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Obama's Scapegoat "speculators"

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May 01, 2009 – Comments (17)

These are a few of the "speculators" B.O. tried to smear during his Chrysler hissy-fit this week.

According to Bloomberg:

Pension Funds

Columbus, Indiana-based Reams Asset Management bought Chrysler loans on behalf of 37 clients, including public pension funds in Seattle, Sonoma County, California and Baltimore County, Maryland. Reams also invested money for the Bill & Melinda Gates Foundation and the University of Kentucky, according to the court document.

Pension funds. Hear that you public employees? Barack Obama says you're speculators who need to knuckle under to his orders, stand behind unsecured creditors, and stop trying to get an "undeserved, taxpayer-funded bailout."

Of course, most of those who first knuckled-under were already the recipients of much larger, undeserved, taxpayer bailouts. B.O. didn't bother elaborating on that, just like he didn't bother pointing out that the people he was trying to muscle were just regular folks all over the country.

Learn from it, B.O. You are out of line on this one, and you're letting your ego get in the way of optimal decision-making.

17 Comments – Post Your Own

#1) On May 01, 2009 at 8:50 PM, devoish (98.37) wrote:

Perhaps the regular folks shouldn't have had these other folks leading the negotiations. I bet most of those "public employees" would like to see a President stand up for their health benefits.

http://money.cnn.com/2009/04/21/autos/chrysler_loans.reut/index.htm?section=money_topstories 

...The steering committee of Chrysler lenders includes JPMorgan Chase & Co (JPM, Fortune 500), Goldman Sachs Group (GS, Fortune 500), Morgan Stanley (MS, Fortune 500), Citigroup (C, Fortune 500). It was broadened to also include Oppenheimer Funds, Stairway Capital Management, Elliott Management and Perella Weinberg Partners.

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#2) On May 01, 2009 at 9:11 PM, ikkyu2 (99.31) wrote:

I actually logged in to make a post to my own blog making just this point, but you beat me to it.

Government bailing out a dying firm - ok, debatable, but it can work.

Government telling senior secured debtholders to go fish in favor of junior debt when the company is going into bankruptcy - not cool.  You cannot mess with capital structure laws, not even if you are the President of the whole universe.

I would not be surprised to wake up next week and find out that the corporate capital markets had suddenly seized up as senior debtholders suddenly awoke to the fact that they are only senior debtholders at the pleasure of the President. 

And I'd think long and hard before loaning my capital to any American business after a stunt like this. 

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#3) On May 01, 2009 at 9:18 PM, devoish (98.37) wrote:

They're still senior. Maybe, due to a legal precedent of having less than 70% of the claims? There was a negotiation. They held out. They know they did. President Obama knows they did. We know they did. The law of the land still rules.

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#4) On May 01, 2009 at 9:34 PM, motleyanimal (90.89) wrote:

My cats hissed at the television when Obama said that. It should be interesting watching the UAW run Chrysler. Well, maybe during those fragments of time between extended breaks and lunch periods.

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#5) On May 01, 2009 at 10:31 PM, devoish (98.37) wrote:

Well, maybe during those fragments of time between extended breaks and lunch periods.

Whatever will they do with the executives club memberships and the three martini lunch.

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#6) On May 01, 2009 at 11:04 PM, bostoncelitcs (39.29) wrote:

I wonder if Halliburton employees have to worry about their 401k's?

 

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#7) On May 02, 2009 at 8:56 AM, KhelSkie (69.06) wrote:

I'm going to love the mess that will become contract negotions. 

 Can you say Conflict of Interest???  Good, I knew you could.

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#8) On May 02, 2009 at 9:10 AM, lenri (72.60) wrote:

Obama may turn this company over to the unions but will the American people buy their cars. Well...the workers will. I won't.

Pres was way out of line here. I am not surprised. This is just the beginning of the new New Deal. Wanna bet the bankruptcy court screws those investors/lenders too? Everyone will fall in line.

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#9) On May 02, 2009 at 9:40 AM, Windsun33 (< 20) wrote:

It was that comment, and a few other similar recent ones, that finally totally convinced me that BO has not a clue about economics, or how capital or investment really works. Starting to wonder if Biden is feeding him his lines on the teleprompter.

 And as far as his idea that the bankruptcy will only take 30-60 days, lottsa luck Charley. I am betting more like 30-60 WEEKS.

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#10) On May 02, 2009 at 12:09 PM, amassafortune (29.48) wrote:

One of the easiest ways to precipitate another downturn in this economy would be to move toward a position that debtholders no longer have a legal and rightful place in front of workers and equity holders when a company is losing money.

My Grandma gave me a rampant speculation certificate years ago with two "E"s on it and I heard recently that the issuer is in a negative cash flow trend. I should probably cash it in while I still can.

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#11) On May 02, 2009 at 1:06 PM, devoish (98.37) wrote:

One of the easiest ways to precipitate another downturn in this economy would be to move toward a position that debtholders no longer have a legal and rightful place in front of workers and equity holders when a company is losing money.

In this case the workers are debtholders, and I absolutely agree they should be first in line, and not somehow lumped with equity holders who shold be at the back.

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#12) On May 02, 2009 at 1:53 PM, uclayoda87 (29.24) wrote:

It seems that key to understanding this administration is to find out who is typing the lines into the president's teleprompter.  I doubt it's Joe Biden unless the old senile facade is hiding a truly brilliant man.

Maybe the answer lies in an old movie:

The Manchurian Candidate

Some malevolent Russian/Chinese/Soros syndicate has hacked into the president's teleprompter to seize control without having to fire a shot.  This is no different than having zombie computers being controlled by malware, its just takes zombie control to a higher level.

