[Swiftwater Gazette] Chrysler - The Chicago Way

Sun May 3 12:36:54 EDT 2009

Rik,

This goes back to the original intent of the founding fathers.
Federal Bankruptcy court is clearly part of the Judicial Branch.  If
you loan me money and I choose not to pay, you take me to COURT.  If I
think I can't pay and want a second chance to get my financial affairs
in order, I go to bankruptcy COURT.  But, what if I'm a friend of the
POTUS (like the UAW)?  Why bother with COURTS when I've got the PREZ
in my hip pocket?  So what if we agreed on certain terms and you took
your risks based on the current law and well established precedents,
I've got the PREZ on my side and he's willing to take illegal action
against you, or at least use his influence and power to destroy you.
As the author of the article you posted points out in so many words,
this scares the hell out of prudent investors when the rules are
constantly changing or are ignored.  Roosevelt described the Great
Depression as "capital on strike".  "Strike, my ass!" Gone into hiding
or looking for a new country is the better description. No one is
going to invest where there are no solid, well understood, and fairly
enforced rules. China is already looking down the road and has decided
they don't want to be paid back in inflated dollars.  You think anyone
else wants to invest in the United States or US based companies when
the rules change daily?  I don't (and I'm not).

Elections have consequences.  When you elect a street thug, you get
street thug rules. Ya think ACORN and the ACLU are up to running a car
company?

