Are you following the disembowelment of Chrysler’s secured creditors with an eye not just toward what it means for the moribund car company but for what it could do to the very concept of secured debt? Has it dawned on you what the consequences will be if the President gets his way and consideration is given to creditors not according to contracts, rules, and established legal precedents but according to which group is most politically favored? And do you believe the President advanced the cause of economic recovery by publicly excoriating “speculators” who once hoped to profit by lending money against hard assets to an ailing company?
Profit? There’s no profit to incentivize risk taking in this country, only sacrifice!
Law? There’s no law to protect the politically unfavored in this country, only derision! link
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In the opening scene, a naive investor buys some bonds, explaining to his staff that they are a sound investment secured by hard assets. Even if the company goes under, the investor explains, bond investors stand to get about 80 percent of their money back.
The next day, a government official calls and offers to buy up the bonds at 33 cents on the dollar, while giving controlling interest in the company to the labor unions. The investor refuses. That night, a man shows up at his home.
“We’re not saying anything bad is going to happen to you,” the tough says, “but the big boss is going to be very disappointed in you if you don’t take the deal. By the way, how’s your little girl? Is she still going to school down on Federal Street?” The investor caves.
The evolution of the Chrysler LLC bankruptcy seemed almost as bad. The Obama administration brokered a deal that gave labor unions a 55 percent equity stake in Chrysler, putting their interests ahead of the secured interests of bondholders. link
2 comments:
It's so insane that i can barely believe it could be happening.
And what's really nuts is that Obama will claim he's doing it for the little guy! The little guy OWNS THESE BONDS! in pension funds and 401k's and IRA's etc. This is their "safe" money.
They get screwed over and the unions get paid first because Obama want's to reward his political cronies and the sheep like gary and Anita will continue to believe that the "rich" are the ones getting hurt in all this. If they're rich, this is a tiny hit. If they're middle class they're screwed! but hey the unions get a huge piece of the company that they helped to destroy and we will prop up with our tax dollars for the next few years so that's something.
idiots.
Either this is another example of example of Obama's lack of executive experience showing and he hasnt thought through the reprecussions of his actions (like gitmo, or prosecuting "torture" memo laywers to name just two things hes recently flip flopped on)
Or he is an evil genius hell bent on destroying capitalism, and the America we've all known for the past 200+ years.
This move will destroy contract law, abd it will destroy the bond market, which for the unlearned is about four times the size of the stock market. Most people dont know or understand the bond market but like Rhino said theyre invested in it... big time. It keeps corporate America running and 401k's relatively safe. Before now that is. This is bad.
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