View Full Version : LEGAL: Is Obama violating basic contract law with his Chrysler/Fiat deal?
Pharon
06-09-2009, 09:37 AM
This is an interesting video (http://money.cnn.com/video/news/2009/06/08/news.060809.intreasurer.cnnmoney/) that explains the problems with the whole Chrysler/Fiat "buyout" plan. In a nutshell, when a company goes bankrupt (or does restructuring), the first people to get paid are the secured creditors. It's been this way for 150 years, and it's been a pillar of our economic system.
Obama is trying to use TARP money as leverage here, but it's a misapplication of Treasury funds, since the auto manufacturers were not part of that legislation. In fact, they were specifically omitted.
The deal they're trying to make here lets Fiat and the unions move ahead in the creditor line, and the case is probably going to be heard by the Supreme Court soon.
Here's an article (http://blogs.wsj.com/deals/2009/06/08/an-indiana-long-shot-over-chrysler-at-the-supreme-court/) that discusses the temporary stay that Ginsburg issued yesterday to give the Indiana pension funds people (the guy in the video) more time to make their case. Should be an interesting one to follow as it develops.
Seriously though, watch the video. The guy has some great responses, and the chick interviewing him is so blindly biased toward Obama, it's almost uncomfortable to watch.
redsox39
06-09-2009, 09:42 AM
She was coached, lol.
"So you are saying that the Constitution is more important than Obama's intentions?"
Wow.
Das Kahlua
06-09-2009, 09:50 AM
If you look at this proposal, what two groups would benefit the most and what group would get the shaft? The government and the UAW would benefit, getting much more control over Chrysler, not to mention precedent for this type of action, and the investors would get the shaft.
Of course this violates contract law, but is anyone really surprised? This is the American left in a nutshell.
Pharon
06-09-2009, 09:59 AM
I'm surprised. Why? Because no one -- not even among any of the Washington liberals -- has ever done this before.
It's as much a blatant and egregious violation by the executive branch as the shit that Bush was trying to pull on the international stage for the past 8 years.
Both were flagrant illegal power grabs done in the middle of a crisis.
Anyone else here see this connection?
And yet not a PEEP from anyone on the left over this.
(THAT PART doesn't surprise me.)
Das Kahlua
06-09-2009, 10:03 AM
I'm surprised. Why? Because no one -- not even among any of the Washington liberals -- has ever done this before.
It's as much a blatant and egregious violation by the executive branch as the shit that Bush was trying to pull on the international stage for the past 8 years.
Both were flagrant illegal power grabs done in the middle of a crisis.
Anyone else here see this connection?
And yet not a PEEP from anyone on the left over this.
(THAT PART doesn't surprise me.)
True, this is an extreme that hasn't been reached before, but so is the level of spending and government control over every aspect of our lives, so this doesn't really surprise me.
Our Constitution and laws are only sacrosanct to the left when a Republican is in charge, when they're in charge they're only obstacles that must be avoided and ignored.
redsox39
06-09-2009, 10:06 AM
True, this is an extreme that hasn't been reached before, but so is the level of spending and government control over every aspect of our lives, so this doesn't really surprise me.
Our Constitution and laws are only sacrosanct to the left when a Republican is in charge, when they're in charge they're only obstacles that must be avoided and ignored.
Let's be fair here, Neither Bush, nor Obama is going to win the "Constitutional Prize for Accuracy"...
Das Kahlua
06-09-2009, 10:10 AM
Let's be fair here, Neither Bush, nor Obama is going to win the "Constitutional Prize for Accuracy"...
No they're not, but many conservatives came out and called Bush out on his BS. I don't see liberals doing the same for Obama.
BIG PIZZLE
06-09-2009, 10:32 AM
Conservatives only started jumping ship on bush when the shit hit the fan. Give it time..
redsox39
06-09-2009, 10:40 AM
Conservatives only started jumping ship on bush when the shit hit the fan. Give it time..
They might be too "Emotionally" invested, lol.
Okie Medicvet
06-09-2009, 10:52 AM
Our Constitution and laws are only sacrosanct to the left when a Republican is in charge, when they're in charge they're only obstacles that must be avoided and ignored.
that works both ways.
