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  • Chrysler's Creditors and Offers You Can't Refuse

    President Obama was clearly miffed yesterday. His plan for restructuring Chrysler without a bankruptcy had been blocked by the refusal of some of the firm’s creditors to sign on to the restructuring deal hand-crafted by the White House. He decried their decision, calling them a “small group of speculators.” Later, White House spokesman Robert Gibbs elaborated, saying that the creditors should have given ground “for the greater good.”

    Just in case the message was missed, an unnamed Administration official added: “We know who some of them are.”

    Despite the fact that Chrysler’s soon-to-be partner Fiat is based in Turin, White House’s attitude sounded more like Palermo. And the recalcitrant creditors had turned down a deal they couldn’t refuse.

    Specifically, the creditors refused to settle the debt owed to them by Chrysler for 29 cents on the dollar. The offer was far below what the UAW would get under Obama’s plan, and the creditors thought they could do better, electing to bring the matter up before a bankruptcy judge. Maybe they are right, maybe wrong, but they seem to have a decent argument. They certainly do have a fiduciary duty to represent the interests of those who entrusted them with their savings, not a Greater Good defined by the government.

    True, the holdouts represent only a small minority of Chrysler’s creditors. But among those who did agree to the terms, the four biggest – Citi, JPMorgan Chase, Morgan Stanley and Goldman Sachs – are banks which themselves took massive bailout money from the feds, and whose future is largely in the Administration’s hands. Not only does the government own a substantial amount of their stock, but government “stress tests” of their stability are due to come out next week. It’s hardly likely they would want to raise a fuss with the White House over a few bonds right now.

    The recalcitrant creditors are well-aware of pressure on TARPed firms, and even label themselves “The Committee of Chrysler Non-Tarp Lenders.” Not all the members are publicly known, but – despite efforts to paint them as rich speculators, they include broad-based investment firms as OppenheimerFunds. Also on the list is a firm called Stairway Capital Management, which provides funds for distressed enterprises, hardly the sort of activity policymakers should be discouraging just now.

    Until last night, a third major firm, Perella Weinberg Partners, was also on the “no” list. But soon after the government’s attacks yesterday, they decided to settle. Perella Weinberg, by the way, recently won a major consulting contract with the FDIC.

    No doubt just a coincidence. But this is why we have courts, and not just politicians, to decide these things.

    Posted in Economics [slideshow_deploy]

    39 Responses to Chrysler's Creditors and Offers You Can't Refuse

    1. mmusa, usa says:

      The comments about the debt holders were truly astonishing. This says a great deal — not that we needed much more evidence after the stimulus package and the latest fed budget — about how this administration has little regard for free-market principles and contracts. I hate to see Chrysler and GM in this situation but what the government is doing is simply compounding the problem.

    2. ozzy6900 says:

      President Obama is simply against Capitalism! He, as many of his background, feel that Capitalism needs to be done away with so that everyone can "share" in the wealth. In other words, those that are lazy can live off those that work. I am very adamant over this as I was raised on the premise "If you don't work, you don't eat!".

    3. Reg USA says:

      How can Obama in one breath say he is not going to help Chrysler any more and then in the next he is giving them $8billion more? Bankruptcy is bankruptcy is it not even if it is Chapter 11? Is the judge going to use that to pay off other debtors such as U.S. taxpayers at $.29 on the $1.00? Or is Fiat going to reimburse the U.S. taxpayers for all they loaned Chrysler? Did I miss something in all the rhetoric the anointed one was spewing out in that news conference when he was so upset with the private equity firms for not accepting the $.29 on the $1.00?

    4. Sherri Huntsville, says:

      Chrysler and GM should be in bankruptcy court before an impartial judge. The government should not be wasting any more of the taxpayers money on these failing companies. I think the Obama administration is abusing its power by trying to pressure the Chrysler creditors. And my family sure won't be buying any vehicles from these now government owned companies.

    5. Marilee, Illinois says:

      I just want to know why these firms, banks and other institutions are not using the legal system to stop the White House? Mr. Obama is clearly crossing the lines of executive power. They need to do it before Mr. Obama totally changes the Supreme Court and issues are no longer decided on RULE OF LAW.

    6. Kilroi1, Boulder Co says:

      This was nothing more than the attempted theft of a private corporation by the Federal Government. How does any investor in his right mind put money back into this economy knowing that Obama and his band of tax cheating thugs won't come in at any minute and rip them off? I say congratulations to those investors that flipped him the middle finger and I think you should name the administration official who made the underlying threat. Our own government is becoming a bigger threat to this country than any threat from abroad.

    7. Steve Barber, Andorr says:

      The way to stop the nonsense is by a constitutional convention called by 2/3's of the state legislatures for the purpose of considering the adoption of two amendments to the U. S. Constitution.

      One, repealing the 16th amendment and requiring that the states fund the federal budget by assessment based on each state's percentage of the national population.

      The other, repealing the 17th amendment and requiring that two residents of each state be appointed by the governor of their state to serve as U. S. Senators, the appointments to be subject to confirmation by their state senate.

