which is good. They hadn’t been as sharp in the last few games, and they gotta go smack Peyton around next week to go out on a high before they take their week off.

      Remember, last couple of years, that bye week has hurt teams.

      • masaccio says:

        I’ll take a good win. The Titan defensive line is really fast, and dominates even without Albert. The offensive side? Borrring but good enough.

        Did I mention 13-2? Oh yes, and Home Field Advantage?

  15. rwcole says:

    These automakers can’t make money unless people start buying cars- they CANNOT save their way to greatness and they know it. The gooper union busting bullshit is transfer behavior– they keep getting their clocks cleaned- so they want to go out and clean someone else’s clock.

  16. punaise says:

    OT follow-up

    Clueless SF gadfly/spotlight-seeker/name-dropper/washed-up politician Willie Brown can’t resist inserting himself further into l’affaire Blogojevich:

    I got a call from Illinois Gov. Rod Blagojevich the other day. The first thing I said to him was, “You know, this call is probably being taped.”

    Blagojevich said he had read my column in The Chronicle last week, in which I raised questions about the “pay to play” charges being leveled against him in connection with his pending appointment of someone to fill Barack Obama’s now-empty U.S. Senate seat.

    I think he liked how I raised questions about the timing and manner of U.S. Attorney Patrick Fitzgerald’s decision to charge him over what appears to be little more than loose conversations he had with his staff.

    He laughed, we talked, and all in all he seemed in pretty good spirits for a guy looking at federal charges.

    I wouldn’t bet on him stepping aside anytime soon. If anything, his hand is getting stronger by the day.

    I can’t go into details, but …

  17. SaltinWound says:

    I really don’t like this version of Dick Cheney that seems to be cutting loose and having a good time in his final days.

  18. alank says:

    From the wayback machine:

    Eric Feldstein, GMAC’s chief executive, said the company made great strides during the first half of 2007 to stem losses from the troubled residential mortgage unit. GMAC’s exposure to the subprime mortgage market caused the company to post a $305 million net loss during this year’s first quarter. “The net losses incurred by ResCap continue to constrain GMAC’s bottom-line profitability,” he said in a statement. “But we are encouraged to see that the aggressive risk-mitigation initiatives implemented in the first half of this year have reduced ResCap’s losses – quickly and significantly – despite increasing challenges in the U.S. mortgage market.”

    In November 2006,GM sold 51 percent of GMAC (which includes auto-loan, mortgage and insurance units), to a group led by New York-based Cerberus Capital Management LP last year to raise money for its restructuring and help GMAC get a higher credit rating.

  19. alank says:

    So, the mortgage side of GMAC has been the drag factor. A company that makes a living buying stuff with borrowed money is not really in a position to be of any help to the auto company. They’re business model comes down to “take the money and run.”

  20. alank says:

    Another item:

    With its GMAC stake, Cerberus also got one of the largest subprime players: a lender named ResCap Capital.

    Cerberus, along with Citigroup and Aozora Bank, acquired the GMAC stake in November for $7.9 billion.

    The deal seemed a masterstroke at the time: GMAC parent General Motors, reeling from troubles at its core auto unit, got billions in cash and dividends from the deal.

    Cerberus, meanwhile, scored what was seen as one of the crown jewels of the financial world, an asset that reliably threw off billions in cash and earnings.

    But ResCap could sharply reduce GMAC’s luster. ResCap has $57 billion in subprime loans on its books as of Sept. 30, or a staggering 77 percent of a $73 billion portfolio.

    For Cerberus investors, it’s scary enough that giant mortgage lenders like HSBC were bloodied from greater-than-expected losses in subprime surprises. But a look deeper into ResCap’s financials indicates their prime business has no shortage of risks.

    At the end of September, ResCap was carrying $8.8 billion in mortgages generally viewed as nontraditional. It also had another $7.5 billion in prime second lien loans, which are used in home-equity loans and widely seen as risky.

    Wall Street, meanwhile, is waking up to ResCap’s risks. Late last week, a Lehman Brothers analyst argued in a statement that GMAC might have to reduce its book value by up to $950 million because of mortgage delinquencies.

    If Cerberus’ consortium used standard financing, then the consortium likely put up around $1.58 billion in equity. If GM takes a write-down of $900 million to $950 million, Cerberus and its investors might have to write down up to $990 million – more than 50 percent of the initial equity investment.

    Cerberus did not respond to repeated calls for comment.

