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Did White House Team Abuse Chrysler's
Creditors, or Justly Target Evil "Speculators"?
55% of Chrysler will be owned by a union retiree health care
trust fund and 35 percent held by Italian automaker Fiat.
After previously refusing the government's settlement offer, a group
of Chrysler's creditors capitulated on Friday rather than taking
their case through the bankruptcy processes. The decision by the
so-called non-TARP lenders is a victory for the Obama Administration
and avoids the potential for a protracted court battle: But at what
cost?
Critics like hedge fund manager Cliff Asness say the Obama
administration abused power by threatening Chrysler's creditors -
either directly or merely rhetorically, depending on whom you ask.
The President had some harsh words for the "speculators" who
originally refused to play ball while car czar Steve Rattner has
been accused of threatening ruin the reputations of certain hedge
fund managers, most notably the principals of Perella Weinberg
Partners. (The White House steadfastly denies this claim.)
Perhaps more importantly than who said what is the undeniable fact
the administration effectively rewrote the contracts governing
Chrysler's obligations, fundamentally altering how creditors have
historically been treated in a bankruptcy situation.
If you recall, the "sanctity of contract law" was cited by Obama's
team during the scandal over the AIG bonuses. The fact some
contracts are apparently more "sacred" than others raises an
interesting question: Why the tough love for autos and their
creditors and kid gloves for the financials and their
lenders/counterparties?
That this double standard is continuation of the prior
administration's policies suggests very little change has come to
Washington D.C., at least when it comes to bailouts. And if it was
economic gangsterism when Bush-Paulson were running the show, can't
the same be said of the Obama-Geithner-Rattner team?
Posted by Aaron Task
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