    8. Laurette Porter-Rath says:

      Why isn't anyone taking alot of this stuff to Court??? It seems to me that most of this is "MAFFIA LAW"–There seems to be an awful tolerence for this!!!!

    9. Claire, Belleville, says:

      Perella Weinberg was threatened by the White House: Give up your claim or THE WHITE HOUSE PRESS CORPS will ruin you.

      Not that anyone had to wonder whether the media and this administration have an incestuous relationship.

    10. George Ferrell Ch says:

      Our United States Congress appears to have forgotten that they took an oath of office to obey and support the Costitution of the United States of America. Do we no longer have our

      Constitution? Most of the news today idicates that we do not!! Do we even have a legitimate president? I have yet to see evidence of it.

      I do not see the true honest American citizens can accept this attack our government our society.

    11. Claire, Belleville, says:

      How's this: according to the attorney for the group of which Perella Weinberg was a part,

      Perella weinberg was threatened by the White House: Give up your claim or THE WHITE HOUSE PRESS CORPS will (report on) (tattle on) (ruin you) (call you out) make you wish you had.

      Not that anyone had to wonder whether the media and this administration have a close relationship.

    12. Pingback: Barack Obama outlaws capitalism: threatens Chrysler’s non-TARP creditors « Wintery Knight Blog

    13. Grace, Florida says:

      Our Gov. has allot of nerve talking about tourture of terrorists. Our own government is using strong arm tactis against us if we don't do things their way. This country is going to Hell. I say good for the creditors who didn't bow to Obama. I like one of the other bloggers will not support any car company owned by the government.

    14. Bill Adkins, OH says:

      Once again we are on the slippery slope of socialism, direct government control of private business will end up in failure. Capitalism is under attack, without it our prosperity will surely decline. I cannot believe the Obama administration is getting a pass on all these issues.

    15. Michael Webb says:

      Who will be the courageous soul in our Senate to begin Articles of Impeachment. It's time.

    16. Wes, Litchfield, MN says:

      How bad does it have to get? My gosh! How bad does the stink in Washington have to get before everypone starts to smell it. They gave Iowa big bucks to study manure. I think they are studying smell in the wrong place.

    17. Charles-Odessa, Texa says:

      If the Administration can bully Chrysler and major private investors, they will soon be at our house to tax, regulate, make laws, and bully their way into our kitchens and bedrooms.

      Talk is different than actions of the Administration.

    18. Tim says:

      It seems the oath of office has been bastardized by those who have taken the oath. The American citizenry are the only ones left to enforce these oaths through elections while they still occur. If the socialists are able to eliminate the second amendment. There will be no more elections and they will come full circle to communism. Nothing would make them happier. Is this the change Americans desire?

    19. Normca says:

      An impartial judge ? The car czar, himself in some hot water or Obama will pick the judge [who the press will call impartial]. If this was a Republican white house, the democrats would be churning up impeachment. This is "Abuse of Power". The white house press corps doing the bidding of "The One" to ruin reputations ? This ought to tell subscribers of the NY Times, who reside in the heart of the financial district something. Will they vote for Obama in 2012 ? [Or perhaps the question ought to be; will they have the wherewithal to be

      influential ?]

    20. Brad L, Phoenix says:

      While the Obama “Train for Change” hurtles down the track, seemingly unstoppable by the current polling data that shows a massive support for his policies, my instincts warn me of an even greater challenge in the near future. What will happen when GM and Chrysler are controlled by the government/unions and the American people choose to purchase their new vehicles from Ford and/or other foreign manufactures? The assumption of 68% approval ratings will translate into 68% of new vehicles will be purchased from Chrysler or GM may be weak. If there is a significant movement away from both companies’ products, the resultant government action to “correct” that problem may be the needed visibility to the American people that will result in the derailment of the train. If not, the next logical step will be to control the power companies and steel industry due to their impact on the environment.

      Woe be to us all if the dominos continue to fall.

      Where is John Galt?

    21. Chris, Western Wi. says:

      I've always been a staunch GM person and when possible, have ALWAYS purchased American goods. I've purchased new GM vehicles, as well as new Chrysler vehicles in my past, but will never purchase any vehicle from a company which is in bed with the government and unions. I will purchase only Ford products in the future, provided they are not in bed with this phoney president and his idiotic schemes. I will not have any "skin in the game" in support of this phoney president's hairbrain ideas of remaking this country. It's not his to "remake". Lets all unanimously tell Obmama and his liberal fruitcake friends this when election year rolls around!

    22. Angela, Newport News says:

      I blame much of this mess on our failed public educational system. For years, public schools have either ignored or not taught capitalism, therefore graduating students cannot cite one advantage captialism has over other economic systems. Most students I have recently talked to believe that the rich are rich because the poor gave them all their money!

      I once heard someone bemoan the fact that we are the only country in the world that does not instill knowledge of our economic system into future voters. So, those voters go to the polls ignorant and uninformed and vote for the candidate promising the most goodies for them. They never stop to consider that (a) someone else is paying for those goodies and (b) getting those goodies severely limits their freedom. But who cares for a little thing like freedom? All these financial institutions and corporations are now discovering that a government hand-out comes with a hugh price tag, lack of freedom to operate as they see fit.

