"He Used ... Sarcasm"

by hilzoy

Erick Erickson informs us that "The Obama Thugocracy Has Arrived", and that Obama is "turning to the bully pulpit and the press to beat the hell out of dissenters."

"Beating the hell out of dissenters"? With the White House Press Corps? It all sounded very peculiar, so I clicked the link Erick provided, expecting an account of Obama sending Helen Thomas to a tea party with a truncheon. To my surprise, I found a story about a lawyer for the hedge funds who sent Chrysler into bankruptcy, claiming that Obama had threatened his clients with "the full force of the White House Press Corps". The White House denies the story. But suppose it's true: how does this amount to a "thugocracy", or to "beating the hell out of dissenters"? Luckily, Erick explains:

"Yes, yes, the White House denies the story. But while denying it, the White House was also proving the story true. Barack Obama took to the bully pulpit to heap scorn and derision on the the bankruptcy attorney’s hedge funds and money managers."

Ah. I see. He used scorn. He's a veritable Doug Piranha, that President of ours:

"Vercotti: Doug (takes a drink) Well, I was terrified. Everyone was terrified of Doug. I've seen grown men pull their own heads off rather than see Doug. Even Dinsdale was frightened of Doug.

2nd Interviewer: What did he do?

Vercotti: He used... sarcasm."

Though Obama added a twist that even Doug Piranha never thought of: not just scorn, but derision. Next time, he might go even further and add ambition, distraction, and uglification, or even -- I shudder to think of it -- fainting in coils.

I am a bit confused, though. Not by the fact that Erick, who just called a sitting Supreme Court Justice a "goat f*cking child molester", objects to "scorn and derision" -- we all have our moments of weakness. What puzzles me is how someone who thinks that waterboarding is fine and dandy can simultaneously believe that scorn and derision are just too much for the human heart to bear.

Comments

[Johnny Pez]

Bet those hedge fund managers wish they'd settled for having their heads nailed to the floor.

[Ugh]

Erick Erickson informs us ....

Highly unlikely.

[Johnny Pez]

Btw, hilzoy, mocking Erick Erickson seems more Sadly, No! than ObWi. Are you branching out?

[Warren Terra]

The really irritating thing to me is that the accusation just isn't very interesting. When our own resident, ah, gadfly D'd'd'dave went off-topic to post about it a couple of threads and a couple of hours ago, he called Obama's alleged action "extortion" (and linked to a rather nastier post about Obama's actions), when even if the lawyer's allegations were the gospel truth then, at the very most, Obama was threatening that if the auto industry restructuring didn't happen, he would lay the blame at the feet of debtholders who were arguably extorting the automakers, by insisting that unless they got a better deal on the automaker debt they held they'd force the automakers into a protracted and destructive bankruptcy struggle.

It's like Erickson's rewriting the children's ditty:

Sticks and stones may break my bones, but words will crush my under a tyrannical thugocracy

P.S. it's also grimly amusing that Erickson insinuates that Obama acquired antidemocratic tendencies as a small child in Indonesia (he lived there from ages 6 to 10), not just because the idea is absurd but also because I am quite certain that Erickson would have been cheering on the anti-Communist death squads of the early Suharto regime.

[Steve]

I saw the title of this post and now love you forever.

[gwangung]

Generally, most thugs I know of will something considerably more energetic than "scorn" when they engage in their thuggish ways.

As I said before...weak sauce.

[Hartmut]

Well, the one destroys just the body, the other the very soul. And don't forget that sarcasm means tearing of flesh.

[gwangung]

When our own resident, ah, gadfly D'd'd'dave went off-topic to post about it a couple of threads and a couple of hours ago, he called Obama's alleged action "extortion"

Obviously, that's because he thinks hedge fund managers and financiers are such panty-waists and hypersensitive hot house flowers that the mere existence of scorn and derision will crumple them like tin foil under a four year old's hand.

[otmar]

Hilzoy, you are a devious girl.

You used *sarcasm* to attack Erick. How very very wicked of you. You're so cruel, you make the waterborders blush and break out in tears.

