fiat

May 01, 2009 21 Replies

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In case anyone continues to doubt the contempt El Hefe harbors toward the lawful claims of capital or the law of secured lending and bankruptcy, here's an excerpt from a New York Times "live blog" of a conference call with GM CEO Fritz Henderson:

10:00 a.m. | Treasury Dictated Terms for Bondholders: Mr. Henderson said the Treasury told G.M. to offer its bondholders up to a 10 percent stake in the company in return for the $27 billion in debt that they hold but did not give a reason why. Bondholders have said the stake is too small compared to what others are receiving. The current plan calls for 89 percent of a restructured G.M. to be held by the Treasury and the U.A.W.

=93They didn=92t support us going above 10 percent,=94 Mr. Henderson said. =93We went to the maximum that they permitted us.=94

Hugo Chavez -- or even Fidel Castro -- could not have better expressed their disregard for the law, in favor of their political cronies. I expect our own El Hefe to cut a sharper figure than either of those guys, when he starts appearing in public in his pseudo-military uniform with all the braid and medals.

No, wait, El Hefe's got another deal going with the union at Hart Shaffer Marx, his favorite suit maker located back home in Illinois. After he's finished strong-arming a TARP-dependent Wells Fargo into waiving its secured rights and turning ownership of that private business over to the union, El Hefe will surely feel obliged to continue wearing the Hartmarx products. I just hope THOSE jobs don't end up costing us $250,000 apiece.

180 Out

om...

Don't believe me? Here's an article posted today to the web site of National Review magazine (William F. Buckley's rag):

Don Obama's Message to GM Lenders [Henry Payne] The Obama administration=92s brass-knuckled coercion of bondholders to surrender their first-lien bankruptcy rights so that a politically favored UAW could take a majority stake in Chrysler amounts to a forced taking of assets. And it is important to note these mob tactics were carried out not by rogue underlings but with the public endorsement of the President of the United States himself.

It was President Obams (as I noted here last week) who personally stepped in front of television cameras on April 30 to smear Chrysler investment funds as =93speculators.=94

"I don't stand with them. I stand with Chrysler's management and employees," Obama declared.

Obama=92s high profile got the intended result of cowing bondholders into submission. After all, the president is the don of Washington politics =97 and one with the IRS and the SEC at his disposal.

But Obama was sending a message to GM investors as well. Chrysler=92s Chapter 11 filing was just a warm-up act. GM=92s bondholders control $27 billion in company debt, dwarfing the $20 billion owed the UAW=92s health care (so-called VEBA) fund, or the $16 billion loans by the U.S. government.

Yet, the administration =97 through its ventriloquist dummy, GM =97 has told these investors they=92ll get just 10 percent of the company while the UAW gets 39 percent and Washington 50 percent. Sound familiar?

But GM=92s =93speculators=92 are different than Chrysler=92s easily demoniz= ed Wall Street =93hedge funds.=94 They are names like Fidelity Management, Franklin Advisers Inc., and Pacific Investment, which manage the 401ks of millions of Main Street Americans. They are also the Polish Beneficial Association, the Knights of Columbus, and the Grand Lodge Sons of Hermann in Texas. Speculators?

The White House offer =93must look to bondholders like something Tony Soprano dreamed up,=94 financial analyst Shelly Lombard has written. Sound familiar?

How far are these firms willing to go to secure a fair deal for their investors? They must even now be calculating the political costs after watching Don Obama himself mixing the concrete galoshes when Chrysler=92s lenders werre pushed off the end of the pier.

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