The Constitution? That shits older than the internet! Who still cares about that?
This is an interesting video (http://money.cnn.com/video/news/2009/06/08/news.060809.intreasurer.cnnmoney/) that explains the problems with the whole Chrysler/Fiat "buyout" plan. In a nutshell, when a company goes bankrupt (or does restructuring), the first people to get paid are the secured creditors. It's been this way for 150 years, and it's been a pillar of our economic system.
Obama is trying to use TARP money as leverage here, but it's a misapplication of Treasury funds, since the auto manufacturers were not part of that legislation. In fact, they were specifically omitted.
The deal they're trying to make here lets Fiat and the unions move ahead in the creditor line, and the case is probably going to be heard by the Supreme Court soon.
Here's an article (http://blogs.wsj.com/deals/2009/06/08/an-indiana-long-shot-over-chrysler-at-the-supreme-court/) that discusses the temporary stay that Ginsburg issued yesterday to give the Indiana pension funds people (the guy in the video) more time to make their case. Should be an interesting one to follow as it develops.
Seriously though, watch the video. The guy has some great responses, and the chick interviewing him is so blindly biased toward Obama, it's almost uncomfortable to watch.
Here (http://zerohedge.blogspot.com/2009/06/richard-mourdocks-take-on-scotus.html) is another interview with the same guy. He talks about some different parts of the same argument.
The whole thing is BS. The banks (JPM, C, MS and GS) didn't want any part of a fight with the government. And the non-TARP lenders put up a fight in the beginning, but they buckled when the biggest creditor buckled (Prella Wienburg). I know a guy that works at one of the hedge funds that has a small position in the paper. The story that he heard is that Wrella Weinburg received a call from the FDIC, who they have contracts with, about their FDIC contracts that are up for renewal.
Obama used the bully pulpit to strong arm the Snr Sec creditors into agreeing to a lower recovery than they should have gotten. The UAW, as an Unsecured creditor, shouldn't receive anything until the Snr Secs are paid off in full (Or they agree, under their own free will, to take less).
And the whole liquidation angle is a scar tactic. If Chrysler was liquidated, Fiat could buy them and enter the US market that way (Granted, this would cost them some cash. Unlike the current deal that they are getting).
The best part is that I think the GM Snr Sec holders are getting taken out at par.
Mustard
06-09-2009, 07:33 PM
Fuck fix it again tony. They were already here once and sucked hard balls, why should we want them back again?
Team Obama won this round.
http://www.breitbart.com/article.php?id=D98NEVL80&show_article=1
Das Kahlua
06-09-2009, 08:49 PM
Hooray. I'm sure this won't end up horribly tragic.
Hooray. I'm sure this won't end up horribly tragic.
What is the worst that can happen?
http://www.bloomberg.com/apps/news?sid=asXxg9ZZRjv4&pid=20601087
Das Kahlua
06-09-2009, 08:58 PM
Good point.
freegood
06-09-2009, 09:03 PM
Yes. It's pretty fucked up painting secured creditors as fatcats and corp execs.
He's going to do it anyway.
UAW +1
Yes. It's pretty fucked up painting secured creditors as fatcats and corp execs.
He's going to do it anyway.
UAW +1
It has already been done.
From the WSJ:
U.S. Forced Chrysler's Creditors to Blink
By NEIL KING JR. (http://online.wsj.com/search/search_center.html?KEYWORDS=NEIL+KING+JR.&ARTICLESEARCHQUERY_PARSER=bylineAND) and JEFFREY MCCRACKEN (http://online.wsj.com/search/search_center.html?KEYWORDS=JEFFREY+MCCRACKEN&ARTICLESEARCHQUERY_PARSER=bylineAND)
President Barack Obama's auto task force heard a blunt message early this spring from J.P. Morgan Chase (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=jpm) & Co., the largest lender to Chrysler LLC. In any deal to remake the troubled auto maker, Chrysler would have to repay its lenders all $6.9 billion it owed.
"And not a penny less," said James B. Lee Jr., vice chairman at the bank, in a call to auto task-force boss Steven Rattner on March 29.