    • readerOfTeaLeaves says:

      Alank, I’m still over reading comments at the link you posted and if the blurry images starting to morph in my mind and burble and dart around are even half correct, you strike me as a f*cking genius, which is intended as a compliment.

      More later…

    • readerOfTeaLeaves says:

      Want to bet its worse than the numbers reported?
      So Cerberus bought 51% of GMAC in Nov 2006, thinking they were The Smartest Guys in the Room II.
      GMAC contains a great deal — billions and billions of toxic CDSs, billions of which represent absolutely **nothing**. Like a Seinfeld joke, except that they really, truly, genuinely represent nothing more than the toxic paper on which they are printed. There is no underlying asset; no house, no strip mall, no property. It’s a paper contract used to ‘leverage’ debt.

      And who did they purchase the CDOs from…? Paulson’s old Wall Street firm of Goldman Sachs? Or Citigroup? Or a variety of CDO sellers, including AIG?

      So Cerberus, stuck with the toxic debt worth magnitudes more than the assets (when those existed) and the ‘paper’ (when the underlying assets did not exist) needed a bailout to cover it’s bets, at the same time that it desparately needs/ed to unload its toxic mortgages.

      They need to unload the bad loans to someone — anyone!
      And they need ‘liquidity’ to cover swaps they’ve already made and need to pay out…?

      Is this correct?
      Anybody know?

  21. wavpeac says:

    Well, finally I am not alone…now all of us are being screwed royally from this totally dirty, law breaking group!!

    When I was going through this stuff, I just kept thinking “where is the law in this”?

    When are we going to fight this disgusting crew back and hold them accountable?

    I know it’s complicated. I know, I know, I know!! But geesh…I can’t stand to watch this crap.

    • masaccio says:

      wavpeac, I was thinking that you were ripped off by the mortgage arm of this business, now known as ResCap or Resolution Capital llc

      Now it looks like that company is dragging down the entire deal trying to turn GMAC into a holding company.

  22. JohnLopresti says:

    Slightly on-topic: skimming Cerberus site’s portfolio of clients yielded some pretty opaque finances for one entity, maybe they ‘took it private’. guess the message is go study sovereign funds; it was a textile trade company, competition in PRofChina if one is to read the saccharine prospectus from 2006, the client co, that is, not Cerberus.

    Glimpsed in the foliage: Κήρβερος Cerberus, Ψυχή Psyche, Ὀρφεύς Orpheus, Ἡρακλἣς Heracles; you see, there are several versions of Κήρβερος one with the standard three heads plus a serpent tail, another has fifty heads but those storytellers worked on a rote basis, Ψυχή brought honey cakes to Κήρβερος to appease his national security of Hades consciousness, while she tricked him by sending an eagle to get some cosmetics inside hell. Ὀρφεύς simply twanged a blues tune and Κήρβερος seemed to think 12-bars sufficient to let the fool check out hell for himself, Ἡρακλἣς kind of did a Jesse Ventura rhino lock on Κήρβερος, but that is another tale. Must be some way to understand what Cerberus does guarding the gate of Hades.

    OT+1: Can’t find link but CIA recently decided to rule some Church committee documentation needed more archival time to achieve the perfect mellowing of aging, until 2050; MadDog’s WaPo link to the Nara Crew NatArchive* suit to shed sunlight on ovp papers seemed a little too close to its sources of information to provide lucid explanation, other than the appearance that some stuff might get stacked on backup tapes a deliberately underpopulated archivist klatch will scrutinize and categorize until sometime after 2013.

    OT-2: WB was famous for driving a jagXKE between home and work, about 90 miles, maybe a halfhour drive if the traffic is lite. I have a lot of respect for him. Somebody needed to get IL governor to lighten up and laugh, Благо к тебе.

    OT-3: Glenn Fine receives NatLawJour award and praise of acluWA-DC. I like the part about Fine’s being skitterish about taking the elevator to anyplace on the top floor of DoJ. Article is by Marcia Coyle publish date tomorrow, posted yesterday.
    *The article covers a diffuse terrain, unsure if NatArch actually is part of ‘teh coalition’ suing ovp.

    • PJEvans says:

      re OT-2
      120 miles, actually, between SF and Sacto, and good luck doing it in less than two hours. 90 minutes – well, it’s not legal, but if you’re at the speed that everyone else is doing, okay, they probably won’t see you.

    • readerOfTeaLeaves says:

      Totally, OT — pushing the envelope here [but to such interesting places!]

