Yesterday (May 1) on Detroitâ€™s Frank Beckmanâ€™s morning talk show (WJR), bankruptcy attorney Tom Lauria made the incendiary accusation that the members of the White House had threatened to use the â€œthe full force of the White House Press Corps to destroyâ€ his clientâ€™s reputation if it didnâ€™t acquiesce to highly unfavorable terms of the governmentâ€™s proposed Chrysler restructuring plan. Because of the strongarm tactics, Lauriaâ€™s client dropped its opposition. …
…There is a pattern here. Financial institutions holding billions of Chryslerâ€™s secured debt are being held hostage by the TARP loans they are not permitted to pay back. They are being forced to accept just pennies on the dollar for loans they made in good faith less than two years ago. Just like mob loan sharks, the administration wants them under its thumb so they can extort more and more concessions.
This is an abuse of power that goes beyond Nixon.
Oh Noes! Why is the White House being so mean to the nice businessman?
Here’s the reason: The client who is being strong-armed is hedge-fund manager Perella Weinberg Partners LLP. Perella and a couple of other hedge funds that owned a part of Chrysler’s debt have been obstructing Chrysler’s attempts to restructure itself and avoid bankruptcy. The hedge funders wanted Chrysler liquidated so they could take their money, and too bad if the loss of Chrysler sets off a chain reaction of failed suppliers and other businesses that send the entire American economy into a tailspin. Not to mention what would happen to the retirees, who would lose their pensions, etc.
â€œBankruptcy is only required today because of the greed of a few hedge funds that held a fraction of Chryslerâ€™s debt,â€ said Rep. Candice Miller, (R-Mich.) â€œPresident Obama today stated that he did not stand with these hedge funds and neither do I.â€…
…â€œThe administration put a great deal of pressure on those entities to go forward,â€ said Rep. Gary Peters, (D-Mich.) â€œThey gave these hedge funds every single possible opportunity to accept the deal.â€
Last night, the Treasury department sweetened their $2 billion cash offer to holders of Chryslerâ€™s secured debt by $250 million. The secured debt holders would have gotten the cash in exchange for retiring roughly $6.9 billion in debt. The administration also extended an original 6pm deadline to continue negotiating through the night.
Sen. Debbie Stabenow, (D-Mich.) blamed the breakdown in negotiations on three large hedge funds â€“ Oppenheimer Funds, Perella Weinberg Partners and Stairway Capital.
â€œWeâ€™ve been working with them every day, last night, and up until this morning,â€ said Stabenow. â€œThey pushed as hard as they could.â€
The White House strong-armed Perella Weinberg Partners into signing on to the $2 billion deal in order to leave something left of Chrysler to restructure. This in turn will, it is hoped, save thousands of jobs (you’re saving not just Chrysler, remember, but also suppliers) and at least some portion of employee health and retiree benefits. And this is good not just for the employees and retirees, but for the state and local economies in which these businesses are located.
In other words, three hedge funds tried to hold a chunk of our nation’s economy hostage, and the White House didn’t let them get away with it. And this meathead blogger says the White House is abusing power. Jeez louise, people are stupid.
Update: A mouthpiece for Plutocracy called “Founding Bloggers” links here, saying,
Right on cue, here is a liberal blogger that makes the case against the evil capital investors who would dare exercise their rights under contract.
What the pea-brains aren’t noticing is that there are vast numbers of contracts that are being shredded or amended because of the plight of the automakers. These include contracts with suppliers and, probably, dealers as well as workers. Everybody else is taking a hit. The White House is trying to spread the pain around so that there’s something to salvage and the overall U.S. economy doesn’t take a bigger hit than it’s already taking.
In a perfect world the automakers would be making a profit and the capital investors would be making a nice return on their investment. But when the Titanic is going down it’s not the time to complain that you paid for a cabin with a better view and want a refund.