More
Timeline: The Run-Up to Chrysler's Bankruptcy (http://online.wsj.com/public/resources/documents/WSJ_Chrysler090510.pdf)
The next day, Mr. Obama called the banker's bluff. The president stepped before a podium to announce that Chrysler could face a disorderly bankruptcy or even liquidation. His meaning was clear: If that happened, the lenders would get nowhere near $6.9 billion.
A few hours later, Mr. Lee called Mr. Rattner back. "We need to talk," he said.
The banker's about-face was a vivid example of the government's tightening grip on a humbled financial industry. Pulling a trick from the hedge-fund playbook, the government used its leverage as the sole willing lender to Chrysler, either in bankruptcy court or out, to extract deep concessions from some of the country's biggest banks.
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http://s.wsj.net/public/resources/images/OB-DQ470_obama__D_20090510200603.jpg
Getty Images President Obama announces Chrysler could face bankruptcy.
http://s.wsj.net/img/BTN_insetClose.gif
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The results of these hardball tactics were on display Friday, as the last resisters of a deal to slash the value of Chrysler debt abandoned their effort to fight it in bankruptcy court. That raised the chances for a relatively swift transit through Chapter 11, producing a new Chrysler 55%-owned by a trust for union retirees, 35% by Fiat SpA -- which hasn't even been a Chrysler creditor -- and not at all by the senior secured lenders.
That conclusion would upend a longstanding tradition concerning rights in a bankruptcy: Senior secured lenders usually get paid in full before lower-priority creditors get anything. Not this time.
The White House's role in restructuring Chrysler has sent a shudder through the community of lawyers and lenders in the field of bankruptcy and corporate workouts. Critics complain that the administration has violated a bedrock principle of American capitalism and unfairly demonized financial firms that are vital to the functioning of the economy and its eventual recovery.
Administration officials reply that the Chrysler crisis required bold action. While Chrysler's suppliers, dealers and unionized workers are critical to its survival -- and so is Fiat, which will contribute high-efficiency engines and foreign distribution -- the creditors were expendable.
"You don't need banks and bondholders to make cars," said one administration official.
The administration could exert such leverage because it was convinced big banks were too tarnished in the public eye to put up a fight. They risked being blamed for Chrysler's demise. And if Chrysler had to liquidate, they and other lenders would have to try to recover their money by selling closed auto plants and other assets that are little in demand.
Mr. Rattner forced the issue during the spring negotiations. More than once, he told Mr. Lee: "You can have the company and run it or liquidate it."
http://s.wsj.net/public/resources/images/OB-DB685_USAINC_C_20090204211745.jpg
Previously in USA Inc.
N.Y. Fed Chair Faces Questions on Goldman Ties (http://online.wsj.com/article/SB124139546243981801.html)
05/04/2009
Regulators Fell One Bank, Spare a Rival (http://online.wsj.com/article/SB124052105775549689.html)
04/24/2009
Goldman Pushes Stock Issue in Plan to Escape U.S. Grip (http://online.wsj.com/article/SB123966372945715013.html)
04/14/2009
Bailout Man Turns the Screws (http://online.wsj.com/article/SB123906145595395075.html)
04/07/09
AIG's Rivals Blame Bailout For Tilting Insurance Game (http://online.wsj.com/article/SB123776549185209083.html)
03/23/09
Citigroup Chafes Under U.S. Overseers (http://online.wsj.com/article/SB123553469005467485.html)
02/25/09
AIG Seeks to Ease Its Bailout Terms (http://online.wsj.com/article/SB123543559972054331.html)
02/24/09
In Merrill Deal, U.S. Played Hardball (http://online.wsj.com/article/SB123379687205650255.html)
02/05/09
Politicians Asked Fed to Prop Up Ailing Bank (http://online.wsj.com/article/SB123275568798411819.html)
01/24/09
Political Interference Seen in Bailout Decisions (http://online.wsj.com/article/SB123258284337504295.html)
01/21/09
This account of the fight among Chrysler, its lenders and the government is based on interviews with dozens of people involved in the negotiations, including bankers, financial advisers, lawyers, union and Chrysler officials and Obama aides.
