GraniteGrok

The Chrysler reorganization is shaping up as another milestone in the decline of the rule of law under Barack Obama. We've said for quite a while that bankruptcy is the only viable option for Chrysler and General Motors, not--as Obama claims--because they don't know how to make the right kinds of vehicles, but because their unsustainable union contracts make it impossible for them to be profitable. That reality has now been turned on its head, as the administration has tried to bully Chrysler's secured creditors into going away, while the United Auto Workers Union, solely on the basis of political clout, would be paid at an implied rate of 50 percent and would emerge owning 55 percent of the company, with the government also holding a stake.

This is banana republic capitalism at its worst. Political influence, rather than the law, dictates the rights of the parties. When some of the secured creditors refused to be intimidated, Obama libeled them in the press, saying, outrageously, "I don't stand with those who held out when everyone else is making sacrifices." Actually, under Obama's plan the politically favored parties, principally the UAW, will benefit--will steal money, to put it crudely--from the parties who held out. Those parties call themselves the "non-TARP lenders."

The problem, there are lots of people in this country that believe Obama is correct in this matter.  That said, ask yourself this question: what if it was your hard earned money you were trying to grow for retirement in the fund that Obama is giving you 5 cents on the dollar?  Would you be so apt to agree with Obama that you don't count?  And trust me, the principle of this is far more important than the money right now.

And it literally is 5 cents on the dollar in the case of GM:

The deal that is coming out of the government aid and deadline for GM is truly astounding. As the WSJ breaks down the numbers, private bondholders of GM securities would get 5 cents on the dollar for their investment and own 10% of the company; the government will own 50% of the company and a return of 87 cents on the dollar; and the UAW would own 40% of the company and have a return of 76 cents on the dollar. Now we know why Obama and the UAW have been fighting so hard to keep GM out of the bankruptcy court.

So, Progressives - where's the equality in that?  Where is the fairness in the political calculus that one set of people are more valued than another?  Where Government places a higher value on itself than on private citizens who voluntarily put their money at risk?

Remember this - the Obama's Government HAS to make these Trillions of our dollars actually work or he AND the Congressional Dems are toast; they have to have private investment to assist in order to be successful.   But ask yourself this question: while the lure of profits is strong, what sensible fund manager is going to partner with the Destroyer-of-Wealth-in-Chief as long as Obama keeps throwing that money away (e.g., 95 cents on the dollar)?

And look what happens when the investors dare to stand up for their LEGAL rights (following the Rule of Law) when they see that Government (read: Obama) has decided that it has the right to determine winners and losers, politically, in the marketplace?   After all: 

“I want to disabuse people of this notion that somehow we enjoy, you know, meddling in the private sector,” the president said in response to a question.

Indeed:

People are reeling from having their 401ks wiped out in the current market slide. And now those who had for years bought what they thought were "safe" blue-chip corporate bonds are discovering they were only safe until they were told by the government to go fly a kite because government wants to pay off the unions instead. That is deeply unfair to small bondholders, and it’s dreadful economic policy. As a friend of mine put it to me, "Who in their right mind will buy corporate bonds now? And if nobody's buying bonds, how exactly are our debt markets going to get humming again? What a mess."

Indeed. This could be the continuation of the Tea Party phenomenon, manifesting itself in a different way.

Actions have consequences - on one hand, Obama says he is trying to fix the financial markets (yeah, that's working so well with that tax cheat Geithner, eh?) yet on the other hand, the less-visible-but-more-revealing other hand, Obama is destroying that which he purports to be saving. When a Harvard economics Professor, Greg Manikow, starts to bring up the Rule of Law and how Obama is breaching that public trust, there's a problem:

Or is he trying to achieve a "fair" outcome as he judges it, regardless of preexisting rules and agreements? I fear it may be the latter, in which case politics may start to trump the rule of law.

Again, it is worth repeating: "...meddling in the private square..."; indeed!

Yet Obama continues as when he demonized out some of these providers of capital that make it possible for our capitalist system go 'round:

While many stakeholders made sacrifices ... a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout.

Translation: Saul Alinksky Rule for Radicals:  Pick the target, freeze it, personalize it, and polarize it"; in other words - DEMONIZE the financiers!  But why?  Because Marxism / socialism theory wants the "units of production" in the hands of the workers and not in the hands of those that provide the money that allows that to work.

And they fight back:

The problem was that a group of small bondholders rejected the deal that car czar Steven Rattner and his deputy (and it seems the real dealmaker) Ron Bloom.

The bondholders made a good point. They are secured creditors, and in our bankruptcy law secured creditors get paid off in full before unsecured creditors get anything. That’s a sound legal principle: why would secured creditors lend anyone anything unless they can get their security back if the loan isn’t paid off? In this case, the small bondholders were willing to settle for only 60% of what they were owed. But, they complain, the government wouldn’t negotiate directly with them, but only through JPMorganChase, which (unwillingly) took TARP money on October 13 and thus is under pressure to do what the government wants.

Translation into politispeak: The government squeezed the small bondholders too hard in order to protect the United Auto Workers, which of course has over the years been a bounteous source of money (and manpower) for the Democratic party. The government can muscle the big banks, but it can’t (at least not yet) muscle creditors whom it hasn’t forced to take its money.

You see, when you owe nothing to the Government, as GM does, and when the Government owes something to you (as in the UAW and unions in general), you are not beholden to the Government but you certainly are a target.  After all, all of the "big banks" that "own" the largest amount of GM bond debt owe TARP money, and the biggest, CitiBank, is majority owned by the Government.

How convenient!

Political hack masquerading as a financial institution of some (little?) merit?

Obama will get his way - the small fund operators and their individual investors (including Ma and Pa saving for retirement) will get hosed.  The UAW will take control, Fiat will get 20% of the company for basically doing nothing (after all, they are NOT providing ANY capital for this at all), and Obama will have moved this country more to the Left.

The question we ask today is not whether our government is too big or too small, but whether it works -- whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified."

-President Barack Obama, 1/20/09

“I want to disabuse people of this notion that somehow we enjoy, you know, meddling in the private sector,” the president said in response to a question.

The answer to the first, in this matter, is a "No" that will become obvious in the mid to long term future.  The second is a resounding "No" right now.

The fallout will land on his head.  The problem is, the fixing will be up to us after he has moved on to the rubber chicken circuit, earning more money for a single engagement than I will in my life time...