      Instead of bail-outs, these companies would have been much better off with coporate tax cuts, capital gains tax cuts etc. But try telling that to Nobama who is a creature of the very public school education cited above. If asked I bet he couldn't give one advantage capitalism has over socialism, and that, my friends, is the heart of the problem.

    23. Angela, Newport News says:

      Me again. Forgot to mention that George Bush started this bail-out mania, giving Nobama just the chance he needed to continue down this slope.

      I don't know whom to be more angry at—the guy I voted for twice who betrayed capitalism and should have known better or the current president who, true to his campaign promise, loves redistributing the wealth.

    24. WJ, New Jersey says:

      We are experiencing Chicago style, Illinois power politics at its worst. The morally bankrupt Rham Emanuel & Dick Durbin… along with press sec Gibbs… make us detest these politicians who are pulling the strings behind the scenes. They will say and do anything to advance their socialistic agenda. Character is not something with which they are endowed.

    25. Lynn B. DeSpain says:

      Capitalism is a , "Stand Alone Ideal." It is not Democracy, Republic, Socialism, any religion, or sect. It is business. It is about fair profit, fair labor and enterprise.

      No Government can interferewith the process of Capitalism without changing the 'Ideal' into something new and no longer competitive. All businessses will fail at some point, and other businesses will replace them. This is fair and open market. This is a level playing field. The Way the President is trying to run business likens to a Football game where the Government adds ten more players to the opposing team and calls it "Fair."

      Hozro

    26. Tom McKinney, Dunwoo says:

      Where is the annually $4.5 Billion needed to pay the Chrysler UAW retirees their earned pensions? (150,000 retirees X $30,000 average pension= $4.5 Billion).

      Thank you.

      Tom McKinney

      Dunwoody, Georgia

    27. Normca says:

      Mr. Bush, the "compastionit conservative" in his read my lips moment, said his intention was to help the incoming president with the bail out. I just think Mr. Bush did not pick top advisors well. Paul O'Neil, Hank Paulson. However George, who I voted for twice [and stuffed envelopes for] dissapointed us all. But if George started it, Obama has ran passed the goal post and continues to run. Mr. Retribution is showing his disdain for a financial system that worked well for years.

    28. Ruth Trowbridge, Ama says:

      I wonder what will the effect be, if grass roots America in large numbers now begins to boycott every Obama re-made industry and solidly supports and patronizes freemarket companies which don't capitulate to his offers or pressure. Can we stop him?

      A large scale move of our money to local small-town banks and credit unions would not hurt things either. It might put a little teeth in the tea parties as visible evidence that the American people are not silent about the remaking of a free nation.

      It is also time to see some serious lawsuits brought to the bench.

      ps.

      Like the earlier poster, I may drive my first Ford.

    29. Pingback: Chrysler Bankruptcy & the Rule of Law « Bejohngalt’s Blog

    30. Larry in Texas says:

      I think it was about time someone stood up to the mafioso led UAW and the Obamanomics theft team, featuring Nancy "Profit Sharing" Pelosi! I don't blame 'em in the least for insisting they get paid more than 29 cents on the dollar! Hell the credit card companies are rippin'folks off for 26% interest that never missed a payment on their credit cards, simply because they can raise rates at will and give no reason for doing so!! That's another abuse that will surely grow exponentially from this administrations misdealing and intervention in the free market. Funny,how these allegedly intelligent, Presidential tax evading appointees, can't comprehend that just because they own GM/Chrysler along with the Union(Mafia)even THEY can't force me to buy a car I would not buy before.I sure aint goin' to buy one now that they forced their way into the Board room, claiming CFO status on "OUR BEHALF".They now have the audacity to believe that I'll buy from them because I'm now "VESTED in the 'Company' by proxy", and do it willingly because I'll lose money if I don't!! I never volunteered my money, or graciously agreed to use it for bailing out a money vacuum. How stupid and naive do THEY really think we are? How does the saying go? I feel for ya, I just can't reach ya!!

    31. Truth Hurts, The Rea says:

      Do we see a future country when our esteemed leaders find full employment for all of the thugs on parole from our prisons to intimated and threaten anyone who disagrees with there socialist views? OR IS THAT POSITION ALREADY RESERVED FOR ACORN<LA RAZA AND NBC?

    32. Brad S,, Detroit, MI says:

      The time for Chapter 11 for Chrysler & GM was back in December before the Government got knee-deep in this mess. The main two causes of the auto failure were : 1) $4/gallon gas that destroyed SUV/Truck sales that the US manufacturers relied on for profit. 2) The banking/credit industry collapse that stalled all durable good sales for more than 3 months. Both of these maladies struck a death knell to an already weakened industry. Don't be fooled, Ford is quickly running out of cash and will be forced to make some tough decisions pretty soon as well. For all of you car buyers out there – do your research and buy a vehicle that has a high US built content – especially look at where the powertrain is built – it should say it on the Monroney (window sticker) label. Keep the money here in the US. Please don't make knee-jerk reactions to the "created crisis", because then we are no smarter than these crooks that unfortunately are in office for the next couple of years.

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