Mitt Romney, who famously authored an op-ed in 2008 suggesting that the federal government should "let Detroit go bankrupt," has been on the defensive in the Midwest ever since President Barack Obama's controversial auto bailout turned the struggling companies around. Political observers roundly agree that Romney's opposition to federal intervention may very well cost him Ohio and therefore the White House.
At Tuesday's presidential debate on Long Island, Romney attempted to recast the story, with himself as the champion of the industry (see the video above), but his comments at the time, recorded for posterity, have made such a reinvention challenging.
But while Romney's political fortunes may have been shorted by the Obama's auto rescue, the bailout was a boon for his personal fortune.
A new report running Thursday in The Nation finds that Romney and his wife, Ann, made at least $15.3 million -- and perhaps tens of millions more -- as a result of bailout funds paid to General Motors. The story, an early copy of which was provided to The Huffington Post, is written by investigative reporter Greg Palast and was backed by the The Investigative Fund at The Nation Institute.
Romney's windfall from the bailout is directly tied to his relationship with Paul Singer, the billionaire hedge fund manager who donated $1 million to the Republican's presidential campaign in April. As The Nation reports, the Romneys invested at least $1 million with Singer's fund, Elliott Management, which is known for investing in distressed or bankrupt companies.
One of those bankrupt companies was Delphi, an auto parts maker that hit financial trouble after being spun off from its former parent, GM. Singer's fund bought up a controlling interest in Delphi for about 67 cents a share on average, The Nation calculates. By last November, Delphi's initial public offering was priced at $22 a share, thanks in part by efforts to cut costs by moving operations overseas and employing non-union workers. Delphi's stock price has continued to take off, with shares closing around $32 as of this week.
But that profit was also greatly bolstered by Delphi's lingering ties to GM, which depended on the company for essential auto parts. The Nation reports:
The Treasury allowed GM to give Delphi at least $2.8 billion of funds from the Troubled Asset Relief Program (TARP) to keep Delphi in business. GM also forgave $2.5 billion in debt owed to it by Delphi, and $2 billion due from Singer and company upon Delphi’s exit from Chapter 11 bankruptcy. The money GM forgave was effectively owed to the Treasury, which had by then become the majority owner of GM as a result of the bailout. Then there was the big one: the government’s Pension Benefit Guaranty Corporation took over paying all of Delphi’s retiree pensions. The cost to the taxpayer: $5.6 billion. The bottom line: the hedge funds’ paydays were made possible by a generous donation of $12.9 billion from US taxpayers.
Since the Romneys had at least $1 million invested with Elliott by the end of 2010, with a third of that portfolio likely in Delphi, The Nation estimates that they made at a minimum $15.3 million off Delphi's resurgence.
As Phillip Martin has previously reported, Romney also profited heavily from the bailout thanks to Bain's investment in Sensata Technologies, which makes electronic parts for cars. He has been able to avoid paying taxes on some of those gains by transferring nearly a million dollars of Sensata stock to his own tax-sheltered nonprofit. Now that the taxpayer has helped save Bain's company, the Romney-founded private equity giant is returning the favor by shutting down an Illinois Sensata factory and shipping the production to China. Some of the 170 workers who are losing their livelihoods have been arrested in attempts to persuade Romney to use his influence to halt the outsourcing. Romney has declined to do so.
The bailout has proved to be a tricky point of criticism for Romney throughout the campaign. While it was controversial at the time, many now credit Obama's decision to continue the rescue program (started under President George W. Bush) with the industry's relative turnaround. Both GM and Chrysler did enter a managed bankruptcy, for which Romney took "a lot of credit" earlier this year. However, he has failed to mention that the companies may not have rebounded without the assistance of massive federal loans.