      Glimpsed in the foliage: Κήρβερος Cerberus: has some rather unpleasant associations with death. The opening lines of the Iliad go something like, “Menace! Sing, Muse, of the menacing destruction wrought by the unremitting wrath of Achilles, son of Peleus, whose hard-hearted fury resulted in the needless deaths of his fellow men, left on the battlefield to be eaten by dogs and vultures…” Homer was a moralist, after a fashion.

      Ψυχή Psyche: or ‘Soul’, often associated with honey cakes, which would also link her with the Moon. There are associations in parts of the ancient Near East between the New Moon and women baking crescent-shaped honey cakes to entice the moon to return to the sky; there are also notes of women offering the honey cakes to the full moon. Honey was also associated with medicine, as it was used to ‘make the medicine go down’. If you’ve ever had some lovely kourabeties cookies, soaked in honey, these are probably our modern descendents of honey cakes offered by ancient ‘Psyches’ each month.

      Ὀρφεύς Orpheus: the idea that music was ‘a form of medicine’ as a form of ‘harmonizing’ and creating ‘good vibrations’ is quite ancient. Unfortunately, the Pythagorans didn’t write down their [secret] knowledge, but they seem to have definitely linked ‘harmonics’, and music with the concept of ‘healing’ and ‘medicine’. Hence, the associations with harps and cymbals.

      Ἡρακλἣς who held up the heavens has some interesting associations with the Precession of the Equinoxes.
      If you note the location of this constellation near mid-heaven, you’ll see it’s quite possible that it’s in the region where the Pole Star shifted; he was credited with saving the world when the ‘pillars fell’ (the pillars being the preceding Pole Star as the precession shifted things).

      To bring this back round to our current thread topics:

      If the “Pillars of the Earth” on Wall Street have collapsed, and as I look at the level of fraud and greed on Wall Street I’m tempted to hope that they have, what we may have here is an “Economic PREcession”. Now there’s a concept the Dems and Obama should get behind ;-))

      A Precession would be neither a ‘re-cession’ nor a ‘de-pression’, but rather natural shift to a new paradigm; new rules by which to navigate, as it were. The old ways collapsed (as has happened more than once in human history!) and thus we enter a new way of doing things: designate CDS’s no longer legal, and move on.

      As for Cerberus… it can ‘go to the dogs’, which is another way of ‘go to hell’.
      Time for some ‘healing music’ to feed my soul, so it’s off to iTunes for this reader.

      (An eclectic interest in archeoastronomy is not altogether a bad thing… and an economic PREcession might be a chance to improve matters greatly.)

      • EternalVigilance says:

        Thanks for pushing that particular envelope.

        The essence of what we’re seeing is the end of the religion of Capitalism itself (as the last stage of the progression out of Mesopotamia, moving through Egypt, and ending with the stages of Judaism, Christianity and Capitalism).

        This ending was easy to predict, because Capitalism is predicated on the assumption that resources are infinite, human effects are negligible, and all that matters is the insatiable desires of unconnected individuals. It, like cancer, is a system based on permanent growth and a disregard for the effects of that growth on the host body (which is why cancer is such a feared killer in western society, it’s the outprojection at the physical level of the dominant religious process).

        Living, most especially in the sense of “eternal life,” is a process that is sustainable, and what we’re doing collectively isn’t sustainable, so it’s more truthfully seen as actively and intentionally dying.

        (To invoke another story of the week, Capitalism is itself a giant Ponzi scheme – or, more accurately, Ponzi was one of the foretellers of the demise of Capitalism, if one could read those leaves. )

        But since creation and destruction are the same thing (even the Mona Lisa destroyed the white canvas upon which it was painted), we need to allow that which has served its purpose well – Capitalism – to reach its natural goal and die (with our grief, our thanks and our gratitude) before we have a hope of creating what comes next.

        Mythologically, I’d say that Cerberus as a guardian of Capital is wonderfully appropriate – in that Capitalism, and the elevation of Man to God, inevitably leads to death. The symbolism of Cerberus as guardian of Capital is that Capital has already entered the underworld, never to return – and thus Capitalism is already dead.

        Think I’ll play a little Al Hirt as funereal tribute. Thank you, Capitalism, and go with God.

        • readerOfTeaLeaves says:

          Yeah, it’s weird how when you misprice things because you use government to create huge externalities and other fancy non-compete features your entire system goes into collapse.

          Who could possibly have imagined…?

