Well President Obama came out this week and announced that Chrysler would go into bankruptcy. This is a move most everyone knew was coming months ago, except for the US government of course.
Remember a few months ago when the heads of the three auto manufacturers went to Washington? Pelosi, Reid, and even President Obama said they were to big to fail and proceeded giving them taxpayer money. So, on behalf of the American taxpayers, our government gave these companies billions of dollars to get their act together. Your money!
Shouldn't the government in all it's wisdom give them "your money" only after studying AND UNDERSTANDING their plan for restructuring? I would assume if you are going to give someone several Billion dollars you are confident they will pay it back. Now I'm not going to throw blame on the Big 3 manufacturers for their situation; that's another discussion entirely.
So this brings me to the news conference the President held announcing the bankruptcy of Chrysler. First when the hell does a President go live on TV to announce the bankruptcy of a US company? That's a bit weird don't ya think?
In his speech President Obama reads [from the teleprompter], "My job as president is to ensure that, if tax dollars are being put on the line, they are being invested in a real fix that will make Chrysler more competitive".
He proceeded to talk about a small group of investors or hedge funds who were, "demand[ing] twice the return that other lenders were getting."
Obama states, "Now, while many stakeholders made sacrifices and worked constructively, I have to tell you, some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout."
He continues, "Because of the fact that the UAW and many of the banks, the biggest stakeholders in this whole process have already aligned, have already agreed, this process will be quick, it will be efficient. It's designed to deal with those last few holdouts, and it will be controlled."
OK So now President Obama has identified their were "holdouts" that were hampering the Chrysler bankruptcy deal and they would "be controlled" or dealt with. He said they were demanding twice what others were getting. Greedy huh?
First these 'holdouts' were secured investors. This means they invested in Chrysler and are the first in line to get 100% of their investment back before anyone else. This is basic investing and done all the time.
Second these 'holdouts' agreed to take 50% instead of 100%. Yes they agreed to this but the government or President Obama's task force said no you will take 29%.
These 'holdouts' would not accept 29%. and felt they had an obligation to their investors. Therefore in his speech the President pointed this group out as a small group of 'holdouts' wanting twice the return other lenders were getting even though they are entitled by law to get 100%!
Also, most if not all of these 'holdouts' did not get TARP money. Many of other lenders who are taking the 29% did get TARP money.
It was also pointed out that the President is also trying to influence a judge before a court case or bankruptcy. READ THAT LINE AGAIN. The President is trying to influence a judge. Is this how they will 'deal' with the 'holdouts'?
One last point. The attorney for the group of holdouts says that one of his clients was directly threatened by the White House if they did not remove their opposition to the deal. They were told the "full force of the White House press corp would destroy it's reputation". See audio link below.
UPDATE 5/4/2009 - Some of the funds say they were not threatened by White House. Only the attorney made that statement.
To sum it up:
You have a group of so-called 'holdouts' who are looking out for their investors. They have done nothing wrong, did not get TARP money, and are acting within their rights given to them by The Constitution. They also are trying to help Chrysler by taking only 50% of their investment. In return The President essentially portrays them as greedy hedge fund investors that will be dealt with. Don't forget a few months ago the government gave Chrysler billions of dollars of your money. What is that money worth now?
The words from his speech that really stand out are "designed to deal with" and "controlled". Should any President control or deal with a group who does not conform to that government wishes? Think about it.
Oh yes did I mention when it's said and done that the UAW will own 55% of Chrysler?