[John Spragge]

Just a practical question, and perhaps those here with more knowledge of current US economic conditions can tell me: if Chrysler had gone into chapter 7, what if anything would this lawyer's former clients have got out of it. I can understand how a fiduciary might consider themselves bound to demand the best return for their principals, even if that means disrupting an otherwise good deal. But if they have a choice between getting something and getting nothing, or at most much less, then you have to wonder what basis they have for demanding more.

[Aimai]

a thing of beauty hilzoy.

Aimai

[dmbeaster]

Spragge:

I have not seen enough details to know the answer to your question, but there is a basis for inferring that the small hold-outs were engaged in a hold-up.

Creditors similarly positioned holding much larger amounts of debt were approving the deal. They were presumably represented by equally talented bankruptcy specialists, and decided that the deal being offered was as good as what they would get by not cooperating and insisting on a chapter proceeding.

This kind of deal requires unanimous agreement, and the potential for a smaller creditor to hold-out for special consideration in exchange for cooperation is always there.

This would be a Chapter 11 proceeding, and the rules dictate the rights of each class of debt. The goal of a successful Chapter 11 is to put together a reorganization plan that allows the operating business to emerge intact -- it is simply the ownership and debt that gets adjusted. For a plan to be approved, each similarly positioned class of debt (and otherwise) being impaired has to approve the plan by a majority vote (based on the amount of interest of each voter in that class). Also, the plan has to result in a greater amount being received than the class of creditor would receive in a straight liquidation (which is almost always the case for operating businesses).

It is common to have that plan basically worked out in advance before a Chapter 11 filing, and it is sensible for creditors to agree to such an arrangement to avoid the expense and delay of the formal proceeding so long as what they are getting is most of what they would get in a formal proceeding (you might take slightly less since the expense and delay offset a slighter higher outcome in formal proceedings).

However, such prefiling deals require unanimous consent, whereas a formal proceeding does not. Hence the power of the hold-up by a smaller creditor who anticipates that those with a lot more to lose in a formal proceeding will pay extra for their cooperation.

[Brett Bellmore]

Well, it certainly would have been mere sarcasm if somebody the press wasn't in the tank for had made such a threat. I'm not certain it's not a real threat coming from somebody the press actually likes.

At least, it's as much a real threat, as a creditor who is entitled to turn down a deal turning it down is a real "hold-up". Calling turning down a pre-filing deal a "hold-up" is rather like calling a defendant an extortionist for demanding a jury trial instead of pleading guilty. He's entitled to that formal proceeding. And if he's going to do better under it, maybe it's because the pre-filing was going to screw him over.

[Tom]

In response to Brett, here are a couple of paragraphs Yglesias wrote yesterday that seem directly on point:

What Obama did was to criticize the hedge fund managers who forced Chrysler into bankruptcy for doing something that, though legal, Obama (correctly) viewed as immoral. Is that really such a crazy course of action? A woman who cheats on her husband or a father who never reads to his kids is exercising his or her legal rights, but I think many would say it’s still appropriate to criticize such conduct as wrong. And the President of the United States is within his legal rights to make poor policy decisions, but of course he should still be criticized.

There’s a sense out there, however, that businesspeople should be exempted from the normal rules of society in which some things that are legal can also be wrong. Business decisions made by executives at ExxonMobil are imperiling the well-being of the entire planet but, hey, it’s just business. I think this makes no sense. It would seriously imperil liberty if you tried to make it illegal for people to do everything that’s wrong. But that means you have to be able to criticize people for doing stuff that’s wrong.

[liberal japonicus]

Brett, maybe Obama is oppressing them. You have such a good track record with that vocabulary item, it would be a pity to let it languish.

[Brett Bellmore]

What he did was threaten to mobilize the MSM, who to some extent ARE at his beck and call, against somebody who dared to exercise their legal rights when Obama wanted them screwed over to pay off one of his constituencies.

That might not be a crime on Obama's part, but it's not the slightest bit admirable.

[ral]

OK, Brett, let's take a look at what President Obama actually said, rather than characterizations.

