Mariner fans once dubbed Seattle Times beat writer Bob Finnegan “Pocket Lint” because he was so deep in ownership’s pocket—his pieces were, dependably, dutiful recitations of whatever the company line happened to be—and now I’m starting to think the nickname may need to be revived for Barack Obama. We knew the labor movement had him in its pocket, but the whole business with Chrysler is beyond anything I would have expected. President Obama and his administration essentially took a crowbar and attempted to kneecap a group of Chrysler investors in an effort to win better terms for the United Auto Workers than the UAW will be able to get in bankruptcy proceedings now that the automaker has filed for Chapter 11. As the ever-invaluable Beldar lays it out,
What the Obama Administration has been trying to do, however, has been to cajole or—it’s now becoming more clear—threaten people who carefully bargained for less risk, and who thereby had to settle for lower rewards all along, into voluntarily forfeiting the protections they bought and paid for in the event of the underlying business’ insolvency. Primarily through Chrysler’s pension and retiree health-care obligations, the UAW is a creditor of Chrysler, but one whose position is less favored by the bankruptcy laws than the investors (debt holders) represented by companies like Oppenheimer Funds or Perella Weinburg. Unlike the UAW, their clients negotiated, bought, and paid for the rights not to have to have to make the same “sacrifices” that equity holders or general unsecured creditors would be compelled to make under the bankruptcy laws. But Obama insists—on pain of presidential demonization and worse—that these so-called “corporate renegades” (who’ve been guilty of nothing other than greater prudence) make those sacrifices anyway, and that they do so specifically in order to benefit the UAW!
This goes beyond populism or pro-unionism. Barack Obama is engaged in an assault on not just the entire system of business in the free world, but on the American rule of law upon which it is founded.
And the crowbar in question? The White House press corps, as the lawyer for one of those investors told a talk-radio host in Detroit:
One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under the threat that the full force of the White House Press Corps would destroy its reputation if it continued to fight.
Not that we really needed any further evidence that the MSM is a wholly-owned subsidiary of the Democratic Party machine, but that’s still telling. The White House, of course, is denying the story; as for the response from the aforementioned reporters? Aside from Jake Tapper, crickets.
The bottom line here, in Beldar’s words, is that
the Obama administration is engaged in a colossal abuse of power whose magnitude far exceeds a mere subversion of the White House press corps. Barack Obama has become Guido, the thug who everyone knows has not only a nasty habit but a nasty taste for breaking kneecaps. And the beneficiary of his shakedowns are the United Auto Workers.
Regardless of your position on Chrysler, unions, or any of the other parties involved in this mess, that sort of thing isn’t good for anybody for very long. The rules need to be the same for everyone, and the same at every point in the process. When the government starts bending them to try to manipulate results—when the process is compromised for the sake of someone’s agenda—the system will adjust in a way that will only hurt our economy, and especially those who are most vulnerable.
The thing is, these folks invested a lot of money in an effort to help Chrysler rebound—yes, in the hopes that they would profit off that rebound; our economy doesn’t run on altruism—and they did so knowing what the rules were if their efforts succeeded and what they were if Chrysler went down anyway. Let them and others like them get the idea that the government is willing and able to do whatever is necessary to change those rules after the fact in order to skew the results to its liking, and the next time a big company is looking for help (General Motors, anyone? The New York Times?), the money won’t be there.
Investors are willing to take the normal risks of business, because those risks are predictable, and they’re taken into account in the terms of the contract. If they perceive a significant risk of ex post facto government intervention on behalf of other parties—risks which are neither predictable nor quantifiable—they’ll sit on their hands, rather than take the chance that the next kneecap the Obama administration aims at will be theirs; and GM, or whichever company totters next, will go down.
This is a tempest in a small, cracked Republican teapot. I notice that the blog that started this “thuggery” accusation has now stopped allowing comments. It based its accusation on the words of an interested party — Perella Whineberg’s lawyer — without ever noting the party’s interest, and without ever even bothering to examine how bankruptcy law is structured and applied.
The issue here is Perella Whineberg’s desire to be paid 50 cents on the dollar for its bonds, rather than 29 cents on the dollar offered by the Treasury. The reason Treasury is involved is because Chrysler can’t obtain private “debtor in possession” financing for its bankruptcy. Treasury is playing that role, and he who provides DIP financing always has a big role in bankruptcy proceedings.
Virtually every bankruptcy features some fighting among creditors over pieces of a pie that, by definition, isn’t big enough to give everyone a full slice. The biggest fights are often between different classes of creditors, and in those fights you will often see “senior” creditors howling over not being paid as much as they think they deserve relative to “junior” creditors.
That was the case here. In addition to Perella Whineberg, two other senior creditors (Oppenheimer and Stairstep) were so-called “holdouts” from a settlement agreed to be scores of other creditors. In bankruptcies, holdouts usually don’t do very well. The judge sometimes tosses them an extra crust of bread, but not always.
As the DIP financing provider, the Treasury wants Chrysler to remain an ongoing entity. Its interest is to produce agreement among the creditors so there won’t be a prolonged court fight that might endanger the entity’s ability to repay the DIP financing. So, it wants to corral the holdouts.
Perella Whineberg was corralled last Friday; it issued a press release to that effect. But it also trotted out its lawyer to claim that the White House had forced it into agreement by threatening to ruin the firm’s reputation. The White House categorically denied that version, something that the blog you quoted never mentioned before abruptly closing its comment section on Sunday morning.
We don’t know what was said by the White House to Perella Whineberg. It’s unlikely that anyone threatened Whineberg with the White House press corps, but it’s not beyond imagining that the White House pointed to President Obama’s statements and told Whineberg that they were only the beginning of what they’d face if the holdouts continued to hold out and jeopardized the ongoing operations of Chrysler. After all, the taxpayers are now on the hook for $4 billion in DIP financing, and it’s the government’s job to protect that investment against greedy graspers like Whineberg.
In any case, the idea that “the rule of law” was ignored is outrageous. The Chrysler bankruptcy, and the recent machinations, is par for the course. Perella Whineberg was trying to get a better deal, and failed. What really sticks out here is Perella Whineberg’s utter lack of class and professionalism. They are the personification of the kind of sore losers and manipulative squirrels that the Republican Party has become.
So congratulations–you’ve earned your M.Tr. (master’s degree in trolling), with an emphasis in dishonest and misleading comments. You are now qualified to apply for a job at DailyKos, the Huffington Post, and MSNBC.
No gratuitious insults allowed. Troll, meet big Billy Goat Gruff.
I should note, I think you trolls are doing a great job of demonstrating the validity of the original post . . .
i wondered why i hadn’t even Heard about this “disregard for the law” that my Libertarian friend was wailing and moaning and gnashing teeth over. i dug deeper and found news articles and posts like this one. Apparently i DiDn’T actually miss anything. There’s no there there. Grinder coulda been alittle more diplomatic about it, but… he’s not wrong.
Influence happens. One man’s “supposition” is another man’s “threat”. If we’re talking about deciding on the division of three pieces of pie amongst eleven people, of Course there’s going to be inequity. If we’re gonna have inequity, I’m fine with us considering Pensioners (who’ve earned that fixed income) alongside Investors (who’ll accept all of the reward but none of the risk from gambling).
What’s the hubbub, bub?
Hey, if you’re fine with the administration changing the rules after the fact, then that’s your business. Just don’t complain when the next Republican administration does the same.