From an investment newsletter:
"Chuck, I owe you $200, don't I?"
My personal trainer, Chuck Wells, takes care of my dog for me and looks after our house when we go out of town. I owed him from his most recent dog stint last week when I was in Miami. While we were working out this morning, he asked me why the car companies' bondholders were being so "greedy."
"Well, let's pretend you're GM's bondholders and the $200 I owe you is the debt in question. The government has come in and said, 'Look, we know Porter owes you $200... but for the good of the country... we want you to accept $20 instead. We'll take $100 for helping straighten out the situation. And we'll give $80 to the union.' Would you accept those terms?"
"No way!"
It never ceases to amaze me how generous people like to be with other people's money. Or how quickly people with no skin in the game toss around words like "fair" and "greedy." I don't care what you think of OBAMA!... What he said about Chrysler's secured bondholders was not only slanderous... it was the kind of political rhetoric that will destroy America's capital markets. You cannot vilify creditors ? or else there will be no capital available to lend.
While many stakeholders made sacrifices and worked constructively, I have to tell you some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none. Some demanded twice the return that other lenders were getting.
I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don't stand with those who held out when everybody else is making sacrifices. And that's why I'm supporting Chrysler's plans to use our bankruptcy laws to clear away its remaining obligations so the company can get back on its feet and onto a path of success.
OBAMA!'s remarks are demonstrably false. A group of 20 creditors, the self-dubbed "non-TARP Chrysler lenders," refused the government's lowball offer for their secured bonds. Through a press release, the "non-TARP Chrysler lenders" said they offered to take a 40% haircut on their bonds, even though they were senior creditors and lenders lower down the priority chain were "being given recoveries of up to 50% or more and being allowed to take out billions of dollars."
And Obama's bit on standing "with Chrysler's employees and their families and communities" is nonsense. Who do you think invests in these hedge funds that refused the deal? Pension funds, teachers' unions, and school endowments to name a few... Should these "communities" be punished for the sake of Chrysler's employees... many of whom are union employees who stubbornly refused to take pay cuts until it was too late?
That's the big problem with socialism: Instead of allowing the market to decide who wins and who loses, you have politicians picking. Just imagine what's going to happen to the lending decisions of the banks that have taken TARP money... It's going to be a debacle. Welcome to Amerika.