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The President of the Banana Republic

Many people have used the term Banana Republic to describe the change Barack Obama is bringing to our country. Going after previous administrations for their policies, the politicization of the US census, and now we have the Chrysler debacle. Barack Obama is using his power to subvert established bankruptcy law in order to reward those who are politically close to him: the UAW.

John at Power Line explains:

This is banana republic capitalism at its worst. Political influence, rather than the law, dictates the rights of the parties. When some of the secured creditors refused to be intimidated, Obama libeled them in the press, saying, outrageously, "I don't stand with those who held out when everyone else is making sacrifices." Actually, under Obama's plan the politically favored parties, principally the UAW, will benefit--will steal money, to put it crudely--from the parties who held out. Those parties call themselves the "non-TARP lenders."

This highlights the government's conflict of interest in this transaction, as in so many others now underway. Some of Chrysler's secured creditors are banks who received TARP money. As the New York Times put it, those lenders are "beholden to Washington" and "defying the administration was never a serious option."

It remains to be seen what will happen in bankruptcy court. Already one key player, Perella Weinberg Partners, "under intense pressure from the White House," has caved in and agreed to accept Obama's terms. Whatever the ultimate result, this episode will have consequences. The Wall Street Journal notes:

If the current plan is pushed through, then good luck to any unionized firm trying to raise secured debt on decent terms in the future.

For Chrysler, the administration's plan spells disaster. It is inconceivable that the UAW, the principal source of Chrysler's problems, will manage the company back to profitability. More likely, Chrysler will become a vehicle through which the federal government provides uneconomic subsidies to unionized auto workers and retirees.

That's one huge political payoff - and with taxpayer dollars. As an aside, I hope Perella Weinberg Partners' clients sue them for failing to perform their feduciary responsibility by accepting 33 cents for every dollar when they could have negotiated up to 67 cents on the dollar in bankruptcy court.

I'm not sure which of our country's laws that were in tact before Obama came into power will still be in tact when he's out of power. All hail the President of the Banana Republic.

Update: Obama is really going to the mat for the UAW on this. He's going so far that he's calling these hold out creditors and threatening them if they don't go along with that he wants for the UAW. NewsBusters brings us this interview that Tom Lauria, attorney for the non-TARP funded creditors who are, rightfully, demanding that bankruptcy law be followed, had with WJR's Frank Beckman:

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.

OK, number one. Number two, 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, in fact I'm going to have to go here, because I'm heading down to the bankruptcy court to start taking on this battle, which is of epic proportions. But 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.

Beckman: Tom Lauria, really appreciate it. Final question, will Oppenheimer Funds and Stairway Capital, your other two clients in this, are they committed to standing firm? I've got to believe they're facing the same pressure Perella Weinberg did before it changed its mind and said "Okay, we'll go along now."

Lauria: Well they are today, but the Executive Office hasn't called them yet and made threats to them. So, maybe by tomorrow I won't have any clients, and maybe this fight will be over.


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Comments (8)

This bannana thing is racis... (Below threshold)
epador:

This bannana thing is racist I tell you.

Yeah, can you imagine the t... (Below threshold)
GarandFan:

Yeah, can you imagine the timidity of those hedge fund managers actually doing their fiduciary duty to their stakeholders? Of course, Obama, with all his LEGAL TRAINING, can see right through that. Those people are just being "obstructionist". Does The One really have a legal degree?

GrandFan -0 "the timidi... (Below threshold)
marc:

GrandFan -0 "the timidity of those hedge fund managers actually doing their fiduciary duty"

obama's class warfare in this matter is striking, by labeling all the recalcitrant debtors as hedge fund managers is hogwash.

There's millions of private investors and an additional millions of Americans via their retirement funds that have money invested and owed to them by Chrysler. They are all part of the 30% that are telling obama and the UAW to stuff-it in their collective butts.

As a sidenote, wonder what hyperbolist thinks of his Gov pumping in over 2 billion to this scam?!

