The Shocking Collapse of America’s Auto Parts Giant

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 Wall Street’s “smartest guys in the room” just lost $2 billion—and called it business as usual. In this episode:

• The stunning First Brands bankruptcy and how billions vanished overnight
• Why “financial engineers” create disasters they don’t even understand
• The same fraud and gimmicks that fueled 2008 are alive and well today
• How auditors like BDO stamped “clean” reports while cash disappeared
• The Apollo Global conflict of interest that reeks of insider corruption

If something doesn’t make sense—it’s probably a scam.

Episode Transcript

Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact that we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst and trader Chris Markowski.

Speaker 2 (00:16):
Collapse of an auto parts giant, First Brands shocking bankruptcy.
Then again a few several weeks ago, we reported on
tri Color and that bankruptcy auto subprime auto lender. I'm
gonna tell everybody something that's kept me, kept my clients

(00:40):
out of trouble, kept us out of trouble. And here's
one to grow on a lot of real they call
themselves real smart people on Wall Street. Oh yes, look
at the degrees on the walls, and look at where
they went to a graduate school and all this frapp

(01:01):
and they come up with all sorts of funky ways
of financing things. They're financial engineers, you see. Yeah, I
guess maybe I'm you know, they try to explain stuff.
I've been in these meetings, you know, various different things
over the years. Not anymore. I don't go to them anymore.
I laugh at the stuff. There's a scene there's a

(01:25):
scene in the movie Big with Tom Hanks and Tom
Hanks is okay, he's a little boy in an adult body,
but he ends up becoming an executive if you haven't
seen the movie. In a toy company and again one
are the Wizards of Smart. One of the Wizards Smart,
one of the the top executives there, ones with the

(01:47):
with the fancy degrees on the walls, you know, real
smart ones. There is basically pitching a toy, pitching a
new toy that the toy company is going to put
out to all the other really smart executives in the room.
And Tom Hanks's character, boy in an adult body, raises

(02:09):
his hand. I don't get it. I don't get it.
Thought the toy that they were pitching was stupid. How
is it fun? Basically went off. I don't get it.
Has served me well, serve me, well, serve my clients, well,

(02:29):
serve my family. Well. If I don't understand it, if
it doesn't make any sense to me, I'm staying to
flip away from it. That's for darn sure. I look
at the financing behind this auto parts giant, this first brands.

(02:54):
Two billion dollars just went missing. How does that happen?
I don't know? It did. So it's like that South
Park skit during the Great Recession.

Speaker 3 (03:05):
And it's gone, two billion dollars gone missing, and you know,
all these various different stories how this is gonna pan out.

Speaker 2 (03:17):
And then again you got others that are blowing it
out of proportion, thinking, oh, this is a Lehman Brothers moment. Now,
Lehman Brothers had two hundred billion dollars and debt. First
Brands got a levered, over levered autoparts company. They got
six billion dollars in debt. And yeah, there's probably fraud
involved with this, but it's Wall Street. When as they're

(03:37):
not fraud involved with something, shouldn't surprise you. Take a look,
read some of the stories. Look at how these things
are structured, Look at how Wall Street puts it together. Again,
this is again all these these really smart, super smart people,
all smart schools, working at ubs and Jeffrey's. You couldn't

(04:03):
see this. I took a look at this and I said,
you've got to be kidnap me. I mean, I want
to say, I mean, I'm trying to figure I mean,
I want to go ahead and borrow, you know, a
couple billion dollars and see what I can do with it.
I mean, are you kidding me? Giving away cash on
walt I don't. I don't understand. I don't understand if

(04:26):
it's an I don't understand how they do. It's it's
how they account for things, how they put these things
on their books. And this is part of the problem.
It's part of the problem with how a lot of
corporate Americas run, how publicly traded companies are run and
based upon next quarters earnings. And we got to beat that.
And we've got to how we go about accounting for

(04:48):
certain things on our books to make our numbers look
better than they actually are. It's some their gimmicks. Quite frankly,
you want to find something interesting about this to b
D oh you here to commercials? Oh yeah, we got BDO. Well,
we we're gonna call BDO accounting consulting firm BDO. I
want to talk about a conflict of interest here. BDO

(05:11):
was first brands. It was their auditor. Okay, right at
this point in time, Okay, if you're utilizing BUDO after
learning this and you still want to use them, well,
you know there's something wrong with your medulla. Oblin, God,
I just got to say that Anyway, they're First Brands auditor. Okay,

(05:35):
issue two billion dollars went missing, yet BDO issues a
clean bill of health. Huh. But what's interesting was is that, Okay,
we want to talk about crooked shit. Okay, Apollo private
equity company Apollo Apollo Global profited by remember those credit

(06:02):
default swaps. Remember credit default swaps. That's just how how
certain investment firms made money selling after selling crappy products
to their clients, then they would buy credit to fault
swaps on the products that they sold, knowing that they
were going to collapse. Well, Apollo did that very thing,

(06:23):
basically shorting synthetically shorting First Brands loans. Now, what the
crooked thing is is that it just so happens that
BDO's largest lender is Apollo. Yeah. Again, by like I said,
I report on this stuff, I have to talk about

(06:44):
this stuff here in the program. And yes, I feel
like I have to take a couple showers extra showers
a day dealing with all of these dirt bags. But again,
this is the reality of the terrain watchdog on Wall
Street dot Com.