Wednesday, December 10, 2008

Bailing Out Cerberus . . .

There is a Forbes article by Dan Gerstein on the auto-industry bailout that should be of interest to us: Chrysler's Hidden Coffers - Why is Cerberus, one of the world's richest private equity firms, begging for a bailout?

Buried on the business page of The New York Times Saturday were the details of Detroit's biggest snow job yet--literally as well as figuratively. Turns out that Cerberus CEO John Snow, who spent three-and-a-half lackluster, and some might say lap-doggish, years as President Bush's second Treasury secretary, is leading a who's who of crony capitalists in a lobbying campaign for a taxpayer bailout to "salvage Cerberus' investment in Chrysler."

That's right. Not to save the jobs of Chrysler employees or America's disappearing manufacturing base, mind you, but to prevent
"one of the world's richest and most secretive private investment companies" from having to take a relatively modest financial hit and use some of its own capital to prop up the smallest of the major automakers.
Cerberus is no stranger to the Mohawk Valley, having purchased Remington Arms about a year and a half ago . . . and we gave it a 'bailout' of our own. In an OD headline from from this past April: Aid for Remington could reach $4.2 million - Officials cite 100 new jobs as reason for public assistance. Of course, Remington aid won't counter '07 job losses. Read some of the comments following the first OD story -- pretty interesting insights.

The USA seems to be going the way of New York State, supposedly using taxpayer dollars in desperation to salvage jobs. . . . but in reality simply giving money away to increase someone's profit margin. The results will be the same. The inevitable merely gets delayed. Taxpayer dollars will not change a business model that is no longer viable. . . . but they still can make "connected" people rich.


Anonymous said...

A local example of what you write is the Hotel Utica. To this day, I don't think there has ever been an accounting of what the owners have put in and what they have taken out.

Greens and Beans said...

Again, let me point to “Classical Conditioning.” If government keeps rewarding the failing corporate entities with lucrative taxpayer bailouts, they will keep getting more of the same behavior.

After the financial institutions got their government bailouts, the automakers followed suit. Now, we are beginning to hear rumblings from failing newspapers needing government bailouts. ( Soon, we will see more corporations seeking to put their money grabbing heads in the vast government troughs. (,1000000567,10009307o-2000570206b,00.htm) ( Why is Chapter Thirteen Bankruptcy not an option? (

rmary said...

Cerberus also is 51% owner of GMAC Financial Services with GM being 49% owner. This past Thursday GMAC was putting in their paperwork to be a bank instead of a Financial Service therefore being able to put their hand out for the bank bailout monies.

I find this whole thing outrages! These people would sell their grandparents if they could make a penny.

Anonymous said...

Wow this is really very scary. Congress seems to disregard our interests and entertains these requests. Where else in history has business been improved by delaying "survival of the fittest"?

The economy collapse is just money's reaction to market realities. A natural paring down. Companies that make substandard products or outdated media just die if they don't change. To go broke giving them life support is just as damaging if not more than just letting them go. Sooner or later the economy will recover and fewer people's heads will be in the clouds.