Amazing that no one in the ... (Below threshold)

Amazing that no one in the main stream media has covered this story. This the change that all of these left wing numb nuts voted for? This is basically the mob mascarading as the Obama administration. While Obama oversteps the boundaries of the executive branch with these sorts of tactics, the left is still concerned with the way the CIA kept our country safe by interrogating known terroists. In 1000 years, they will have written that this was the beginning of the fall of the great country called the United States, when people with no qualifications undermined the principles laid down by the genuises we call the founding fathers. Jefferson is rolling in his grave about now.

> Obama libeled them in ... (Below threshold)
Arthur:

> Obama libeled them in the press, saying, outrageously, "I don't stand with those who held out when everyone else is making sacrifices."

I expect the President to stand for the law. I guess that's too high a bar for Obama.


It's obvious that they know... (Below threshold)
CDR M:

It's obvious that they know what they are doing hence the concern of DHS inre right wing extremists. They know if they violate the Constitution enough, there will be consequences and probably not all settled in the court of law. When you have 1.3 million firearms sold in the first quarter this year, there are some real concerns out there of where this country is going in regard to it's Constitutional authority. Blackmailing/strongarming investment firms to take bad deals brokered by the executive office, approved by the legislative and overlooked by the judiciary, you start to mix the ingredients for some real bad juju.

In 1000 years, they will... (Below threshold)
Deke:

In 1000 years, they will have written that this was the beginning of the fall of the great country called the United States, when people with no qualifications undermined the principles laid down by the genuises we call the founding fathers. Jefferson is rolling in his grave about now.

I don't think it will be that long, there are so many similarities between the fall of the Roman Republic and the current state of the U.S. it's scary. Rome is the only great empire to fall from internal pressure and I feel the U.S. is on the same track, that's right whether we like it or not were an empire in every sense of the word, it's really a shame but as they say history has a way of repeating itself.

Entrenched, Dynastic, political class, giving rise to dictatorship. Ceaser, who promises the mob more and more free bread and circus thus garnering more support. A Plebian class, the Roman middle class, who has to shoulder a greater and greater burden, a huge weakining of the feeling of being "Roman"

Rome took a couple of centuries to complete it's final downfall but in modern times with the speed of communication it will take a lot less for us. It's sad but in a way fascinating to be living at the mid to end point. Here is the REALLY scary thing though, Rome was the solidifying power in the world at the time, and they kept the peace and insured stability, what happened when they were no longer around? The world entered a Dark Age, from which it took centuries to recover. If the U.S. is not around to keep N. Korea, Iran, all these tin pot dictators with Nukes in line who is gonna do it? The U.N.? I think we can see where this is going.

Your witnissing history, the sad part is it's our children and grand children that will have to pay the price.

It is sad that so many peop... (Below threshold)

It is sad that so many people can't see the forest for the trees. As others have so eloquently stated, there is a well established, legal order by which creditors must be paid back.

In this case, Obama has decided that the well established rule of law in these matters did not fit with his purposes, and thus should be dispensed with. In addition, he seized the opportunity to cast more unfavorable light on Wall Street, weather these particular groups of investors deserved it or not. No matter that the creditors bought the bonds based in large part on the fact that they were guaranteed by law to be paid back IN FULL in any bankruptcy proceeding, before any other creditors (including the UAW health fund)received a thin dime.

I fear it is only going to get worse for well established legal principles before it gets better. Now we have Fiat involved in the mix. They are going to lend Chrysler a hand in the design of small, fuel efficient vehicles. The problem is that Americans have demonstrated that they do not want these vehicles, unless gas prices are historically very high. How then to create a market for these products? I'll let you draw your own conclusions here, but you can start with cap and trade, restricted oil exploration and offshore drilling. Could that make fuel prices rise, and drive more Americans into the arms of (new, Chrysler/Fiat produced) smaller vehicles? You be the judge.

Chrylser should have been allowed to declare bankruptcy long ago, before the many taxpayer billions were in place. Not only would the taxpayers not not be on the hook, but the new Federal government would not be able to get their grimy paws on any more of America.




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