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. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don't stand with those who held out when everybody else is making sacrifices.

REMARKS BY THE PRESIDENT ON THE AUTO INDUSTRY, April 30, 2009

I don't see a threat here.

[ral]

Oh, pardon me, the above statement is the carried out threat.

Hmm... not much sarcasm or derision either. A little uglification, perhaps, although it's hard to make hedge fund managers any uglier in the public eye these days.

[bobbyp]

Brett,

Asserting investors who purchased toxic Chrysler debt at 30 cents on the dollar are getting "screwed over" when they are taken to task for holding out for 50 cents on the dollar is a bit presumptuous.

[Brett Bellmore]

Asserting that investors who hold out for a normal bankruptcy proceeding are committing a "hold-up" is a bit presumptuous.

[KCinDC]

No doubt Erickson would be even more outraged if an administration repeatedly implied that its political opponents were guilty of treason.

[mss]

I don't think I'm over-sensitive to this sort of thing---probably the reverse---but all the complaints about Obama's "thugs" strikes me as nothing more than a racist dogwhistle.

[Scott P.]

Who used the phrase "hold-up"?

[Brett Bellmore]

Strikes me that one of the most annoying aspects of the Obama administration is going to be 4-8 years during which any criticism at all of the administration gets you labeled a racist.

[OCSteve]

Whether this story is true or not, there is no doubt that Obama has been publicly vilifying people who don’t immediately fall in line. These people have a fiduciary responsibility and could be sued by shareholders for taking this crappy deal.

He’s done this for months now – pick a scapegoat and publicly vilify them. It’s like he has no idea why someone might possibly disagree with what he wants to do. I mean, he has a gift and he won after all – how on earth could anyone not fall right in line? Can you recall another president in recent history who so frequently used his bully-pulpit to go after individual citizens?

And we’re talking about senior preferred debt which any bankruptcy judge would put at the front of the line. And can we at least consider the other side of the story here?

April 30, 2009 — As of last night’s deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country’s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money.

As much as anyone, we want to see Chrysler emerge from its current situation as a viable American company, and we are committed to doing what we can to help. Indeed, we have made significant concessions toward this end — although we have been systematically precluded from engaging in direct discussions or negotiations with the government; instead, we have been forced to communicate through an obviously conflicted intermediary: a group of banks that have received billions of TARP funds.

What created this much-publicized impasse? Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler’s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars. In contrast, over at General Motors, senior secured lenders are being left unimpaired with 100% recoveries, while even GM’s unsecured bondholders are receiving a far better recovery than we are as Chrysler’s first lien secured lenders.

Our offer has been flatly rejected or ignored. The fact is, in this process and in its earnest effort to ensure the survival of Chrysler and the well being of the company’s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.

We have a fiduciary responsibility to all those teachers, pensioners, retirees and others who have entrusted their money to us. We are legally bound to protect their interests. Much as we empathize with Chrysler’s other stakeholders, the capital is just not ours to contribute to their cause by accepting a deal that is outside the well established legal framework and cannot be rationalized as being commercially reasonable.

We are continuing to discuss our position with the United States Treasury. We have made a proposal which we earnestly believe is fair and would appropriately recognize our legal position.

As President Obama implied yesterday, it is likely that Chrysler will have to file Chapter 11 whether or not all lenders agree to any particular proposal. Chapter 11 is often used to help implement an agreed deal and dispose of unwanted legacy liabilities. We are hopeful and optimistic that we will reach a positive resolution of our issues so that all stakeholders will move forward together to implement Chrysler’s “quick trip” restructuring in an un-contested proceeding. Our Group will never initiate a bankruptcy filing on Chrysler — that is a decision for the Company and the Administration to make.

As we all appreciate, laws are the foundation of our economy and society. Despite recent travails, our country remains the economic envy of the world and the United States remains a vital engine of global growth. The rule of law made it that way. We urge that people remember this and not succumb to unproductive and unwarranted finger pointing.

[Phil]

Strikes me that one of the most annoying aspects of the Obama administration is going to be 4-8 years during which any criticism at all of the administration gets you labeled a racist.

