President Obama announced today that there was a deal on Chrysler and that Fiat and the governments of the US and Canada and all the stakeholders were working together to save Chrysler. I am also certain that by the time we get the "Mainstream media" reports in the morning, that the Chrysler deal will be depicted as a "done deal." Further, you can be certain that the press will report that it will speed through the bankruptcy court and that the 30% of the bond holders who refused to capitulate were "speculators" and "almost evil organizations."
What will not be reported, made clear or even suggested is that those investors owning 30% of the bonds were mostly pensions and endowment fund managers with a fiduciary responsibility to protect their beneficiaries from a truly onerous and probably unfair discount of 90% of their face value of the bonds. The President called them "speculators" which of course is clearly a pejorative term, designed to make them look evil and uncooperative.
The press will also say nothing about the fact that the bankruptcy judge has the authority and the responsibility to make judgments that are fair to all the creditors, and for the unions to get 55% of the equity, while the 30% of the bond holders get less than 10% willl clearly need to be explained to the judge. My conviction is that the "cram down" is grotesque and unfair.
Yet, no matter what else we think, the press love affair with President Obama
will certainly spin this as a great victory for Obama and a "done deal." I think it is tragic that we will have a labor union with the majority of the stock. How can the union negotiations be balanced when they control the shares and inevitably will control the board?
What makes you believe the unions want "balanced" negotiations? The union bosses are thugs and like it that way.
Posted by: Ken | May 01, 2009 at 12:54 AM