President Obama announced today that Chrysler LLC would enter chapter 11 bankruptcy. After throwing billions of taxpayer dollars at Chrysler on the pretext that bankruptcy would be a horrible thing, Obama has now decided bankruptcy is a good thing. President Obama severely criticized the secured debt holders who would not agree to his terms. The four institutions that hold 70% of the secured debt were coerced into accepting a deal that is not in their best interest. They took TARP money and ,figuratively, "sold their soul to the devil." Now, they have to pay the price for that decision. If their sacrifice was for the taxpayers who bailed them out, this would be fair. Instead, the UAW is the recipient of their coerced largess. The other 30% of debt is held by small investors and hedge funds who received no government bailout. They balked at being asked to write off 70% of their money while the UAW is only taking a 50% "haircut." Under U.S. bankruptcy law, secured debtors should be in line in front of the UAW. These creditors rightly object to being asked to give away their money to the UAW. The hedge funds and pension funds involved have a fiduciary responsibility to get the best deal possible for their investors. Federal Judge Arthur J. Gonzalez has been assigned to the case. He was first appointed in 1995 and is up for reappointment later this year.
Here is the administration's just issued statement on Chrysler:
Chrysler
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