The struggle began last year when Chrysler and General Motors (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=GM) Corp. faced a potential meltdown. Chrysler went to the lenders that held 70% of its debt -- J.P. Morgan, Citigroup (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=c) Inc., Goldman Sachs Group (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=gs) Inc. and Morgan Stanley (http://online.wsj.com/public/quotes/main.html?type=djn&symbol=ms). It wanted to know if they would lend more and if they would provide financing in case Chrysler filed for bankruptcy.
When they said no, the auto maker turned to Washington. Just before Christmas, the Bush administration agreed to lend Chrysler $4 billion, as well as $13.4 billion to GM. The Treasury gave Chrysler three months to reduce its debt and forge a cost-cutting agreement with the United Auto Workers union.
Chrysler turned to the lenders it had just been asking for new loans, but now asked them to agree not to get paid in full for their old loans. It wanted them to chop the $6.9 billion debt to $5 billion. At a meeting in early February, Mr. Lee and other bank executives rebuffed the request. With the government getting so involved in supporting Chrysler, the banks held out for talks with federal officials.
The Obama administration's auto task force held scant hope that all of Chrysler's lenders would agree to a compromise. There were 46 debtholders in all, including many small hedge funds and distressed-debt funds. Most of these had acquired their holdings at a discount on the secondary market. With no consumer operations, they had less reputation on the line than the banks did. In addition, unlike banks, they didn't have to worry about saving Chrysler in order to salvage other loans, to parts suppliers and to Chrysler Financial.
The task force's Ron Bloom, a former investment banker and steelworkers-union negotiator, agreed to handle talks with the UAW and Fiat. Mr. Rattner, co-founder of private-equity firm Quadrangle Group, would take on the lenders. He soon butted heads with Mr. Lee. Known on Wall Street for his suspenders, white collars and deep Rolodex, Mr. Lee, as the senior deal maker at J.P. Morgan, has lent more money to more companies than almost anyone else on Wall Street.
J.P. Morgan faced by far the most Chrysler exposure: $2.7 billion of debt. Monitoring the situation, J.P. Morgan Chief Executive Jamie Dimon called Chrysler Chief Executive Robert Nardelli several times.
Mr. Lee's March 29 demand for full repayment reflected a common view among the creditors. "You lend someone $6.9 billion, you would like $6.9 billion back," said one.
View Full Image
http://s.wsj.net/public/resources/images/OB-DQ472_chrysl_D_20090510215113.jpg
Getty Images New Chrysler vehicles sit in a lot at the Belvidere Assembly plant in Illinois.
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Many of the lenders believed the administration wouldn't let Chrysler file for bankruptcy. "The plan was to call the government's bluff. The game was to game the government," said a manager of a distressed-debt fund.
Then came President Obama's tough talk about the possibility of Chrysler going into bankruptcy or even liquidation, which came just hours after the administration pushed out GM's chief executive, Rick Wagoner. Acting like a bank that is a troubled firm's last hope, President Obama sketched out what Chrysler would have to do to get more federal money.
When Mr. Lee spoke to Mr. Rattner again on March 30, the J.P. Morgan man acknowledged the landscape had changed. He sought a meeting that would bring the lenders to Washington.
Chrysler's four main lenders were already indebted to the Treasury as recipients of loans from the Troubled Asset Relief Program, the government's pool of emergency aid to financial-system titans. Citigroup had received $45 billion; J.P. Morgan, $25 billion; and Goldman and Morgan Stanley, $10 billion each.
Obama aides say they were under White House orders not to use TARP as leverage over the banks. Lawmakers weren't so shy. Rep. Gary Peters, a Democrat whose Michigan district includes Chrysler offices, wrote to the bank CEOs listing their TARP loans and asking them to extinguish most of Chrysler's debt.
Mr. Rattner hosted a meeting of senior bank officers on April 2, in an ornate conference room at the Treasury. They heard presentations from Chrysler's Mr. Nardelli and Fiat Chief Executive Sergio Marchionne. The more than 25 listeners were told that deals with Fiat and the UAW were nearly complete.