You mean like how hilzoy got called a racist when she criticized the Obama administration here and Eric got called a racist when he criticized the Obama administration hereand von got called a racist when he criticized them here.

Oh, wait -- that never happened, because hilzoy, Eric and von are not racists. Seems like the easiest way to avoid being called a racist is to, you know, not behave in a racist manner. Has nothing to do with criticizing the Obama administration,

On the other hand, when you throw a rock into a pack of dogs, the one that yelps is the one that got hit. You sure yelp a lot, Brett.

[Brett Bellmore]

Time for me to resort to somebody else's old favorite:

"Oh, wait -- that never happened, because hilzoy, Eric and von are not racistsRepublicans."

[Jesurgislac]

there is no doubt that Obama has been publicly vilifying people who don’t immediately fall in line.

God forbid a black man should presume to publicly vilify white shareholders, eh?

[Phil]

See, I deliberately stuck von in there knowing he wouldn't be considered a liberal like Eric and hilzoy are, and you fell right into the trap, since you aren't a Republican either, Brett.

Would you like me to looks for places where Sebastian has also criticized the Obama administration and not been called a racist, so you can further entangle and embarrass yourself?

[mss]

Brett,

I certainly didn't call you a racist, or even imply it. I don't agree with your take here---I think Obama's statement is appropriate, even responsible, since he's trying to preserve as much value in a rapidly collapsing industry as he can---but you can certainly disagree, vociferously even, without being racist. I'd apologize, but really, why would you think this had anything to do with your views or comments? My comment was about the word choice and framing Erickson used.

My point is that Erick Erickson (and other denizens of RedState and Free Republic, etc.) exploit minor issues and events to deploy racially-loaded words and images to describe Obama and his administration. Erickson's policy views and criticism are gloriously irrelevant (convenient, since they are also incoherent). The point is to briefly reference a policy you disagree with, extrapolate a ludicrous conspiracy to oppress good white Republicans someday, then start ranting about non-existent thuggery, Chicago-style political violence, and other things that Obama has absolutely nothing to do with. Heck, Erickson led off his piece with a reference to Obama's childhood years in Indonesia---is that really relevant to understanding auto industry policies, or is it a reminder that he's not *really* American, just another brown person who doesn't really understand "freedom"? Seems straight out of the Atwater playbook to me.

[hilzoy]

Brett: attributing bad motives to people one disagrees with is common. Which bad motives depend on the situation. Having spent the Bush years being accused of working with al Qaeda, supporting the destruction of my country, hating the troops, etc., etc., etc., I don't find it surprising.

That said: Jes: the insinuation in your comment is ugly, and I can't see what in OCSteve's time here could possibly warrant it.

[gwangung]

there is no doubt that Obama has been publicly vilifying people who don’t immediately fall in line.

Oh,HORRORS.

"Oh, wait -- that never happened, because hilzoy, Eric and von are not racistsRepublicans."

Given the past track record of the Republican party vis a vis African Americans, I'm afraid suspicion is well earned. It's probably not accurate in this case, but when Obama is called a thug or an extortionist over this trifle, then don't be surprised when counter arguments are on equally specious grounds.

[Oyster Tea]

OC: You've made the point. All that is needed in response to Obama's comments is to give the other side of the argument. People can then decide whether they agree with The President or the Hedge Fund Managers.

But, this discussion is about accusing the President of "Thuggery" for bringing it up at all. Your approach is correct. The name calling is the problem.

[Ugh]

Can you recall another president in recent history who so frequently used his bully-pulpit to go after individual citizens?

Does Reagan count? How about Nixon?

[woody]

Gee, Brett, I figgered you and Buffy'd be out in the Hamptons this weekend or sailing or some other elite pursuit fitting your exalted station, rather than rebuking us proles with your privileged insights and wisdom...

[cleek]

What he did was threaten to mobilize the MSM,

OMG! imagine what would happen if a reporter got there and... took a statement from one of the poor,poor,aggrieved hedge fund managers! lives would be ruined.

