For What It's Worth

There’s something happening here.
What it is ain’t exactly clear.
There’s a man with a gun over there,
Telling me I got to beware.
I think it’s time we stop, children, what’s that sound?
Everybody look what’s going down.

There’s battle lines being drawn.
Nobody’s right if everybody’s wrong.
Young people speaking their minds,
Getting so much resistance from behind.
It’s time we stop, hey, what’s that sound?
Everybody look what’s going down.

What a field day for the heat.
A thousand people in the street,
Singing songs and carrying signs,
Mostly say, “Hooray for our side.”
It’s time we stop, hey, what’s that sound?
Everybody look what’s going down.

Paranoia strikes deep:
Into your life it will creep.
It starts when you’re always afraid.
You step out of line, the man come and take you away.

The Buffalo Springfield (1967)

From Information Arbitrage:

Another train wreck is the auto companies. Chrysler is currently staring into the abyss, soon to become part of the Fiat family. In the meantime, Chrysler’s bondholders are in a game of chicken with the US Government, which would like to portray them as "obstructionist" and "putting their interests in front of preserving the company." Well, duh. What else did the the Government expect them to do, donate their holdings to the Chrysler pension plan? The kind of coercion and stiff-arming going on here, if not amicably settled, will land the Obama Administration and recalcitrant Chrysler creditors in a pitched court battle, which could have ramifications for not just the auto industry but any sector where the Government seeks to get "enthusiastically" involved. Is restructuring under the Administration’s watch somehow more beneficial to all constituencies than under the experienced eye of the bankruptcy court? While the Administration has been pulling strings from the sidelines and tacitly engineering the bailout of the financial sector, it has steadfastly refused to force troubled institutions to face into their problems, whether through bankruptcy or radical restructurings of their businesses. The inconsistencies between the treatment of the autos and the banks is blinding, likely leading to suboptimal outcomes in both cases. Pussyfooting around with the banks. Wielding the hammer with Chrysler and GM. It just doesn’t make sense. (Emp. mine – Ed.)

Mish Shedlock has more thoughts, and provides some quotes from John Mauldin:

And before I close, let me make a few comments about the Chrysler and GM issues. I tell my kids all the time that actions have consequences. If I hold senior secured debt of a company and the government tells me I have to take less than unsecured junior debtors, I am not going to be happy. I may have been dumb to make the loans in the first place, but I did it under a very specific contract and the rule of law.

If the Obama administration arbitrarily changes those rules to favor a political class (unions), then that is going to have a chilling effect on future lending to all corporations. As an aside, they are spending $12 billion to save 54,000 Chrysler jobs (at $22,000 per job). With 600,000 jobs a month being lost, why are these 54,000 jobs more special than those of the rest of the unemployed, who get a fraction of that amount in unemployment benefits? (Emph. mine – Ed.)

Actions have consequences. The lenders who are forcing the Chrysler deal into bankruptcy court are not all "predatory hedge funds." They are mutual funds, pension funds, and other financial firms with small stakeholders as their investors.

Cerberus, the hedge fund that originally bought Chrysler, deserves to lose their money. They made a bad investment. But those who lent money deserve to be treated in accordance with the contracts they signed.

Demonizing investors and businessmen is hardly helpful. They are precisely the people we need to help get this economy moving. Governments don’t create true job growth, businesspeople do, and mostly small businesses. I am not certain why small business owners, the job creation engine of the country, should see their taxes raised in order to protect bond holders of automobile companies or banks, or for union jobs to be preserved in companies that are clearly not competitive.

What is going on here? Is Obama turning the Constitution into a worthless scrap of paper and ignoring 226 years of case law?

 

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One Reply to “For What It's Worth”

  1. Why let something like that silly old Constitution get in the way of nationalizing car companies…and banks…and health care…hey, it’s just another day in the March Toward Socialism.

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