Thomas Lauria, attorney for Chrysler's senior creditors, made the accusation that the White House threatened one of his clients, Perella Weinberg Partners, causing them to cave and accept the White House's offer of 29 cents on the dollar. Of course, the White House denied the accusation calling it "completely untrue."
The White House's flat denial has become a bit more complicated as we learn today that Lauria's accusation has been corroborated by two other creditors who were in the meeting with Obama administration officials. The Business Insider has details and they are pretty shocking:
Creditors to Chrysler describe negotiations with the company and the Obama administration as "a farce," saying the administration was bent on forcing their hands using hardball tactics and threats.
Conversations with administration officials left them expecting that they would be politically targeted, two participants in the negotiations said.
Although the focus has so been on allegations that the White House threatened Perella Weinberg, sources familiar with the matter say that other firms felt they were threatened as well. None of the sources would agree to speak except on the condition of anonymity, citing fear of political repercussions.
The sources, who represent creditors to Chrysler, say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler. One person described the administration as the most shocking "end justifies the means" group they have ever encountered. Another characterized Obama was "the most dangerous smooth talker on the planet- and I knew Kissinger." Both were voters for Obama in the last election.
One participant in negotiations said that the administration's tactic was to present what one described as a "madman theory of the presidency" in which the President is someone to be feared because he was willing to do anything to get his way. The person said this threat was taken very seriously by his firm.
The madman theory. The last time we heard that Nixon was president:
As Nixon told his White House Chief of Staff H. R. Haldeman:
"I call it the Madman Theory, Bob. I want the North Vietnamese to believe I've reached the point where I might do anything to stop the war. We'll just slip the word to them that, 'for God's sake, you know Nixon is obsessed about Communism. We can't restrain him when he's angry -- and he has his hand on the nuclear button' -- and Ho Chi Minh himself will be in Paris in two days begging for peace."
So, is Obama channeling Nixon? Maybe Machiavelli?
Yes, the people who made these statements were kept anonymous, but who wouldn't be want to be under these circumstances?
What keeps going through my mind at this point, though, is what will the bankruptcy judge do? Judge Arthur Gonzalez has 200 years of bankruptcy law precedent that he applies with every bankruptcy that comes before him. Will he follow the law this time, which says these secured creditors get paid first and in full or as much as they can be, or will he bow to the pressure from the White House? I'm not accusing the White House of contacting the judge, but you know that he has to feel immense pressure right now. If he does not do as Obama wants, then he may find himself the target of left wing media and blog antipathy unlike anything he has experienced in his life. Judge Gonzalez was a trustee before being appointed a bankruptcy judge. Trustees represent the interests of the bankruptcy estate for the benefit of the creditors, so he knows full well what should happen here. The question is, will he actually follow the 200 years of bankruptcy law precedent or will he cave, too? And if he does cave, what happens to those 200 years of bankruptcy law precedent? We may not know for a while, as I expect Chrysler's senior creditors will appeal and take their case as high as they can.
Hat tip: Ed Morrissey at Hot Air