The Audacity of Secured Bondholders

This is the latest post from 3BP contributor Petr Weifen. Petr understands that greed, for lack of a better word, is good.

President Obama hosted an event yesterday regarding the Chrysler bankruptcy filing. As an unashamed capitalist, I can only say that I found his comments breathtaking for their brazenness.

An example...

"Today, I am pleased to announce that Chrysler and Fiat have formed a partnership that has a strong chance of success".

Ponder that statement for just a minute. The President of the United States is brokering and announcing corporate mergers and commenting on their likelihood of success. I had no idea the President had the constitutional authority to broker international corporate mergers. If Obama wants to be the Investment Banker in Chief, I wish he'd do better deals than giving US companies away to mediocre (I'm being charitable) European conglomerates.

He went on...

"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."

The group of investment firms and hedge funds happen to own secured bonds of Chrysler. In other words, they were smart enough to invest in debt instruments issued by Chrysler that were secured by hard assets (buildings, inventory, etc). Due to their secured status, they are more likely to collect on their debts than unsecured creditors and equity holders. These investors were being strong-armed by our Federal Government and the TARP-drunk zombie banks to forego their contractual rights as secured debtholders and accept pennies on the dollar. They refused and I salute them. The President, however, is clearly miffed that these investors didn't forfeit their contractual rights for the "greater good" (read: UAW). These are Government strong-arm tactics reminiscent of the Soviet Union or Peron's Argentina. Obama's willingness to use similar tactics and, then, to vilify private investors after his plan was defeated is a chilling sign for capitalists.

Finally, Obama's use of first-person pronouns in his Chrysler statement suggests an ego that is out of control.

"I decided to give..."

"I am pleased to announce..."

"I rejected the original plan..."

"I challenged them..."

"The standard I set was high..."

After reading these, I'm surprised that Chrysler was able to ever manufacture a single car without Obama's guiding wisdom and counsel. I'm sure it's heady stuff going from community organizer to President of the United States in a span of five years. However, the signs of narcissism on display today suggest a man that believes too deeply in his powers. His power of persuasion didn't save Chrysler….let's see if he has better success with Iran, North Korea, Russia, Mexico and numerous other more vexing problems.