So ask yourself who really benefits from the president's statements and the puppeteer will be revealed.

After reading about how we have come to this financial mess, can anyone really believe that no other conspiracies are yet to be uncovered.

 

 

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#13) On May 03, 2009 at 2:29 PM, camistocks (< 20) wrote:

Bloomberg

Chrysler Lenders Tested Obama, Lost Game of Chicken (Update1) 

Now, the government and Chrysler plan to use bankruptcy to compel the dissidents, all secured creditors, to go along with a plan to create a more viable carmaker in partnership with Italy’s Fiat SpA. In lashing out at the holdouts, Obama is attempting to rally the public behind his efforts to rescue the automaker, said Stuart Rothenberg, a Washington-based political analyst.

 

An anonymous group of 20 Chrysler lenders calling itself the “Committee of Chrysler Non-Tarp Lenders” said in a statement yesterday that they’d been treated worse than junior creditors during negotiations in violation of “long-recognized legal and business principles.” They said they were owed $1 billion.

Their loans are trading at about 15 cents on the dollar, Chrysler has said. TARP is the U.S. Troubled Asset Relief Program for banks.

OppenheimerFunds, Stairway

The dissidents included OppenheimerFunds Inc., Perella Weinberg Capital Management LP and Stairway Capital Advisors, a person representing the group said, asking not to be identified. Also in their camp is Group G Capital Partners LLC, said another person who declined to be named.

After the president’s comments yesterday, Perella said it had agreed to the buyout offer.

Obama’s team had first offered secured lenders $2 billion for their $6.9 billion in loans, and then raised the offer to $2.25 billion. In a game of chicken, the holdouts asked for $2.5 billion, and Obama’s patience ran out.

“They were hoping that everybody else would make sacrifices and they would have to make none,” Obama said. “Some demanded twice the return that other lenders were getting.”

With Chrysler now in bankruptcy, the government will pay secured lenders $2 billion, according to a court filing.

 

Deadline Ignored

While lenders representing 70 percent of the Chrysler loans agreed to Obama’s offer of $2.25 billion in cash, the dissidents ignored a deadline of 6 p.m. on April 29, according to one of the investors who declined to be named.

Many dissidents paid from 50 cents to 70 cents on the dollar for their Chrysler loans, so they’re sitting on losses, according to people familiar with the matter. 

Ronald E. Kolka, Chrysler’s chief financial officer, said in a court filing that the first-lien debt is trading at about 15 cents on the dollar in the secondary market. 

‘Absolute Priority’

Chrysler’s dissident lenders have on their side the “absolute priority” bankruptcy rule, which holds that value must be distributed according to the legal priorities of the stakeholders. What riled the group that put out the statement yesterday was that junior creditors -- a workers health-care trust -- would get equity in a new Chrysler entity while the group’s members wouldn’t.

“Junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full,” the dissidents said in the statement.

The absolute priority rule is regularly modified in bankruptcy court, said Richard Hahn, co-chairman of the bankruptcy practice at Debevoise & Plimpton LLP, a New York law firm that isn’t involved in the Chrysler negotiations. Two- thirds of the lenders can force the holdouts to go along with them in a procedure called a cram-down.

Cram-Down

“The U.S. bankruptcy code foresees the possibility that it may be necessary to vary from absolute priority, in particular when a two-thirds majority is convinced it makes legal or business sense,” Hahn said. “If the government has consents from 70 percent, that’s more than enough” to give equity to junior creditors.

The dissidents “may be calculating that they can get more money by waiting a bit longer,” Hahn said. “Presumably they will file objections in court. The issue is less whether they’ll win than whether they can cause a meaningful delay that may cause Chrysler or the government to come to an accommodation.”

As they engage in that next game of chicken, the dissidents may receive more of the public condemnation they got yesterday from Obama and from lawmakers including Representative John Dingell, a Michigan Democrat.

“The rogue hedge funds that refused to agree to a fair offer to exchange debt for cash from the U.S. Treasury -- firms I label as the ‘vultures’ -- will now be dealt with accordingly in court,” Dingell said.

entire article 

 

Dissidents - these are not dissidents, these are just greedy hedge funds. And many pension funds do invest in hedge funds. They shouldn't.

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#14) On May 03, 2009 at 4:18 PM, OldEnglish (28.14) wrote:

Yeah, those greedy speculators that hold SECURED debt... gamblers annoymous members one and all. Real maniacs.  Obama is right, only chumps and speculators loan money to American firms now. After all, Obama's patronage class is the only group that receives the protection of contract law in the new America. 

Boycot Chrysler and all the patronage firms. More importantly, you'll save yourself the agony of owning garbage: An UAW made vehicle.

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#15) On May 03, 2009 at 6:48 PM, starbucks4ever (97.62) wrote:

I pray to God that the dissidents hold out to the end and derail the bankruptcy procedure for the next 8 years. 

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#16) On May 03, 2009 at 9:08 PM, camistocks (< 20) wrote:

zloj - be careful what you ask fron God. He may not like your wish...

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#17) On May 04, 2009 at 8:18 AM, TMFBent (99.82) wrote:

You're letting the word "hedge fund" cloud your judgment, Cami. Obama made this personal, and hosed pension plans because his ego couldn't take a group of investors not kowtowing to his grandness. The others, you should realize, were forced to submit because they're already on the hook for billions in public handouts. Obama already has hooks into them.

This sets a bad precedent. Even those who agree with government intervention into the financial system (I'm one of them) should be able to agree on that. With this move, Obama's changing the rules to "I make the rules, so don't tick me off."

Sj

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