When the issue of the $6.9 billion in debt came up, Mr. Rattner looked at the lending group and said, "We have in mind for you a much lower number." He silenced the room by proposing they get just $1 billion.
While that wasn't the administration's bottom line, the task force had determined what was: the amount lenders would get in a liquidation of Chrysler assets. A Chrysler analysis in January estimated that at $2 billion. The UAW and Fiat knew about this figure, and also knew that the task force was first going to offer lenders just $1 billion. But the lenders, having waited so long to engage with the Treasury, were in the dark.
The bankers asked the government team for projections of what a combined Chrysler-Fiat alliance would look like. "If you want a response other than 'No,' something like a counteroffer, then we need those new numbers," Mr. Lee said, according to people present in the room.
In the following days, the lenders began to realize their leverage was small and dwindling. Only the government had the ability or willingness to finance a bankruptcy reorganization of Chrysler, while also supporting its warranties and suppliers and recapitalizing Chrysler Financial. None of the lenders, some of which had consumer operations in the Midwest near Chrysler plants, had any desire to take over and liquidate the company.
Mr. Lee had another problem. Unrest was spreading among creditors as some worried that TARP-recipient banks were open to cutting a deal with the Treasury. Some lenders that hadn't gotten TARP money decided to hire their own lawyer. To calm the smaller debtholders, the banks on April 10 allowed three of them on the group's steering committee: OppenheimerFunds, Stairway Capital Management and Perella Weinberg Partners' Xerion Fund.
The Chrysler-Fiat projections sought from the Treasury didn't arrive until Easter, April 12. By then, deals with Fiat and the UAW had largely been hammered out.
The lenders spent a week haggling over how to respond to Mr. Rattner. The big banks at first proposed the group offer to cut the debt in half and get no equity stake. That outraged some hedge funds and distressed-debt firms that didn't face the banks' broader concerns and that were accustomed to fighting in the trenches for their interests. The reply, sent April 20, reflected the hardening position of the hedge funds: The lenders would cut just $2.4 billion in debt, in exchange for 40% of Chrysler's equity.
The offer landed with a thud. Rep. Peters said the lenders were seeking much more than market value for their debt, "which amounts to a taxpayer subsidy." It was just 10 days until the government's deadline to reach agreements with the UAW, Fiat and lenders if Chrysler was to get more government money.
After receiving one more bank counteroffer, the Treasury on April 28 offered what it had planned all along, to buy out the lenders for $2 billion. The only sweetener was that it would be in cash, meaning the lenders didn't have to wait for a reorganized Chrysler-Fiat to pay it.
Mr. Rattner called Mr. Lee: "It's $2 billion, take it or leave it."
The big banks quickly agreed to the deal -- equal to 29 cents on the dollar. Though that offered a profit to a few firms that bought debt as low as 15 cents on the dollar, most of the lenders had paid 50 cents to 70 cents, and the banks 100 cents. News that the big banks were accepting the offer leaked before they had told the smaller lenders. "To say the least, we were floored," says one.
Mr. Lee was nonetheless intent on winning 100% approval from debtholders, to give the government the option of avoiding a Chrysler bankruptcy filing. He asked the Treasury to raise its offer by $250 million, which it grudgingly agreed to do if the lenders answered within 90 minutes. After a flurry of last-minute calls, about 20 firms, mostly small hedge funds, voted no.
At noon the next day, April 30, Mr. Obama said Chrysler would file for bankruptcy. He blamed "speculators" who had turned down the $2 billion offer for their $6.9 billion of debt. A lawyer for holdout firms, Tom Lauria, accused the White House of threatening to destroy the reputation of Perella Weinberg. The White House denied exerting pressure on it. Mr. Lauria's clients took their fight into bankruptcy court last week, imperiling the administration's plan to guide Chrysler into and out of court swiftly. But on Friday, the holdouts abandoned the fight as too costly, financially and politically.
"The overarching sense of political pressure," Mr. Lauria said, "remained out there till the end."