[GoodOleBoy]

I was enjoying the back and forth here until the term 'racist' was introduced. I could not make a connection to why it was introduced. Then mss explained the Erickson connection. Although Erickson was prominent in the original post, that connection was not necessary for the discussion.

I think the complaint has some validity if, in fact, there was a threat from anyone connected to the White House to intimidate hold-out investors for exercising their legal rights by using their influence over the White House press corps to spew a stream of negative publicity.

This has been denied by the White House. Obama's scorn and derision in a public statement seems reasonable if that is how he feels. I don't see this as part of the hold-out investors' complaint.

The use of Erickson and racism in the discussion is not helpful except to give some a good excuse to bash conservatives. It really just moves the comments off the real issue.

[Brett Bellmore]

"Gee, Brett, I figgered you and Buffy'd be out in the Hamptons this weekend or sailing or some other elite pursuit fitting your exalted station, rather than rebuking us proles with your privileged insights and wisdom..."

You mean, rather than installing the used washer and dryer in our apartment, so the laundrymat charges for all these baby clothes don't eat us alive? Might take the stroller out to the park, if it weren't going to rain.

[Jesurgislac]

Hilzoy, you know damn well why I think OCSteve is racist: because he's expressed racist views about Muslims, and recently reiterated that he still holds those views. (He was also insulting enough to suggest I share them.)

Moving on from that: isn't it interesting how racists in the US have made racist discourse seem normal by reacting as if "racist" was an insult beyond bearing, rather than an accurate descriptor of their bigoted views?

They do the same thing with "homophobe", too. Homophobic speech is treated as normal: identifying someone as a homophobe is treated as a randomly insulting comment intended to "bash conservatives".

[KCinDC]

GOB, the post is about Erickson's outrage at Obama's criticism of hedge fund managers (including Erickson's use of the word "thugocracy"), so I'm not sure why people should be expected to leave Erickson out of the discussion in favor of discussing whatever topic it is you're wanting to focus on.

[Ugh]

he's expressed racist views about Muslims

Hard to do, methinks.

[RogueDem]

Isn’t this just a continuation of the classic Rovian tactic of accusing the other side of misdeeds which in reality your side is guilty of? This tactic has the twofold result of distracting from the truth of the situation and inoculating the guilty party in that they can now claim disingenuously that both sides do it. It is not like Bush ever tried to “catapult the propaganda”.

[CaseyL]

Erick Erickson is either a vile excrescence who exemplifies the need for retroactive abortion, or a really really clever agent saboteur.

Since the leading lights of the Right have about as much depth and subtle understanding as a garden hose (and that could be slandering the garden hose), I vote for "vile excrescence."

[d'd'd'dave]

I find it interesting that the white house press corps is spoken of as a tool of the administration for shaming the public. Is there not independence there? Is the party line so obviously true and noble that the press corps will submit as one?

gwangung://Generally, most thugs I know of will [do] something considerably more energetic than "scorn" when they engage in their thuggish ways.

As I said before...weak sauce.//

Obama is the velvet glove covering the discretionary use of a regulatory iron fist.

Obama (via Emanuel): "Mr Hedge Fund, you think you need more payment re: Chrysler? If you get it, i'll make sure you get less in every deal henceforth (maybe a special hedge fund profits tax or something). I own the congress you know. And my pocket press corps will spin it like they did the AIG bonuses."
Hedge Funds: "That's blackmail!"
Obama (via Holder): "Err, no. It's more like protection money, a form of extortion. We'll withhold financial violence in exchange for a money concession now.
Warren Terra: "Huh? Extortion you say? Let me get a dictionary."

[gwangung]

d'd'd'dave: Again, weak sauce. Y'all keep servin' it up.

Hell, you're wayyyyyy tougher than those sissy-men you keep insisting these hedge fund manager are.

[mss]

GoodOleBoy,

I have no problem with the President---in fact, any President---criticizing private actors acting within the law but in socially damaging ways. I'm pretty sure elected officials of both parties, including presidents, do this daily, if not hourly, and if no one shed a tear until the poor hedge fund managers got their feelings hurt (omg, bad press!), I see no reason to examine the issue now, other than paranoia.

