This is encouraging. George Schultze, an unintimidated critic of the President Obama's possibly illegal maneuvering in the Chrysler bankruptcy negotiations, may have some big name allies.
Pacific Investment Management Co., Barclays Capital and Fridson Investment Advisors have joined Schultze Asset Management LLC in saying lenders may be unwilling to back unionized companies with under funded pension and medical obligations, such as airlines and auto-industry suppliers, because Chrysler's creditors failed to block Obama's move. The reluctance may put additional pressure on borrowers seeking capital in the worst financial crisis since the Great Depression.
"Lenders will have to figure out how to price this risk," Schultze, 39, said in a telephone interview from his office in Purchase, New York. "The obvious one is: Don't lend to a company with big legacy liabilities or demand a much higher rate of interest because you may be leapfrogged in a bankruptcy."
Former GE CEO Jack Welch observed the obvious:
Jack Welch, former chief executive officer of General Electric Co., criticized how the government handled Chrysler's bankruptcy, saying unions were favored at the expense of creditors.
"I didn't like the terms," Welch, 73, said in an interview yesterday at the Boston Convention Center. "The creditors' rights were trashed and the unions got 55 percent of the company."
Bloomberg uncharacteristically noted another hard to ignore dilemma:
The struggle between creditors and labor has also reached Hartmarx Corp., the 122-year-old clothing maker in Chicago that made the suit Obama wore to his inauguration. Unions are gaining government support in a fight against Wells Fargo & Co., the bankrupt company's lender.
More than 30 members of Congress, including House Financial Services Committee Chairman Barney Frank are urging the San Francisco bank not to liquidate the clothier, according to Representative Phil Hare, an Illinois Democrat. The lawmakers are also seeking Treasury Secretary Tim Geithner's backing.
President Obama has created a choice for tax payers with his handling of the Chrysler bankruptcy: Do you want a permanently government subsidized, managed and financed auto industry or an independent one? With the Hartmarx deal, it has to be asked: Where does this administration and Congress draw the line? Is your job next? Or is it your savings that are next at risk? The private sector has for decades resolved these questions in Federal Bankruptcy Court but the Obama administration claims it knows better and deigns to assume this responsibility itself. Does this policy put the nation in better hands?