Obama wants to give 55% of Chrysler to a UAW pension trust fund, 35% to Fiat, 8% to the US government, and 2% to the Canadian government. Obama wants to give only 30% of the face value of secured credit to the secured creditors. This amounts to putting politically favored junior creditors ahead of senior creditors.
The proposal to grant the UAW a large equity stake has stirred concerns among Chrysler's secured lenders. They question why the union should be given preferential treatment when bankruptcy law grants priority to the secured lenders.
Barack Obama the demagogue has decided to blame the secured creditors for the bankruptcy of Chrysler while he basically tries to screw them out of secured assets they rightfully own.
At the same time, in an echo of the tensions that have run high between Washington and Wall Street, the president and his aides blamed the filing squarely on about 20 smaller investment firms and hedge funds. This group voted against the government's last offer to eliminate $6.9 billion in debt owed them.
They "decided to hold out for the prospect of an unjustified, taxpayer-funded bailout," Mr. Obama charged. Rep. John Dingell, a Michigan Democrat, called the holdouts "rogue hedge funds" and "vultures" and said in a statement that they "will now be dealt with accordingly in court."
Obama decided to give the Chrysler UAW retirees a company to use to make money to pay their benefits. Obama's problem was that a large chunk of that company was assets pledged to back up loans. His solution: ignore bankruptcy law and property law and try to force thru his will. He managed to pull this off with those creditors who are banks regulated by governments. But pension funds, hedge funds, and other creditors who are less under Obama's thumb objected to this property steal. They are hoping a bankruptcy court judge will recognize their legal rights.
No one forced Chrysler to put up assets in exchange for loans. Had Chrysler not put up assets as collateral Chrysler either wouldn't have been able to get the loans or would have had to pay interest rates far too high for it to afford. Now Obama is trying to give the secured lenders the big shaft. This is highly unethical.
Which brings us to the real question, which is, when did it become the government's job to intervene in the bankruptcy process to move junior creditors who belong to favored political constituencies to the front of the line? Leave aside the moral point that these people lent money under a given set of rules, and now the government wants to intervene in our extremely well-functioning (and generous) bankruptcy regime solely in order to save a favored Democratic interest group.
No, leave that aside for the nonce, and let's pretend that the most important thing in the world, far more interesting than stupid concepts like the rule of law, is saving unions. What do you think this is going to do to the supply of credit for industries with powerful unions? My liberal readers who ardently desire a return to the days of potent private unions should ask themselves what might happen to the labor movement in this country if any shop that unionizes suddenly has to pay through the nose for credit. Ask yourself, indeed, what this might do to Chrysler, since this is unlikely to be the last time in the life of the firm that they need credit. Though it may well be the last time they get it, on anything other than usurious terms.
In the long run this will make unions smaller. Companies will flee from union areas and will resist unionization attempts even harder. Governments, utilities, and other organizations tied to the region they service will not escape from unions. But mobile companies will move factories and take other measures to make sure that unions do not block their access to credit markets.
The Chrysler episode shows most clearly how far to the left Obama stands. He's revealing more of his true nature.
|Share |||By Randall Parker at 2009 May 03 12:16 PM Cultural Wars Western|