Thursday, April 30, 2009

Chrysler Goes Chapter 11

Chrysler is going to go Chapter 11 , but the real story is how the Car Salesman- in- Chief and the government behaved towards the company's private investors.

During his speech announcing the deal they will take to the bankruptcy court, Obama had kind words for everybody except hedge funds and investors who were holding out for a better deal. He specifically said he did not "stand with" them. This is a president of the United States fronting on the investors who kept the company solvent and had the gall to ask that they be compensated for their investment. The government couldn't even be bothered to listen to their concerns

“We have been forced to communicate through an obviously conflicted intermediary: a group of banks that have received billions of TARP funds,” the lenders who rejected the government offer said.

The holdout lenders -- who said their combined debt holding represents about $1 billion of the $6.9 billion owed to senior secured lenders – struck back at comments from an unnamed administration official this morning that blamed them for causing the imminent bankruptcy. The group said they had offered to accept 60 cents on the dollar, despite “long recognized legal and business principles” that gives senior lenders such as themselves the right to be repaid in full before others recover anything in bankruptcy court.

“Our offer has been flatly rejected or ignored,” the group said. “In its earnest effort to ensure the survival of Chrysler and the well being of the company’s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.”

This is exactly the same garbage that happened with GM, and it reminds me of nothing so much as what I'll genteelly refer to as mafia financing.

Obama received over 50% of GM - a controlling interest - in exchange for forgiving a mere $10 billion in outstanding loans, a loan shark style deal if ever there was one. And the UAW wound up with 39% of the company just for being such loyal soldiers and campaign donors to the administration. And by the way the so-called 'sacrifices' of the UAW the president mentioned doesn't include reopening their contracts.

Just like Chrysler, the private investors, the ones who bought GM's stock and bonds are the ones getting hosed. And if you think this doesn't affect you, think about the effect it's going to have on investors thinking about buying corporate paper in the future.

This is simply socialism ( AKA 'theft') on a grand scale.


GW said...

This is an atrocity, and I don't know why people aren't screaming about this from the rooftops - nor asking why, at his 100 day press conference, asking about this in some specificity. This is being treated in the press exactly the way Obama's association with Rev. Wright was treated - its being substantively ignored.

Good post.

Freedom Fighter said...

Oh, I concur GW...and thanks for the kind words.

Another thing no one is asking is who is going to design and market the new Pelosimobile, or whatever the new wind driven/solar cars will be called?

The UAW doesn't have that expertise and neither do the government hacks now sitting on the GM board.

Like I said a long time ago, Obama's true model
is Tony Blair and New Labour.

Le bon weekend...and nice to have you back.


Anonymous said...

In the article, FF said: "This is simply socialism ( AKA 'theft') on a grand scale."I venture to suggest that you have the closing bracket (parenthesis) in the wrong place. It should immediately precede the full stop (or period).