I'm not an expert on bankruptcy, or a lawyer, but according to my limited understanding, resolving hold-out problems and squabbling among investors is pretty much inevitable, and since the administration has little realistic option but to get involved in the auto sector bankruptcies, I'm not even sure what option Obama has but to cajol investors to go along, even if he has no tool stronger than the bully pulpit.

Since I don't see the alternative to getting involved in the auto sector in some fashion, I don't find Obama's mild verbal rebuke to hold-outs from the deal on the table a remotely interesting debate topic. All that drew my attention was Erickson's absurdly disproportionate language.

[Mike Schilling]

I find it interesting that the white house press corps is spoken of as a tool of the administration for shaming the public. Is there not independence there? Is the party line so obviously true and noble that the press corps will submit as one?

"Yes", and "no" respectively, which is one reason that the accusation is moronic. (Note that I avoided violating the posting rules by not calling the accuser moronic as well.)

[Tom]

It seems to me that there are some interesting discussions of this question elsewhere on the Web today, at Yglesias's place and the Volokh Conspiracy. It's not totally meritless to argue about the pros and cons of Obama's having, at least apparently, played some kind of hardball in negotiating with the hedge funds over Chrysler -- though it seems to be unclear who actually threatened whom with what.

But I think terms like "thuggery," "extortion," and "financial violence" are misplaced and don't help us to think this through. It's obviously not unprecedented, in either business or politics or law, for one party to threaten to do something that would harm the other (via negative publicity or otherwise) in order to get leverage in a negotiation. Businesses say things to their workers that amount to threats all the time -- take a pay cut or we'll close down the plant, or whatever.

So my question is, what makes this instance a big deal? Is it just the unfamiliarity of it, that it's the president making a threat to some financiers? Why shouldn't we look at this as just an ordinary instance of how the world works?

[John]

Obama is the velvet glove covering the discretionary use of a regulatory iron fist.

What evidence is there that Obama threatened anything of the kind? The accusation is that Obama threatened to sic the White House press corps on them, whatever the hell that means, and even that is being denied by the White House.

[Nell]

Well he had to, dinnee? I mean there was nothing else he could do, be fair. [The 'edge fund managers] had transgressed the unwritten law.

[jdog]

Next Obama (or Hilzoy) will attack them with bogus psychiatrists.

http://www.youtube.com/watch?v=heskWNMUqC8

[KCinDC]

I find it interesting that the white house press corps is spoken of as a tool of the administration for shaming the public.

Yes, that's a good tipoff that the accusation is bogus. I'm pretty sure that no one in the administration is delusional enough to believe that they control the White House press corps.

[russell]

Obama is the velvet glove covering the discretionary use of a regulatory iron fist.

We're talking hedge funds, right? Private equity firms? Don't have to register with the SEC, don't have to make their books public, don't have meaningful capital reserve requirements? Plus, executives have their salaries taxed as investment gains?

It may be that under Obama the pendulum will swing back in the direction of increased regulation of the financial industry. IMO, soon come. Can't happen fast enough.

But just to put some context on this, in fact the hedge fund investors in this particular deal did not knuckle under Obama's iron fist, Chrysler is in fact going into bankruptcy, and Obama has made his "threatened" public statement.

ral quoted it above, but I'll quote it again here:

"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."

Crushing, truly crushing.

And it was reported in the press, no less. Obama snapped his fingers, and a thousand bylines were launched. The President of the USA made a public statement about the bankruptcy of a major manufacturing firm, and reporters quoted his comments right there where the public could read them.

If that's what an "iron fist" looks like, I'm losing no sleep.

[magistra]

He knew all the tricks, dramatic irony, metaphor, bathos, puns, parody, litotes and... satire. He was vicious.

Well you can understand why Erickson's worried about litotes. It would probably be...unfamiliar to him.

