Comments on: An Ordered Society

By: anon

anon — Fri, 15 May 2009 05:33:15 +0000

One point which is probably not widely understood here is that the holdout creditors were vulture investors. They bought the Chrysler loans for pennies on the dollar when it was blindingly obvious that only a government bailout could save the company and enable it to honor its debts. The vulture investors essentially gambled that a bailout would allow them to realize a profit on their purchase of the debt.

If they turn out to be right, an obviously horrible incentive would be established – a creditor doesn’t need to pay attention to the fundamental solvency of a company: he just needs to predict whether he can make money off the taxpayer in a government bailout. This is probably not the type of situation that the Constitution was meant to enable.

Don’t feel sorry for the holdout creditors here. These people are blood suckers, not victims.

By: Quartermaster

Quartermaster — Thu, 14 May 2009 16:14:29 +0000

The founders gave us law to avoid what barry is doing to Chrysler and its creditors. It doens’t matter what they would have gotten in court, the union was just one more creditor and they need to get in line behind the secured creditors.

That they were friends of Barry was the main thing, and Lex’s point should be well taken. Say goodbye to much of US industry after this, particularly in union states. Right to work states, which have been industrializing like crazy when the rust belt industry has moved, may have an easiuer time. The north, however? Rottsa ruck fellas. Played that game once, ain’t doin’ it again.

The left wingnuts have cut their own throats again. They never learn or forget.

By: Wilko

Wilko — Thu, 14 May 2009 15:56:09 +0000

Anon is right about who dictates the terms. I have been waiting to see the aftermath knowing that only the government was able to handle the DIP financing for Chysler and presumably GM.
But since the government derives it’s financing from us it is more than a little disturbing that a few make the rules as to who is secured and how much they will get.

You don’t get what you deserve, you get what you negotiate, apparently. It’s obvious that the administration used it’s size to exert it’s will at the expense of the creditors

By: JKB

JKB — Thu, 14 May 2009 15:55:04 +0000

If the federal government is the DIP and gets to dictate terms then they could have simply asserted that right in a lawful bankruptcy court. Instead they sought to threaten and intimidate senior creditors to give up their positions outside the jurisdiction of a bankruptcy judge. They did this so they could reward the “Friends of Barack”.

If you think finding financing was hard in January, well, wait until some unionized business tries to get a loan now. The union being on the “Friends of Barack” list. No discount for offering assets as security since the administration has tossed out the idea of a secured creditor having priority over an unsecured one.

And yes, I know that if loans are not given, the government will confiscate the cash to fund loans themselves, but that only works once. After that, they’ll have to turn on their friends since everyone else will be broke and trying to make over the wall into Mexico.

By: Brian R

Brian R — Thu, 14 May 2009 15:52:18 +0000

So now the administration is using stimulus money to tell the states how to arrange their own houses. Big surprise there, they’ve been making banks and automakers dance for their dinners for months now. Why not the states too?

It sure makes those governors who tried to turn down the funds look a lot less stupid than they were made out to be. It seems turning down the money is the only way to retain freedom of action.

By: anon

anon — Thu, 14 May 2009 14:57:49 +0000

There aren’t too many people (creditors included) lining up to provide debtor-in-possession financing for a Chrysler in bankruptcy. Without that financing, Chrysler is worth just about nothing. Ever try to sell a few billion in assets over the course of ~6 months? That’s what would happen (fire-sale at crazy al bargain basement prices) w/o DIP financing, assuming you could even get someone to buy a car plant in this economic environment.

The provider of DIP financing is always the one with the most power, and the one who gets to dictate terms. This time the government is the only entity dumb enough to put more money into the smoldering hole that is Chrysler.

These creditors are lucky to be getting anything and they know it…