Chrysler and President Obama
Posted by Mike Sylvester - 5/14/09 @ 6:14 pm - Filed Under National Politics
As all of you know I opposed the bailout of Chrysler and I wish we would not have spent a single tax payer dollar on Chrysler. I think we should have let Chrysler go into bankruptcy last year.
During the lead up to Chrysler’s bankruptcy President Obama called on the bondholders of Chrysler to make large sacrifices; in fact, he got angry when Chrysler went into bankruptcy saying he felt that a few of Chrysler’s bondholders forced the company into bankruptcy.
President Obama has no idea of what he is talking about; at least as far as this issue is concerned
Consider a couple of facts:
- First and most important is that in bankruptcy the bondholders are protected and they are more likley to recover a higher portion of their investment. That was written into the bankruptcy code on purpose to facilitate the sale of corporate bonds.
- Second President Obama proposed giving the United Auto Workers 43 cents on the dollar on the amount it is owed by Chrysler while at the same time asking the bondholders to accept 28 cents on the dollar. Worse yet his plan offered the UAW a 55% ownership interest in the reformed company; while the bondholders would get effectively no ownership.
As usual I think the government should not be involved with Chrysler at all; however, if they do decide to get involved they should try to structure the deal in such a way that each of the parties that is due money from Chrysler gets a proportional amount of the money they are owed and a proportional ownership interest based on the money they are owed.
President Obama’s plan did not do that at all. It gave the UAW the best deal, gave the Government a decent deal, and screwed over the parts suppliers owed money by Chrysler as well as the bondholders.
Jeff Pruitt had an interesting post a few weeks ago entitled “Stick it to the bondholders.” In that post Jeff correctly points out how the bondholders were asking for far too much. I agree with him; however, the Administrations position offered the bondholders far less than it offered the union and that is simply wrong.
Once again, all of the groups owed money by Chrysler should get a proportional amount of money and ownership based on the amount they are owed by Chrysler.
Mike
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13 Responses to “Chrysler and President Obama”
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You didn’t really think Barry was gonna let the UAW down, did ya? He certainly couldn’t acheive income parity for the masses and stoke the class warfare crap if he didn’t fellate the union bosses once and a while.
Anybody taking Econ 101 as a freshman knows if Chrysler had filed an 11 bankruptcy a year ago, they’d be emerging by now. Instead, we just prolonged it and allowed a few billion more dollars to be flushed down the toilet.
Hope-n-change baby!! Are ya feelin’ it yet??
Just to illustrate some MORE stupidity, I just listened to/watched an interview this morning with a New Jersey Chrysler dealer who’s being axed. He’s in the top 2% of the nation in sales volume and his customer sat scores are too…He’s one of the shining examples of Chrysler and they’re gonna blade him (and his 48 employees) and keep exactly who?
The less succesfull dealers. BRILLIANT, simply BRILLIANT.
I wouldn’t want to jump to conclusions, but I do wonder how the minority dealers are fairing in all this?
The idea that accepted bankruptcy rules could be overturned by executive degree by Obamamassiah is simply ludicrous and another example of our system being destroyed in the name of “fairness and equality”. This is purely and simply a “take from those who have saved and invested and give to those who have consumed beyond their means” !!I fear for our children and grandchildren and our total system of government and economics!! If this is”hope and change”-give me pessimism and the status quo anytime.
I think Ted Kaczynski’s place is still for sale in Montana.
Maybe it’s time to start packing up my guns and bible.
Not sure what an “executive degree” is L Marine, is that like an MBA?
Anyway, bankruptcy courts and rules are ultimately set up by Congress and Congress has the authority to abolish or modify them.
Obama put pressure on the bond holders. They offered to take 50% on the dollar and Obama said the bond holders were not negotiating. Then Obama wanted to know who the bond holders were. Now they are getting nothing. They are not going to fight.
This has now set a bad example for what to do when GM files for bankruptcy.
As I said on October 31, 2008, no bailouts for anyone. It only sets a bad example and will extend the misery. However, Mark Souder said he could not stand by and let America go down the tubes.
The next round of adjustable rate mortgages are set to be reset in two years. Are you ready? That will be the end of 2010 the first of 2011 if my memory is correct. Then we have the long anticipated year in which Medicare’s trust fund is exhausted 2015 followed Social Security’s third series of negative cash flows until its trust fund is exhausted in 2037.
How are you planning to ride this out?
Keith-make that executive decree as in “Obama Order”(coupled with threats of reputation destruction for all who objected).Yes ,Congress makes the laws and can change them but the executive branch just violated our established bankruptcy laws by putting the unions ahead of secured Chrysler creditors.This is clearly anarchy in it’s early stages!! What do you think that will do to the incentive to buy Corporate bonds? We will soon be left with noone willing to invest in US industry except the federal government.Of course,that is what the Socialists(liberal Dems) currently in power really want and are working toward!! I predict that knowledgeable investors will increasingly look to foreign corporations and currencies as the most prudent investments.What do you think that will do to job creation in the US?
The law is clear and applies to all, including the Government unless, as has been noted, the law is changed by Congress. No matter how many of us are in violent agreement about the over-reaching of the Government to destroy corporate governance, and trample rights of bondholders and shareholders alike, none of us have standing in any of these matters. Why isn’t there swift and aggressive legal action by those with standing to overturn the actions of the Government against them? Seems like there is always a lawyer out there to take on a case like this, but I haven’t heard or read a thing about anyone seeking a remedy. Why?
Congress does establish the bankruptcy laws. But one does not file bankruptcy with Congress. It is filed in a Federal Court. Once filed Congress and the President are only bystanders (or creditors if the Federal Government in named so) and should have no say in how the court adjucates the bankruptcy. Obama has overstepped his authority on numerous occasions, not the least of which is dictating the terms of Chrysler’s bankruptcy.
Jon,
Agree. But if the Chrysler bondholders and shareholders are in fact injured parties as a result of the Government’s actions, why are they not seeking a remedy in Federal Court?
I guess I expected more of a reaction to the Government’s giveaway of Chrysler to the union, and a class action suit or something.
Mike - Your post should have read,” Chrysler’s first bankruptcy should have occured”. That was the president that set up the recent”bail-outs”. I called on Chrysler facilitities in two cities in northeastern Indiana and NOTHING changed at these locations after the state and national bail-out loans were made to them - absolutely no change in management policy - same old UAW crap - the set-up for future failure was put into place then! What a savings could have been made to let them fail then - and don’t give me the crap about what a great “manager” Iococa was - HE WAS A VERY GOOD USED CAR SALESMAN! PERIOD!
Finally! from the Financial Times
“However, the Indiana State Teachers’ Retirement Fund said on Wednesday that it had a fiduciary responsibility to its members to continue the fight. The fund stands to lose $4.6m under the current settlement proposal and has teamed up with Richard Mourdock, Indiana state treasurer, to try to recover those losses.”
Sorry about your luck.
The teachers union can commisserate with the UAW.
You voted for and bought the messiah, live with it, the rest of us have to go back to work.