  23. alank says:

    And more recently:

    Much of the surviving regime within the old, failed financial industry is still in denial about its business model, and the government has been stringing it along. Consider what Tom Marano, the CEO of near-bankrupt mortgage company Rescap, said just two days ago at a conference of the Securities Industry and Financial Markets Association. Rescap holds a portfolio of mortgage loans and related securities. “I get calls from people wanting to buy nonperforming [mortgage] loans all the time,” Marano said, “but the problem is that they want 20 to 25 percent returns” on assets that include delinquent loans, after taking a discount for mortgages already far in default. That is, they want to buy the loans at prices low enough that, when they eventually sell them again, the returns will be hefty. Even on portfolios of mortgages whose borrowers are still making payments on time, Marano said, potential customers offer only “80 to 90 percent” of the original face value of the securities, because “they need a higher rate of return.” No thanks, Marano tells them, and waits for the government to buy on better terms. As of Monday, he was hoping that TARP would buy mortgages in his portfolios that were 90 days delinquent.


    Marano is not an aberration. He’s a representative of a dangerous way of thinking. Much of the financial industry still refuses to acknowledge that its business-model failure is permanent. Far too many people seem to consider that failure the result of temporary, extraordinary market conditions that are—to use a phrase that’s now become an unintentionally humorous cliché—worse than anticipated. But the notion that complex financial engineering could make any long-term security always instantly salable and nearly risk-free was one of the roots of this crisis. Acknowledging its absurdity isn’t a matter of punishment or demonization; it’s a matter of making sure that failed ideas stay dead, so that they don’t come back stronger than before.

    But the government has been doing just the opposite. Further, by promising to buy mortgage-related assets, it has given companies like Rescap an incentive to hang on to their bad debt for as long as possible, rather than sell it to those annoying investors offering prices that are too low. And that has delayed what is already likely to be a long, painful recovery.

  24. ezdidit says:

    Looks like they’re angling for a room with a view like Bernie Madoff may get.
    Do they not realize the jeopardy they place themselves in by advocating another ponzi scheme?

  25. plunger says:


    The artifact came in the form of a photocopied booklet with the title The Portable Bloomberg: The Wit and Wisdom of Michael Bloomberg — 32 pages of Bloomberg quips, anecdotes, and aphorisms with occasional illustrations — dated February 14, 1990, when Bloomberg was a much smaller company, and Bloomberg himself a much less visible figure (this was seven years before publication of his book, Bloomberg by Bloomberg, which has a similar, if more sanitized, tone).

    “Make the customer think he’s getting laid when he’s getting fucked,” is the booklet’s first Bloomberg quotation.

    “A good salesperson asks for the order,” went the second piece of purported Bloomberg wisdom. “It’s like the guy who goes into a bar, and walks up to every gorgeous girl there, and says ‘Do you want to fuck?’ He gets turned down a lot — but he gets fucked a lot, too!”

    I read from the booklet: “The three biggest lies are: the check’s in the mail, I’ll respect you in the morning, and I’m glad I’m Jewish.” I said: “He actually said that?”

    Pause. “Often.”

    I read another Bloombergism: “If women wanted to be appreciated for their brains, they’d go to the library instead of to Bloomingdale’s.” And another: “I know for a fact that any self-respecting woman who walks past a construction site and doesn’t get a whistle will turn around and walk past again and again until she does get one.”

    “This is Bloomberg culture,” she said. “You have to understand, Mike is very uncensored.” After a second, she went on: “When Mike says outrageous things, it’s sort of a test. It’s a loyalty test. It’s a bonding thing when everyone laughs. You stop thinking that it might be inappropriate.”

    “Is all of this a direct quote — these are his actual words?”


  26. plunger says:

    Either Cerberus is a compilation of the dumbest motherfuckers on earth OR it is a government shop – assembled under the direction of Shadow Government operative John Snow to gather up the most toxic shit on earth and segregate it from the mainstream criminal enterprise that is the New York Stock Exchange.

    Coincidence Theory just doesn’t explain one enterprise making back to back “investments” in Chrysler AND GMAC, the two worst ideas ever conceived.

    “Incompetence” is used to explain away too many things that have come to pass under this administration. “Conspiracy” is far more likely.

  27. wavpeac says:

    I really think that this has been a perfectly orchestrated economic terrorism. In my view this has been a perfect vehicle to make a point. Better than bombing or killing Americans.

    With tin foil cap on, I wonder if 9/ll was allowed. I wonder if the terrorists (Saudi?) knew that Bushco would go after the money at any and every cost. (would that really be so hard to predict, especially if you have inside knowledge of the bushco clan?) Terrorism at it’s root, is a form of communication. It is a way of “telling” or “teaching” or “validating” certain positions.

