Class warfare Goldman Sachs style

As Woodie Guthrie noted: when the poor steal the police can be counted on to arrest them but when the rich steal the police can be counted on to back them up.

Here's a recent theft Goldman Sachs style.

Goldman (and some others) takes a public company (Dollar General) private with borrowed money. Now Goldman and partners own it and promptly pay themselves a $239 million dividend (this is the theft right here). They also charge various "fees" during the process. More theft.

Then they sell off the company and make it public again. Same company but now saddled with a big debt load (debt incurred to take it private in the first place, debt incurred to pay the "dividend", debt incurred to pay various fees. Debt incurred to "re-organize" the company.) "Re-organizing" the company is the cover often used to justify these kinds of thefts.

A look at what happens at different places in the food chain makes clear what is really driving the process.

Lets start at the top. Goldman and other members of the group who engineered this whole thing come away with the $239 million dividend, plus the fees they charge, plus whatever profit they made on the sale of the company. Big big winners. Next are the banks who lent the money to make this happen. They probably win as well. There is a risk that some of the money they lent will not be repaid, but chances are that a default -if it happens- would happen somewhere down the line. After they have made *some* profit. It the loans are paid in full they are big winners also. Their position is not as good as Goldman (who has the "dividend" up front, free and clear) but it's good enough. Next is the upper management of Dollar General. They are in good shape also. They get either a nice golden parachute or a nice retention bonus. Then come retail investors who bought stock in Dollar General (or sold their stock to Goldman when it was taken private). Their position is not so good. They are probable losers. Not big losers, but probable losers. They have stock in a company that now has a huge dept load. But no one had a gun to their head forcing them to buy or sell stock in Dollar General so you can't feel really sorry for them.

Left over at the bottom are the losers. The 72,500 employees of Dollar General. They are hammered. They are screwed. Bigtime. THEY are the ones who will feel the austerity that will be necessary to make the debt payments (used to give Goldman their "dividend"). They are the ones who will have to take pay cuts or forgo pay increases. They are the ones who will suffer layoffs so money will be available to pay the debt. They are the ones who will have to work harder with fewer employees doing more things. They are the ones who will have their lunch hour cut down. They are the ones who will have their health insurance cut or be forced to contribute more to health insurance premiums.

THIS is late 20'th (and early 21'st) century class warfare. This unremitting class warfare has been waged by the elite since the early 80's and is THE reason for the increased gap between rich and poor and the disintegrating position of the middle class. Lets go back to Dollar General for a second. It's not just the checkout people and the janitors who are going to get hammered. It's also the department managers and store managers.

Jessee James robbed banks because "that's where the money is". For Goldman, the money is in looting thousands of vulnerable employees.

Notice that we haven't talked about unions yet. The only plausible mechanism for defense against this kind of thing would be a union. It's no coincidence that the American power structure has waged a 30 year war on unions.

Another facilitator of this kind of thing is misuse of authority - which will make for another full post sometime. In a nutshell, Goldman and it's ilk will present themselves as authority figures on the subjects of economics and finance and lecture the rest of us that these kinds of deals are "good for the economy", "good for shareholders" and so forth. They will say something like "it looks pretty bad only if you don't understand how this is good/necessary for the economy."

They are lying. It's only good for them.


http://www.fool.com/investing/small-cap/2010/01/29/avoid-these-cash-machines.aspx?source=ihpdspmra0000001&lidx=9