And...here come the GM lawsuits!
http://www.freep.com/article/20090609/BUSINESS01/906090330/Asbestos+claimants+say+they+ve+been+left+out+of+GM +talks
Willam
06-10-2009, 06:01 AM
There's another case that, while it is not exactly similar, is interesting as far as Obama breaking legal precedents. I don't have time to find the actual article right now (will try later) but basically, it goes like this:
California, as everyone knows, is in a severe financial crisis. To help alleviate this, Govenor Arnold sat down with the union of home healthcare workers (who are paid by the state) and renegotiated their contract, saving the state around $70M a year. Both sides left the table satisfied.
The service industry union heard about the deal and, for what ever reason, went crying to Washington stating the deal was unfair. President Obama went to Govenor Arnold and told him to give back the $70M to the union or California would not get the $7Billion the feds had promised to help California during their crisis.
A little bit of blackmail???
Here's the article: http://www.latimes.com/news/local/la-me-cal-healthcare11-2009may11,0,1771873.story
The Dude
06-10-2009, 07:25 AM
i think its bullshit anyway...using american tax payer money to sell an american company to a foreign entity...yeah, that makes a helluva lot of sense.
The Dude
06-10-2009, 07:30 AM
i could care less if chrysler was sold to nissan if there was no bailout money. but for chrysler (or any other company for that matter) to get bailout money only to be sold right after the ink is dry on the check is horseshit.
Fuck the auto industry and fuck the bailout. let it burn.
I acquiesce to your sentiment
heelsguy
06-10-2009, 08:01 AM
i could care less if chrysler was sold to nissan if there was no bailout money. but for chrysler (or any other company for that matter) to get bailout money only to be sold right after the ink is dry on the check is horseshit.
Fuck the auto industry and fuck the bailout. let it burn.
thank you for saying exactly what I think.
this whole buuuullshit about a company "being too big to fail" sucks donkey's dicks (I haven't used that expression since 8th grade...shows how pissed i am)
The Dude
06-10-2009, 11:35 AM
I just think about it in any other context, like jobs for instance.
In tough (or even not so tough) times when you have an entrenched employee with a lot of seniority (chrysler) who isn't really producing or contributing as much as the freshly hired graduate (foreign auto) who does better work and costs a lot less what happens? The old fucker who can't carry his own weight is shown the door.
I think the bailout of the auto industry is ridiculous in the first place as it doesn't address the root of the problem; that aside, if they get federal money, they should be federal property.
The Italian Fiat will own 20 percent of the new company while 67.69 percent of it will be owned by a United Auto Workers union retiree health care trust fund. The rest will be owned by the governments of the United States and Canada.
8 BILLION dollars and we get to split less than 13%? I mean honestly, who throws a shoe?
thank you for saying exactly what I think.
this whole buuuullshit about a company "being too big to fail" sucks donkey's dicks (I haven't used that expression since 8th grade...shows how pissed i am)
Or you could say that they are too politically connected to fail.
Hanover Fist
06-11-2009, 08:05 AM
All I know is that the whole thing was bullshit, however, Chrysler can start operating and making cars again which means that suppliers can start operating and making parts again which means that people will start working again. If getting people jobs again is the bottom line then I guess that I can live with it. When you live in an area that is at almost 20% unemployment you will take any bright spot you can get.
I disagree completely with how the deal went down and how the senior creditors got screwed, but I think that it will end up biting the administration and organized labor in the ass far more than it helped them in this instance. Getting a loan in any type of industry even remotely attached to the administration is going to be much more difficult now.
Okie Medicvet
06-11-2009, 08:22 AM
I think rather than trying to save what hasn't been making money, we need to be figuring out ways to create new jobs that are needed in the manufacturing area. For instance, the US is very vulnerable to any kind of EMP attack, and yet transformers that would be needed as replacements in areas that would be affected are not even made in the US anymore. That needs to change..rather than sink more money into something that doesn't work, we need to be creating necessary jobs for things that do. jmo.
All I know is that the whole thing was bullshit, however, Chrysler can start operating and making cars again which means that suppliers can start operating and making parts again which means that people will start working again. If getting people jobs again is the bottom line then I guess that I can live with it. When you live in an area that is at almost 20% unemployment you will take any bright spot you can get.
I disagree completely with how the deal went down and how the senior creditors got screwed, but I think that it will end up biting the administration and organized labor in the ass far more than it helped them in this instance. Getting a loan in any type of industry even remotely attached to the administration is going to be much more difficult now.
