Those hedge funds made a very patriotic decision to push Chrysler into bankruptcy as they were making the best decisions for their clients, that is what America’s system of capitalism is all about. President Obama’s little rant the other day was the same disgusting display he makes whenever someone has the nerve to disagree with him. That’s why he went after Rush, Hannity, and Cramer. Its also why he still goes after the almost one million people who went to the tea parties.
Apparently the President’s anger knows no bounds, the lawyer for most of those hold out Chrysler investors Tom Lauria appeared on the Frank Beckman show on WJR-Detroit and he claims that the White House threatened to ruin the investors if they didn’t go along with their plan. Below are key parts of the interview:
Lauria: … they bought a contract that says that they get paid before anyone else does by Chrysler. And they have been told by the government who is in complete control of Chrysler, oddly enough, that despite their contractual right, they do not get paid before everyone else.
So they are standing on their rights, standing on the law, trying to defend in effect what is the Constitution of the United States, to make sure that they get what they’re entitled to for their investors.
Beckman: ……Why not take a concession that is being asked of everybody else and is being accepted by everybody else, including other hedge funds that had bought some of these bonds in Chrysler?
Lauria: ….I can tell you for sure that I represent one less investor today than I represented yesterday. One of my clients was directly threatened by the White House, and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight. That’s how hard it is to stand on this side of the fence. ….That was Perella Weinberg.
.…Now let me just tell you, to be clear, that we do not oppose the rehabilitation of Chrysler. We think it is vitally important that a company like Chrysler be protected to the extent that it can be within the framework of the law. I want to also say that we do not oppose the government backstopping or supporting the pensioneers and retirees and workers of Chrysler.
I actually think that in a troubled economic time like we’re in, that is an appropriate role for the government to perform. What we do oppose, however, is the abuse of the bankruptcy law to coerce first-lien lenders subsidize the rehabilitation of Chrysler or the backstop of the obligations to the pensioneers and retirees beyond what they will do voluntarily.
And just to be clear, these clients of mine have agreed to compromise 50% of their first-lien position to help support the rehabilitation of Chrysler — Contrary to what the President said yesterday in his new conference that “these people will not give to support the effort,” they have agreed to compromise 50% of what they’re owed to support the rehabilitation of Chrysler, despite the fact that they’re under no obligation whatsoever to do so.
… My clients bought a position in the Chrysler capital structure that entitles them to be paid “first dollars out.” That is, they’re to be paid 100 cents of what they’re owed before any junior creditors get a penny.
The government has offerend them 29 cents on the dollar, in the context of a restructuring of Chrysler that will send over $10 billion of value to junior claims. And when I say $10 (billion), that’s a floor. As we’re continuing to review the papers that Chrysler has filed in the bankruptcy court, that number may actually be more like $20 billion. So in other words, my clients, who are contractually entitled to 100 cents on the dollar, are being asked to take 29 cents on the dollar, while junior creditors are being offered somewhere between $10-$20 billion of value in the Chrysler rehabilitation.
….what people really need to understand is that the people who bought this debt are pensioneers, teachers’ credit unions, personal retiree accounts, retirement plans, college endowments. That’s who my clients act as fiduciaries for. And they make all kinds of investments. And as you can imagine in this economy, there are numerous of those investments that have gone bad.
….The fact of the matter is they bought a contract that said “you’re first in line, and in exchange for that you’re going to get a very low rate of return.” And I think everybody in this country should be concerned about the fact that the President of the United States, the executive office, is using its power to try to abrogate that contractual right. If the President will attack that contractual right, what right will it not attack?
Beckman: You made a comment to me before we went on the air about the significance of this case as it relates to the Constitution. I’d like you to explain that to my audience.
Lauria: Well, look, there are kind of two aspects to that. The first is the right to property and the right to contract are kind of sacronsanct in this country. I think everybody understands that when you make a deal it’s supposed to be honored, and if it’s not honored you’re supposed to be able to get protection in court. And what is happening here, through the force of the United States government, and that’s what’s disturbing about this — I mean, private parties have contract disputes all the time — but for the United States Government to step in, the Executive Office of the United States Government, who under the Constitution is charged with enforcing the laws to step in and try to in effect break the laws, I think we should all be concerned about that. That is a constitutional issue.
…realize that our Constitution is premised on the notion that there is a balance between the three branches of government: the executive, the legislature, and the judiciary.
And what’s going to be happening, …. what is going on here is you’ve got the executive branch coming into the judicial branch. And I think it is really important for the Constitution of the United States that people understand that the judicial branch can stand independent and interpret and apply the laws as it’s required to do under the Constitution in the face of intense pressure from the Executive branch to do otherwise. You can read the entire interview at Bizzyblog
Folks If this doesnt give you the chills I don’t know what will. The President of the United States is ignoring the constution, and trying to abrogate a legal contract. If he can do that what’s next? Your deed to a house? Adoption papers? Hell if the White House doesnt like Sprint, can they switch you to Nextel? Can he socialize industry on a whim? Can the president of the United States wake up from an afternoon nap and nationalize Baskin and Robbins because his daugters want ice cream?
You might think all of this is silly, but the White House is trying to annul a basic right given to us in the Constitution. Once government can tamper with a legal contractual agreement between two parties, for any reason, we will cease to be a democracy.