John Bolton

John Bolton

Sunday, May 10, 2009

Obama Plays Robbing Hood for Auto Union Friends

He steals from Chrysler property owners and gives to the Unions!

Remember during the 2008 presidential election when conservatives warned that Obama was a socialist in sheep's clothing and that his real economic plan was based on redistribution of wealth?

The very idea was pooh-poohed by the hoi polloi who got swept along by the hopey changey siren song. It's not true they insisted. Obama's a centrist. How do you know we asked? After all, we reminded them that Obama is the most liberal member of the U.S. Senate. They responded: we know he's a centrist because he told us so. This is just one of your "scare" tactics he warned us about.

And that was that.

It turns out Joe the Plumber was right. Now we the Chrysler deal and it is the most blatant example of theft by government and favoritism to campaign supporters of all time. And few seem willing to make a squeak about it.

Mata Harley covered the thuggish behavior of White House agents in the Chrysler deal and their threats to destroy the reputation of Chrysler investors who have seen their stake in the companies seized and handed over to the auto union. On Friday, Chrysler's creditors, owed billions which were spent to keep the company afloat, gave up their fight for a fairer bankruptcy deal.

Creditors with a secured stake in Chrysler receive 29 cents on the dollar while the Auto Union, receives 50 cents. The Union may end up with a 55% majority control of the company and potentially recover the entire $10.6 billion for their retiree health plan.

I'd like to focus on the larger issue. It's very clear that what happened to Chrysler's investors could happen to anyone who is on the losing side from a group favored by Obama. He got away with this power and money grab and there is nothing to stop him from doing it again and again.

Here is a smattering of excerpts from columns which address the issues raised in the Chrysler deal and how they may impact the property rights and fundamental freedom essential to the survival of the most prosperous economic system on the planet:
White House puts UAW ahead of property rights
By: Michael Barone
The Washington Examiner

Think carefully about what’s happening here. The White House, presumably car czar Steven Rattner and deputy Ron Bloom, is seeking to transfer the property of one group of people to another group that is politically favored. In the process, it is setting aside basic property rights in favor of rewarding the United Auto Workers for the support the union has given the Democratic Party. The only possible limit on the White House’s power is the bankruptcy judge, who might not go along.
Obama’s attitude toward the rule of law is apparent in the words he used to describe what he is looking for in a nominee to replace Justice David Souter. He wants “someone who understands justice is not just about some abstract legal theory,” he said, but someone who has “empathy.” In other words, judges should decide cases so that the right people win, not according to the rule of law.

The Chrysler negotiations will not be the last occasion for this administration to engage in bailout favoritism and crony capitalism. There’s a May 31 deadline to come up with a settlement for General Motors. And there will be others. In the meantime, who is going to buy bonds from unionized companies if the government is going to take their money away and give it to the union? We have just seen an episode of Gangster Government. It is likely to be part of a continuing series.

Obama's bailouts are rewards for his trade union allies
By: Stephanie Gutmann
The Telegraph
May 7, 2009

When the news came last week that Chrysler was going to go through bankruptcy proceedings like any other troubled company - instead of being propped up by massive transfusions of newly printed or borrowed government money like other American companies considered "too big to fail" - many felt relief. Ah, we thought, "finally the free market is going to be allowed to act freely." Creative destruction and all. Chrysler might live or it might die but it least it wasn't going to be like AIG, which got massive bailout of American taxpayer money and then said it needed more, and then said it was going to shut down anyway.
Obama did not have to intervene at all, and that each of his interventions takes us farther from the clean, organic, free-market economic recovery many us of still hold faint hope of seeing and puts us closer to the nightmare scenario of a managed economy and a greatly expanded government with favours doled out to privileged members of an "inner party" who are beyond the reach of elections.
As a friend of mine puts it, what most disturbs him about the Chrysler thing is that it's "just economics by mob rule. The side that can assemble the most votes and the most muscle wins. The unions provide the votes, the government provides the muscle. It works in the short run but now of course nobody will lend to other unionized companies that are in trouble. It's really the Marxist ideal of the working class overrunning businesses by sheer numbers.

So the union now essentially owns Chrysler. But of course it won't run it for the benefit of investors or even for its customers. It will run if for the benefit of union members. They'll just loot the company for wages and benefits and before you know it the company will be teetering toward bankruptcy again. At that point the government will step in and rescue again and give it a lot more money to keep it alive. That's how all the major manufacturers in Europe have ended up - and of course this was the essence of the Eastern European economy. They were just big shells of companies financed by the government for the benefit of the workers."

Welcome to the Worker's State.

Chrysler: An Anti-Union Backlash in Financings?
By Heidi N. Moore
Wall Street Journal
May 4, 2009

Many investment bankers, bankruptcy experts and investors are worried about the precedent being set by the government’s preferential treatment of Chrysler’s unions at the expense of Chrysler’s secured lenders, who are supposed to be the first to be paid off in bankruptcy proceedings and who typically get the best recovery. In the government-led plan for Chrysler, the UAW pension fund will end up owning 55% of the auto maker, while the secured lenders were forced to take just 29 cents on the dollar for the debt they hold.

To financiers, that represents a troubling signal that union interests will supercede financial interests in future cases. “If you think the government will continue to intervene in the economy as much as they have an appetite to, and they’re going to come down on the side of the unions, then you’re going to be careful about getting involved with those companies,” one bankruptcy expert said.

“You can imagine banks, hedge funds, are going to think twice about lending to a company with union exposure,” said a banker who helps companies raise money. “If you don’t know what the rules are going to be, the amount of debt that companies are going to be able to raise is going to drop for unionized companies and their cost of capital is going to get much higher as well.”

“It’s not a fair fight when they have all the money and all the guns,” one banker said about the government. “It’s very limited what we can do because we can get dragged through the press if we don’t cave to whatever outcome they think is right.”

Unions Prevail Over Wall Street in Chrysler Deal
MAY 4, 2009

PRESIDENT BARACK OBAMA BLAMED CHRYSLER'S BANKRUPTCY on "speculators," but the real problem was that the government's plan gave too much to the auto maker's unions and not enough to creditors.

If the secured creditors holding $6.9 billion in claims had been offered anything close to what the administration wants to give the United Auto Workers, there would have been no bankruptcy filing by Chrysler.

In the bizarre pecking order offered by the administration, the unions, which are at the bottom of Chrysler's capital structure, would get nearly full recovery value for their $10.6 billion retiree health-care claims, while the secured creditors at the top of the hierarchy would receive about 30 cents on the dollar.

Credit that to politics and a likely desire by Obama to reward the powerful UAW. After all, who in America really cares about a group of deep-pocketed banks and investment firms holding the $6.9 billion of Chrysler debt? "I don't stand with them," as Obama said of the dissidents who derailed the deal.

Another surprising aspect of the Obama proposal was the willingness of the Treasury to forgive a $4 billion loan to the company made in December in return for an 8% stake in the restructured auto maker -- an interest that could be worth only 20 cents on the dollar assuming new Chrysler's equity is valued at $10 billion.

The United Auto Workers Union invested $4.45 million in Obama's campaign. Their return on that investment at Chrysler may total $10.6 BILLION. Not bad and with more to come from General Motors it's clear that pay to play politics is alive and well in the White House today!

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