The public relations from the White House this morning were extremely clear. The hedge funds, who are among the senior lenders to Chrysler, are the ones forcing the company into bankruptcy today. What is helpful to the more simple types like myself is how elementary it is to understand what is to blame for this American tragedy.
–It wasn’t all the legacy costs the company has accumulated over decades of time as I thought.
–It wasn’t bad management.
–It wasn’t decades of making automobiles inferior to many other makers.
–It wasn’t union contracts that required the car maker to pay workers almost their full wages even when plants were idled and Chrysler wasn’t making cars or money.
–It wasn’t far too many dealerships in too many towns and cities.
It was hedge funds.
Gosh, thank you White House for dumbing it down so even I can understand the situation.
I totally agree with the White House’s logic in this regard too. These hedge funds who hold the senior, secured debt in Chrysler with liens on plants, equipment, inventory and receivables should have simply accepted the Obama plan. After all…all the senior creditors should have allowed the more junior creditors to leapfrog over them and taken gigantic losses for the sake of “saving” the company. Certainly the investors who entrusted the fund managers with the fiduciary responsibility of protecting their investment should have taken much, much less than probably any bankruptcy judge in the United States would have granted them. If I were one of these investors I would want the manager to do their “patriotic duty” and commit me to lose tons and tons of cash. After all….isn’t that the new “American Way”? Punish the fat cats and the investor class and protect the working men and women who embody our working class. Throw aside centuries of contract law and make a “deal with the devil” and let the government FORCE you to accept TARP money that will ultimately allow the Treasury Department to exercise their right to become shareholders and the de facto owners of the major banks in this country? Certainly Karl Marx and Chairman Mao would have done the same thing had they “inherited” this crisis.
What a sad day in America for me.
And the stock market reacts by jumping almost 100 points in the Dow Jones. After popping 168 yesterday on news that GDP fell at a 6.1% annual rate, which was almost 50% higher than the consensus estimates. And this is the economist in me teaching here, but remember that 6.1% contraction in the economy is a measure against the previous quarter where it also contracted over 6%. Please understand what this means in simple terms.
–If your income last week was $1,000 and it was reduced by 6%, the next week you make $940. If it reduces another 6% the following week your next paycheck $883.60.
I have to believe that many people who heard the GDP number for the first quarter (many of whom should actually know better) took solace in the idea that at least the first quarter was at least no worse than the fourth quarter of 2008. But what do YOU think of this:
–Two weeks ago paycheck – $1,000
–One week ago paycheck – $940
–This week paycheck – $883.60
Do things seem to be leveling off to you?
I rest my case your honor. And the senior creditors who wouldn’t agree to this crappy deal being offered by the White House are going to do MASSIVELY better in front of whatever bankruptcy judge oversees this case, which will be in court for YEARS. At least the judicial system still has some modicum of respect for contract law and fairness.