The Securities and Exchange Commission (SEC) is reportedly considering a ban on former auto czar Steven Rattner from working in the securities industry for up to three years. Even if he gets the three years, it would be pitifully short.
Rattner oversaw the bailouts of Chrysler and GM, which were conducted to the benefit of the United Auto Workers. In the GM bailout, billions of dollars were simply stolen from bondholders and turned over to the union-controlled funds.
Rattner has kept mostly mum since he left from his post in July of last year. He claimed that the auto companies were coming out of bankruptcy and his duties as auto czar had been fulfilled. Treasury Secretary Tim Geithner provided this explanation:
Steven Rattner, whose leadership and vision were invaluable . . . has decided to transition back to private life and his family. I hope that he takes another opportunity to bring his unique skills to government service in the future.
But will Rattner be allowed to “bring his unique skills to government service in the future?” Are these unique “skills” the ones that the SEC is currently investigating, such as how to pay off a middleman to secure a nine-digit investment?
The Wall Street Journal first reported the SEC’s complaint back in 2009. Before working in government, Rattner worked for the private investment group, Quadrangle. In October 2004 Rattner solicited then deputy comptroller of New York, David Lolisci for an investment in Quadrangle from the New York State Retirement Fund.
Just over a year later in January 2005, Loglisci organized a meeting with his brother and Rattner. The men discussed a Quadrangle DVD company acquiring the rights to the distribution of a low budget film called Chooch. The makers of the film? Lolisci and his brothers.
Less than a month after the men agreed upon the terms of the Chooch deal, Loglisci informed Rattner that the New York retirement fund would be making a $100 million investment in Quadrangle. Anonymous Quadrangle employees corroborate these findings. Quadrangle says Rattner arranged a payment of $1 million to a middleman to obtain the $100 million investment.
Ironically, Geithner saluted Rattner for the moral equivalent of the activity for which he is now being investigated. Both the auto bailout and the pension retirement deal were based on the sublimation of the public interest to the interests of politically-connected private parties. The SEC can’t do anything about the auto bailout, but it can keep Rattner where he belongs — away from the paper assets of other people.