Hoffa shows Geithner how to run things

Memo to Treasury Secretary im Geithner: If you want to survive another year in Washington, start channeling your inner Jimmy Hoffa. Yes, Hoffa James P. Hoffa, that is -- the current Teamsters boss and the one man who has stared down Goldman Sachs and the big-money crowd on Wall Street and come out a winner. While our Treasury Secretary has been busy covering the friendly tracks he laid as NY Fed Chief, in recent weeks Hoffa has showed Lloyd Blankfein and Co. who's boss -- and did so without even breaking a sweat. The Hoffa v. Wall Street battle began back in December and received little notice, but taxpayers should pay attention to the kind of deal that can be cut when a tough cookie like Hoffa is driving the negotiations. The dispute centered around YRC, parent company of the Yellow and Roadway fleets, the nation's biggest trucker and employer of 30,000 of Hoffa's union brothers. Loaded with debt, and saddled with a CEO who spent more time on CNBC in recent years than Jim Cramer, YRC was headed for a year-end rendezvous with bankruptcy unless it could convince most of its bondholders to swap their debt for stock. That's a tricky proposition under any circumstances, but YRC had another obstacle to face. Hundreds of millions of dollars worth of credit-default insurance on YRC debt would pay off if the company went bust, giving bondholders an incentive to see the company go Chapter 11. Hoffa understood this and decided to play hardball -- he accused Goldman, Deutsche Bank and a handful of hedge funds of trafficking in YRC's credit default insurance and raised the prospect of his 18-wheelers parked all the way from Park Avenue to Broad Street in protest. He also turned up the political heat with union-connected lawmakers in Washington. In the end, the bullying worked like magic and by Jan. 1, fully 88 percent of bondholders agree to participate in the exchange. Bankruptcy was averted, and Goldman Sachs was eventually praised for helping YRC get "over the goal line" by buying up YRC debt in the marketplace in order to exchange the paper for stock. A triumphant Hoffa called it his "first foray into high finance." Unfortunately, Hoffa looks to have a brighter future in that area than the man who currently commands the US Treasury Department. Compare the YRC drama with the slowly evolving tale of Geithner's role in the 2008 back-door bailout of Goldman Sachs and its subsequent cover-up. You'll see why taxpayers sense something is very wrong about this story, and rightly so. As we're now learning by the day, Goldman nearly bankrupted AIG in the fall of 2008 -- much as YRC's credit default holders almost bankrupt that company last month. The key difference is that in AIG's case, the taxpayer was left holding the bag, while Goldman and AIG live to trade another day. But it gets worse. Not only did AIG pay off those contracts to Goldman and a dozen other banks to the tune of 100 cents on the dollar -- or a remarkable $62 billion -- Geithner's NY Fed insisted AIG cross out any reference to the full price of the payout. As e-mails released by Congress last week show, the idea was to keep the public in the dark. The final cost to taxpayers from the AIG rescue -- $182 billion, or about half of the entire US defense budget. Imagine the bargain Hoffa would have driven home for US taxpayers had he been representing our interests the way he did that of his union brethren. Fifty cents on the dollar? You better believe that would have been at least his starting point. And why not? Those who profited from the government bailout of AIG, led principally by Goldman Sachs, obviously think that the alphabet soup of derivatives were spun in such a fine web that no mere mortal could never grasp what was really going on. But the public is not so naive. Jimmy Hoffa, Jr. understood this and rode to the rescue of his constituents. It's too bad Geithner didn't do the same for his constituents, the US taxpayers.
terrykeenan@email.com