President of the United States Barack Obama, is engineering his fix for Chrysler, another ‘private’ corporation. The ‘fix’ is giving a 55% majority ownership of the company to the United Auto Workers union by putting the labor union AHEAD of secured creditors in a ‘White House’ recovery plan. Secured creditors are people and companies who invested in Chrysler, and likely part of someone’s 401k. Under bankruptcy, the secured creditors are always FIRST on the list to recover what they can.
But that is not what happened. What happened is Obama publicly chastised the few creditors that did not want to go along, and used his Chicago-style political tactics on them to play along with his bankruptcy plan.
A leading bankruptcy attorney representing hedge funds and money managers told ABC News Saturday that Steve Rattner, the leader of the Obama administration’s Auto Industry Task Force, threatened one of the firms, an investment bank, that if it continued to oppose the administration’s Chrysler bankruptcy plan, the White House would use the White House press corps to destroy its reputation.
Obama did prevail, ending up with them settling for 29 cents on the dollar out of $6.8 billion owned by Chrysler. The labor union that invested zero dollars into the company gets 55% ownership, and the investors get 29%.
Returning the nation’s wealth to its rightful owners. It is what he campaigned on.
Update 5/7/09: I’m just dying to call this The Lunch Counter effect, but I won’t. Rush’s podcast from yesterday echos the point.