They are still in a tough spot. The factories might be reopening, but who is going to buy what they are producing? Obama's cash for clunkers deal is the first of many government sponsored programs designed to stimulate the auto sector. Too bad for me, I live in a town where I don't need a car. So America enjoy the subsidy, this one is on me.
I think rather than trying to save what hasn't been making money, we need to be figuring out ways to create new jobs that are needed in the manufacturing area. For instance, the US is very vulnerable to any kind of EMP attack, and yet transformers that would be needed as replacements in areas that would be affected are not even made in the US anymore. That needs to change..rather than sink more money into something that doesn't work, we need to be creating necessary jobs for things that do. jmo.
Why are people so obsessed with manufacturing jobs? There are gone...move on. Output is rising, but the number of workers needed to produce goods has been falling for decades and nothing outside of banning technological advancements is going to change that.
http://www.msnbc.msn.com/id/30229507/from/ET/
http://cafehayek.typepad.com/hayek/2006/02/we_dont_make_an.html
There's another case that, while it is not exactly similar, is interesting as far as Obama breaking legal precedents. I don't have time to find the actual article right now (will try later) but basically, it goes like this:
California, as everyone knows, is in a severe financial crisis. To help alleviate this, Govenor Arnold sat down with the union of home healthcare workers (who are paid by the state) and renegotiated their contract, saving the state around $70M a year. Both sides left the table satisfied.
The service industry union heard about the deal and, for what ever reason, went crying to Washington stating the deal was unfair. President Obama went to Govenor Arnold and told him to give back the $70M to the union or California would not get the $7Billion the feds had promised to help California during their crisis.
A little bit of blackmail???
Here's the article: http://www.latimes.com/news/local/la-me-cal-healthcare11-2009may11,0,1771873.story
The federal government has used federal dollars as blackmail for decades.
But this Chrysler thing is pretty fucked up.
They are still in a tough spot. The factories might be reopening, but who is going to buy what they are producing? Obama's cash for clunkers deal is the first of many government sponsored programs designed to stimulate the auto sector. Too bad for me, I live in a town where I don't need a car. So America enjoy the subsidy, this one is on me.
I still don't understand the logic (a bailout started under Bush but fully agreed with on both sides) of giving companies that failed to deliver what consumers wanted for 2 decades billions of dollars rather than just buying them a la Reagan and doing what needs to be done.
I still don't understand the logic (a bailout started under Bush but fully agreed with on both sides) of giving companies that failed to deliver what consumers wanted for 2 decades billions of dollars rather than just buying them a la Reagan and doing what needs to be done.
Go read the old GM thread, I was against it then as I am against it now. And if I was more than four years old in 1981, I would have been against it then. I don't give a shit if Reagan, Bush or anyone else approved of it while they were in office.
Chrysler and GM have been losing market share for decades. This happened because people stopped buying the product that they make and started buying it from someone else (e.g., Toyota, Honda, Nissan, BMW, etc.). SoI don't see how fucking over their creditors and then mandating that they make green cars is going to solve the problem (Yes, reducing the debt load solves their CF problem. But forcing them in the green car market is very risky unless Congress plans on a $4 a gallon gas tax).
Are you going to buy one of these to support the cause?
http://www.conceptcarz.com/vehicle/z15805/Chrysler-Peapod.aspx
Go read the old GM thread, I was against it then as I am against it now. And if I was more than four years old in 1981, I would have been against it then. I don't give a shit if Reagan, Bush or anyone else approved of it while they were in office.
Chrysler and GM have been losing market share for decades. This happened because people stopped buying the product that they make and started buying it from someone else (e.g., Toyota, Honda, Nissan, BMW, etc.). SoI don't see how fucking over their creditors and then mandating that they make green cars is going to solve the problem (Yes, reducing the debt load solves their CF problem. But forcing them in the green car market is very risky unless Congress plans on a $4 a gallon gas tax).
