Obama carries out threat against Chrysler bondholders

Tom Lauria, former legal counsel for some of the bondholder firms involved in the Chrysler bankruptcy, claims the White House threatened to use the press corps to destroy the reputation of one of his clients if they continued to oppose the proposed deal. The White House has denied this, and a spokesman for the client has as well.

It is interesting, though, that no one seems to be questioning whether the press corps could or would be used in such a manner. One could argue that they don't need to questions, as the press is above reproach. One would be wrong, and entirely out of touch with current events. One need look no further than Newsweek yesterday to see how happy the media is to offer free PR work to the White House.

No, the only issue is whether the threat was made, not whether it would have been carried out. In fact the threat is being carried out as we speak.

Obama has made his stance clear: "While many stakeholders made sacrifices and worked constructively, I have to tell you some did not," the president said. "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."

Obama further echoed his theme of the investor class as greedy parasites: "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."

What is the sacrifice that the bondholders were asked to accept? They are supposed to accept 29 to 33 cents on the dollar for their stake (reports vary), compared with 50 cents on the dollar offered to the UAW. The bondholders were reportedly holding out for the same 50 cents offered to others. Not all sacrifices are equal, evidently.

And just who are these money-grubbing holdouts? According to Lauria, his clients "are mainly fiduciaries for pension plans, college endowments, retirement plans and credit unions who invested in low yield supposedly very secure first lien debt".

Pension plans, retirement plans, college endowments, and credit unions. So these awful, greedy investors are retirees, students, and families trying to save. Somehow these people are less important to Obama than Chrysler's management, suppliers, and dealers. Never mind that the same people who supposedly want to buy Chrysler-made cars are the very same retirees and families he's claiming are not willing to sacrifice.

Then there are the legal ramifications. Lauria described the debt held by these bondholders as "very secure first lien debt". The UAW's take has been described as unsecured. Legally, in any normal bankruptcy proceeding, the bondholders would have to be paid first. Anything left over would go to the UAW. So is it really so selfish of the bondholders to give up their prior claim and settle for being treated merely equal with the UAW?

It is to President Obama. The bondholders, in his opinion, should sacrifice by going from the front of the line to the back, while the UAW should "sacrifice" by stepping to the front.

Let's call a spade a spade, folks. Obama's plan for screwing average Americans in favor of his union pals is the worst kind of politics. It's cronyism. What's worse is that Obama is doing precisely what the White House denies he threatened to do: he is using the media to try to discredit the bondholders who dare insist that they be treated merely equally, let alone fairly and legally.