The old Texaco slogan assured us we could trust our car to the man who wore the star—but I don’t think this is what they meant
Chrysler LLC filed for bankruptcy Thursday. But a deal has been reached to combine the company with Fiat in order to allow Chrysler to stay in business.
The bankruptcy filing, which was made in federal court in New York, comes after some of Chrysler’s smaller lenders refused a Treasury Department demand to reduce the amount of money the troubled automaker owed them.
In remarks at the White House, President Obama said that the bankruptcy filing is not a failure for the company but “one more step on the path to Chrysler’s revival.”
The president harshly criticized the hedge funds and investment firm creditors that refused to go along with the deal accepted by larger lenders, saying that they had “decided to hold out for the prospect of an unjustified, taxpayer funded bailout.”
Well, ahem, they were investors, weren’t they? Anyway, it wasn’t their money, per se, but the money of their investors they were expecting to be made whole. And last, why shouldn’t they expect an “unjustified, taxpayer funded bailout” when that’s all this government has done since taking power?
But it gets better (which is to say worse):
In addition, the United Auto Workers union announced late Wednesday night that its membership at Chrysler had overwhelmingly ratified a concession contract reached between the company and union leadership on Sunday night.
As a result of that deal, the UAW will own 55% of Chrysler.
The hedge fund investors, who actually owned 30% of the company, are publicly scolded, scourged, yet the unions, which owned…. what—nothing, a little?—are handed more than half the company on a chrome platter.
And if the hedge fund investors were so venal, and spit in the proverbial soup, why is he announcing this bankruptcy as a success?
The deals give Chrysler “a new lease on life,” President Barack Obama said.
“This is not a sign of weakness,” he said. “I have every confidence that Chrysler will emerge from this process stronger and more competitive.”
Not least, what the hell good were the billions and billions and billions of bailout dollars if bankruptcy and government takeover are the result?
If all of this sounds familiar:
The feds have decided they should own a neat 50% of GM, yet that is not the natural outcome of the $16.2 billion that the Treasury has so far lent to the company. Nor is the 40% ownership of GM that the plan awards to the United Auto Workers a natural result of the company’s obligations to the union.
Yet Secretary Timothy Geithner and his auto task force, led by Steven Rattner, have somehow decided that Treasury and UAW chief Ron Gettelfinger will get to own a combined 90% of GM.
The biggest losers here are GM’s bondholders. According the Treasury-GM debt-for-equity swap announced Monday, GM has $27.2 billion in unsecured bonds owned by the public. These are owned by mutual funds, pension funds, hedge funds and retail investors who bought them directly through their brokers. Under Monday’s offer, they would exchange their $27.2 billion in bonds for 10% of the stock of the restructured GM. This could amount to less than five cents on the dollar.
Maybe you think I’ve been kidding with the hammer and sickle imagery I’ve used in the past, or the USA-SSR rhetoric—but I sincerely ask these questions:
What ought we to call it when the workers have been given ownership of the means of production at the expense of private investors? When government intervention and strong-arming have nationalized industries, even whole sectors of the economy? When the propaganda office runs night and day to burnish the president’s image? When he ridicules grass-roots protests against the burgeoning national debt and impending tax increases?
It’s all of a piece, as any student of Soviet history knows, and we’re all students of Soviet history now—or we’d better be.
Of course, I may have the wrong -ism:
Yes, it is indeed similar to fascism.