Brad

On 5/3/09, Eric Sandberg <sanderico1 at gmail.com> wrote:
> Brad,
>
> Here's some more about the bailouts and a little added bonus stuff from
> Mauldin and Mike Shedlock.
>
> Rik
>
> __________________
>
> Stupidity
> Squared<http://globaleconomicanalysis.blogspot.com/2009/05/stupidity-squared.html>
>
> John Mauldin's weekly E-Letter, Sell in May and Go
> Away<http://www.frontlinethoughts.com/pdf/mwo050109.pdf>,
> is a good read. My favorite portion of the E-Letter is the section "A
> Dangerous End Game". Let's take a look.
>
> The Fed and the Obama administration are playing a dangerous game. The Fed
> is going to print trillions of dollars to forestall deflation and try to
> re-ignite the economy. But for a variety of reasons we will go into next
> week, a real, sustainable recovery may be a few years away. What happens
> when the market start balking at high and unsustainable national deficits?
> What happens when inflation (finally) does return? Can the Fed remain
> independent and take back the money it is printing in the face of what will
> likely be a tepid recovery? And if they don't, what happens to the dollar?
>
> Next year, we will be entering what will certainly be the most dangerous era
> in my lifetime for the US economy. It is not clear what will happen. There
> are a lot of paths that can be taken, though some are more likely than
> others. For those who are convinced that high inflation and a falling dollar
> are absolutely, unequivocally in the future I have just one word: Japan.
>
> Yes, there are differences, but there are a lot of similarities. While I
> think the most likely outcome is a long Muddle Through recovery, the
> likelihood of a lost decade of deflation a la Japan is a very real potential
> outcome. And the possibility of stagflation and a seriously impaired dollar
> is also quite real.
>
> Investors, businessmen, and entrepreneurs need to be as nimble as possible.
> A free market will figure out what paths to take, and I am still optimistic
> about the long term. But we have some very dangerous times in front of us,
> and we need to be realistic.
>
> And before I close, let me make a few comments about the Chrysler and GM
> issues. I tell my kids all the time that actions have consequences. If I
> hold senior secured debt of a company and the government tells me I have to
> take less than unsecured junior debtors, I am not going to be happy. I may
> have been dumb to make the loans in the first place, but I did it under a
> very specific contract and the rule of law.
>
> If the Obama administration arbitrarily changes those rules to favor a
> political class (unions), then that is going to have a chilling effect on
> future lending to all corporations. As an aside, they are spending $12
> billion to save 54,000 Chrysler jobs (at $22,000 per job). With 600,000 jobs
> a month being lost, why are these 54,000 jobs more special than those of the
> rest of the unemployed, who get a fraction of that amount in unemployment
> benefits?
>
> Actions have consequences. The lenders who are forcing the Chrysler deal
> into bankruptcy court are not all "predatory hedge funds." They are mutual
> funds, pension funds, and other financial firms with small stakeholders as
> their investors.
>
> Cerberus, the hedge fund that originally bought Chrysler, deserves to lose
> their money. They made a bad investment. But those who lent money deserve to
> be treated in accordance with the contracts they signed.
>
> Demonizing investors and businessmen is hardly helpful. They are precisely
> the people we need to help get this economy moving. Governments don't create
> true job growth, businesspeople do, and mostly small businesses. I am not
> certain why small business owners, the job creation engine of the country,
> should see their taxes raised in order to protect bond holders of automobile
> companies or banks, or for union jobs to be preserved in companies that are
> clearly not competitive.
>
> Consequences Indeed
>
> Somehow Bernanke, Geithner, and Obama think they can ignore (or get away
> with) fraudulent bailout schemes, shameful treatment of auto bondholders to
> help out unions, and cotton candy treatment of bank bondholders.
>
> While banks are happy and financial bondholders are ecstatic with the
> bailouts (at least for now), taxpayers are taking it on the chin.
>
> What Happens ....?
>
> In his article, Mauldin asks bunch of "What Happens?" type questions. He
> does not answer them. Perhaps there are no answers, at least not yet.
>
> However, it's important to remember we are in this mess because Greenspan
> elected to blow another bubble rather than face what would likely have been
> a short-term recession of limited consequences. Instead, Greenspan elected
> to bail out his banking buddies who were in deep trouble with loans to
> dot-com companies and Latin America. The fruits of Greenspan's attempt to
> bail out banks were worldwide housing and credit bubbles of epic proportion
> that have now popped, leaving banks much worse off than before.
>
> Compounding Greenspan's errors, the trio of Bernanke, Geithner, and Obama,
> like the trio of Bernanke, Paulson, and Bush before them, all seem to think
> the results will be better this time if we just do it again with more force.
>
> I have news for all of them. While we may not be able to predict for certain
> the consequences of "Stupidity Squared" we can say for certain the result
> cannot possibly be any good.
>
> Mike "Mish" Shedlock
> http://globaleconomicanalysis.blogspot.com
> <http://globaleconomicanalysis.blogspot.com/>Click Here To Scroll Thru My
> Recent Post List <http://globaleconomicanalysis.blogspot.com/>
> Stupidity
> Squared<http://globaleconomicanalysis.blogspot.com/2009/05/stupidity-squared.html>
> *Posted by Michael Shedlock at 10:21 PM*
>
> On Sun, May 3, 2009 at 6:19 AM, Brad Haslett <flybrad at gmail.com> wrote:
>
>> There's so many things that are disturbing and disgusting about the
>> Chrysler bailout it's hard to pick a starting point.  Forget
>> everything you learned in business or law school, study Italian
>> history during the Mussolini period or the Chicago mob to understand
>> how to do business in the current climate - maybe just watch re-runs
>> of the Sopranos.
>>
>> http://www.youtube.com/watch?v=_GPNvjec-DA&feature=player_embedded
>>
>> Well, actually, someone from the MSM is watching -
>>
>> http://blogs.abcnews.com/politicalpunch/2009/05/bankruptcy-atto.html
>>
>> Does any sane and rationale person really believe that a company owned
>> by the US government and the UAW can really compete? What level
>> position will a cost accountant be, GS-11?  A car designer, GS-13?
>> Will you be able to have payments for a "Peoples Car" deducted from
>> your paycheck like Hitler forced Germans to do for VW's.  Don't laugh,
>> you'll be paying for Chryslers whether you drive one or not!
>>
>> Brad
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