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.
They were hoping that everybody else would make sacrifices and they would have to make none. Some demanded twice the return that other lenders were getting.
I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars.
I don't stand with those who held out when everybody else is making sacrifices. That's why I'm supporting Chrysler's plans to use our bankruptcy laws to clear away its remaining obligations so the company can get back on its feet and on to a path of success.
These creditors have offered to take $0.50 on the dollar for their secured claims. Secured creditors take a lower interest rate on their loans in exchange for a pledge of collateral. That ensures that in the case of bankruptcy, they will be paid first. Before anyone else gets a nickel, these secured creditors, by law, should be paid in full. In attempting to enforce those rights, they have been demonized by the President of the US as not worth of his support.
Unsecured creditors, such as the union, who shouldn't be paid anything until the secured creditors have been paid, have been offered more attractive terms. The union will get a 55% equity stake in the reorganized company. The secured creditors have been offered just $0.29 on the dollar for their loans and no equity. In other words, they are being asked to accept a permanent loss of their capital with no chance of recovering the remainder.
I don't see any way one can view this accept as a raw exercise of power on behalf of the union. The President is openly favoring the union over contractually secure creditors. Does the rule of law mean nothing? Can the President just break contracts on a whim? Didn't President Obama swear an oath to uphold the constitution and enforce the laws?
The right to be secure in your property is one of the most basic rights in this country. The government cannot take your property except for a public use and even then they have to provide equitable conpensation. In this case, the office of the President is attempting to take property from one group of citizens so he can award it to another group. How is that any different than what Hugo Chavez is doing in Venezuela?
Citizens have a right to expect that the government, through the court system, will enforce contracts. What do you do when it is the government itself that is trying to break the contract?
The attorney for some of the holdout creditors was on Frank Beckman's radio show this morning. In that interview, he alleges that the "executive branch" intimidated one of his clients into taking the offered deal. That client was Parella Wienberg. They were told that if they didn't take the deal that the entire weight of the White House press corps would be brought to bear against them. That sounds a lot like extortion to me. And who still believes the press is objective in covering this White House?
This episode says something about President Obama and the tactics he is willing to employ to get his way. It isn't a pretty picture.
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