Are you going to buy one of these to support the cause?
http://www.conceptcarz.com/vehicle/z15805/Chrysler-Peapod.aspx
I was saying we SHOULD do what Reagan did. The American people very clearly didn't want the US auto industry to fail, but the bailout was a definition of throwing good money after bad. If you buy them you can fix whatever you want about them wherever you want, rather than giving them billions of dollars and just getting more ads that act like 30 MPG is as good as a car that runs on dreams.
I was saying we SHOULD do what Reagan did. The American people very clearly didn't want the US auto industry to fail, but the bailout was a definition of throwing good money after bad. If you buy them you can fix whatever you want about them wherever you want, rather than giving them billions of dollars and just getting more ads that act like 30 MPG is as good as a car that runs on dreams.
I am not well versed on the Chrysler bailout of the 80s, but I don't see what the difference is between what they did now and what they did then. They gave them $1.5bn in loans, took some warrants and called it a day. Now, the gov supplied the DIP, equitized it and, according to them, is going to call it a day.
http://www.npr.org/templates/story/story.php?storyId=96922222
What makes you think that the first bailout is different than the second one?
I am not well versed on the Chrysler bailout of the 80s, but I don't see what the difference is between what they did now and what they did then. They gave them $1.5bn in loans, took some warrants and called it a day. Now, the gov supplied the DIP, equitized it and, according to them, is going to call it a day.
http://www.npr.org/templates/story/story.php?storyId=96922222
What makes you think that the first bailout is different than the second one?
I thought we took greater control of them in the 80s, more like they were put into receivership? If I'm wrong then I'm wrong, but I'm just saying for the money we paid them we could've just BOUGHT them and done whatever we wanted and sold them back once healthy.
I thought we took greater control of them in the 80s, more like they were put into receivership? If I'm wrong then I'm wrong, but I'm just saying for the money we paid them we could've just BOUGHT them and done whatever we wanted and sold them back once healthy.
I am doing some looking around and the bailout was in 1979, when Carter was in office. So much for pinning it on Reagan. Anyways...
Mr. Hyde, a Wayne State University history professor, said many people forget that Chrysler was forced to come up with $2 billion in concessions from unions, white-collar employees, dealers, suppliers and banks as part of the deal. State and local governments connected to plants provided tax concessions, and Chrysler was required to adhere to tight government supervision after they received the loans.
http://www.washingtontimes.com/news/2008/nov/24/1979-chrysler-bailout-holds-lessons/
http://www.heritage.org/research/regulation/bg276.cfm
http://www.time.com/time/magazine/article/0,9171,947356,00.html
That tight supervision is what I'm talking about. There should be someone in the room making big decisions, because companies as deep in the shitter as these are aren't going to be fixed by washing away some debt temporarily with government money.
That tight supervision is what I'm talking about. There should be someone in the room making big decisions, because companies as deep in the shitter as these are aren't going to be fixed by washing away some debt temporarily with government money.
Ummm, don't you think that the Car Czar and Co. are going to be the ones giving the green light on everything that GM and Chrysler do going forward?
Ummm, don't you think that the Car Czar and Co. are going to be the ones giving the green light on everything that GM and Chrysler do going forward?
It certainly doesn't seem that way, or if he is he's not doing enough. Those companies need vast, deep-cutting, immediate reorganization.
It certainly doesn't seem that way, or if he is he's not doing enough. Those companies need vast, deep-cutting, immediate reorganization.
Dude, they just went through BK court...how much more reorganizing do you want?
Take this story and multiply it by a thousand:
http://www.boston.com/business/articles/2009/06/05/frank_intervention_helps_delay_closing_of_gm_norto n_center/
Right now Congress is working on a bill to protect the dealerships that are slated for foreclosure around the country. Every local dealership was on the phone with a lobbyist as soon as the names were released.
http://www.autonews.com/article/20090604/BLOG01/906049984/1125
I find it laughable that anyone thinks that GM and Chrysler are not operating on their own free will. And this is just the beginning...
Saving dealerships is not reorganizing the company.
Saving dealerships is not reorganizing the company.
No shit. I working in the restructuring group at my firm. I am pretty sure that I know what reorganizing is.
My point is that the government is dictating what they can and cannot do as a company (GM & Chrysler) a la the 1979 bailout.