    Violence against America and our paradigm of power and control was meaningless, without the finance sector. We in america, don’t really value human life. We value money. We give it lip service, but to any outsider looking at action instead of words, the truth would have been easily seen by our history, our actions, our unrepentant ways, our repeating use of violence and the constant neglect of LIFE for the sake of the almighty dollar.

    We are not, vulnerable to violence, not if the terrorists seek to communicate a message about the evils of capitalism, and greed. Violence only serves to feed that machine in America. (which is part of the lesson many terrorists seek to teach…that america is a Gluttonous and Greedy country). Far better to communicate this lesson by using it against us. By taking the wealthiest greediest souls and turning their paradigm inside out. Yes, it would hurt the poor, but terrorists don’t care about the loss of life or lifestyle. They care about the message.

    The gamblers are running around doing what a compulsive gambler does. They must continue the game, they must maintain the paradigm because with out that paradigm the obsession dies. The obsession cannot die because the nature of obsession is to keep rolling to avoid some truth about life and living that the gambler cannot face. It’s called denial. Compulsions and obsessions cannot continue without denial.

    I believe these folks have been had. (and we are being victimized until we realize that we have to stop enabling the disease.) That is, we have to stop the flow of money into their hands. We have to get ourselves recovered. We must touch base with the things that really matter…and it’s not cars, houses or money. It’s relationships.

    Right now we are co-victims. I fear that the only way to recovery is to detach from my worldly possessions. To “let go” of the “American Dream” and to let those on top face the consequences of their actions. When we save them, to save ourselves…is that any different than the wife of an alcoholic who calls into work for her hung over husband so that he won’t lose his job? It seems to me that in the big picture…regardless of the unions, regardless of the effects, we have to “detach” from the robber barons. We have to be willing to go it on our own without them.

    I think that we can do it. I think the unions can reform. I think that we can develop technology to put the terrorists under by “detaching” from our need for oil. There is much work to be done, and money to be made…but for a more truthful, and effective path. WE need to abandon the path we are on now.

    It’s perfect. Maybe I am giving our enemies too much credit…maybe my tinfoil hat is too tight…it wouldn’t be the first time.

  28. JohnLopresti says:

    PJE, The xke was famous for the tachometer redline equivalency about 140mph, to stay on the safe side. But that was just a phase, and I am sure the more sensible driver prevailed, clearly it has for wB. An assiduously unflattering but full coverage of the pol’s career is available in JanesRichardson’s online work, a little tedious in layout, and inordinately gossipy, but has recorded fairly dispassionately withal some salient points, there, e.g. ch22 and the ch on Unruh are, fortunately, about times past, and paths best traveled only once. I understand the time distance phenomenon in the equation, but maybe the literature at the time in the 70’s simply was typed by some Sacamena kid who always got passed and traveled the same route, rip, qv.

    RoTL, agreed, and thankx for some of the early work; the site I linked is good with text and pointers to the original transcriptions of myth. I think the Cerberus name purposefully selected, and verisimilarly so, at least with respect to the entity I examined, an organization in trouble, whose resolution seemed to be occurring off-books once Cerberus got involved. Though it is only a first impression.

    • readerOfTeaLeaves says:

      think the Cerberus name purposefully selected, and verisimilarly so, at least with respect to the entity I examined, an organization in trouble, whose resolution seemed to be occurring off-books once Cerberus got involved.

      Thx, JL. Like you, I also believe Cerberus’s name quite deliberate and the fact that we even know about them at this point — to say nothing of having John Snow (former Sec Treasury) phoning Paulson (former CEO Goldman Sachs, now Treasury) is significant. And, like so much else they do, ‘off books’ and private.

      So did they think it was some kind of dark humor to claim they guard the Gates of Hell?
      “Hell” being what, exactly?

      The visions of hell that have come down to us – visions of ‘Tartarus’ – almost certainly trace back to slave labor being forced to crawl in mines. “Tar” being associated with ‘tin’ or minerals used in weaponry in the Bronze Age. Also associated with the ancient bull gods (MinoTAUR, TAURus… etc).

      The kingdoms and powers of the ‘bull gods’ seem to have collapsed fairly suddenly, circa 1300 – 1150 BC. Here’s hoping we make a far smoother transition.

      But there’s no reason for us to have to underwrite billions in fraud; the bulls on Wall Street have to answer for their own conduct.

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