[Mike S]

I guess it's no wonder that people who live lives of great power and privilege will come to believe that they should be immune from criticism and inconvenience, but I don't understand the large numbers of sycophantic courtiers and economic royalists who rush to defend the tender feelings of really rich guys. As with the pathetic whining of Jake DeSantis, the alleged wrong here comes down to saying,"Obama hurt the feelings of the overclass, make him stop!" AIG got their enormous bailout, DeSantis got his bonus, and the Chrysler hold-outs will get their day in court where they will a get a cut of a company that is being propped up with taxpayer money. What the hell do any of these people have to complain about?

[ScentOfViolets]

"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."

Just what, precisely, is the beef here? Did Obama say anything that was not true? Did he make a misleading statement, or lie by omission? What?

It seems that all the President did was a) accurately describe the actions of one group of people, and b) say he didn't care for those actions. If double-double-D or Brett or OCSteve or anyone else has a problem with what was said, I'd like to know exactly what that problem is.

[IndependentVoter]

When I read this my immediate thought was from Monty Python's "No one expects the Spanish Inquisition."

[cleek]

Just what, precisely, is the beef here?

Obama is not a Republican. really, that's all you ever need to know, if the subject is RedState. they are GOP cheerleaders, and nothing else.

[Ugh]

What cleek said.

Shills, nothing more.

[Robert K.]

There's got to be role for a enormous hedgehog named “Frank” in all this.

[Brett Bellmore]

My problem with it is that we've frequently seen that, when the executive branch picks out particular people or institutions to demonize, it's not an effort to make sure they can't get a date on Saturday night. It's preparing public opinion for subsequent, much more substantial attacks on them. Often actions which the courts ought to treat as bills of attainder, if that clause hadn't been effectively written out of the Constitution by narrow interpretation.

No institution which saw this play out with AIG should blow off the administration picking them out as the next designated victim.

[243]

So why is labor forbidden to use government as its own implement to negate this engineered advantage?

They'd have to buy out the current owners first and I don't think that they are inclined to sell.

[ScentOfViolets]

My problem with it is that we've frequently seen that, when the executive branch picks out particular people or institutions to demonize, it's not an effort to make sure they can't get a date on Saturday night

If you're going to respond, Brett, respond substantively. What is looks like here is that Obama accurately characterized the behaviour of certain groups. Certainly you're not contesting that part of statement. So then your beef must be with part b), in which Obama says he does not care for this behaviour.

I'm curious, Brett: why can't the president say that he doesn't care for certain types of behaviour? Or maybe I'm not enlarging the scope of my inquiry enough; did you ever make this sort of objection with regards to Bush? In a verifiable way? Certainly Bush made enough of these types of assertions that you should have no problem coming up with an answer.

[matttbastard]

[D]id you ever make this sort of objection with regards to Bush? In a verifiable way? Certainly Bush made enough of these types of assertions that you should have no problem coming up with an answer.

The real feat would be BB coming up with an example that didn't include a superfluous Bill Clinton!!!1one dig.

[bobbyp]

Billmore sez: My problem with it is that we've frequently seen that, when the executive branch picks out particular people or institutions to demonize, it's not an effort to make sure they can't get a date on Saturday night. It's preparing public opinion for subsequent, much more substantial attacks on them.

Like Saddam Hussein? So Bush was equally as bad or mistaken or whatever the hell point it is you are trying to make? Because in all your floundering around on this, you are not making one.

[russell]

It's preparing public opinion for subsequent, much more substantial attacks on them.

If the shoe fits they'll have to wear it, and take whatever consequences flow from that.

They were offered 33 cents on the dollar. They weren't buying. They preferred to take their chances in bankruptcy court.

So, they'll take their chances in bankruptcy court.

Really, take a look at the "restrictive" regulatory regime that is imposed on private equity and tell me that we're talking about anything within 100 miles of an "iron fist".

Hot dog vendors have to comply with a stricter regulatory regime than private equity firms. I've been a hot dog vendor, trust me on this.

If these guys had half a brain they'd STFU, take their haircut, and quit calling attention to themselves.

I've probably taken a worse haircut on my 401k than these guys are taking on Chrysler.

Nobody owes these guys anything. They've had a great ride, they operate in an essentially unregulated environment, they've made, personally, billions of dollars with a "b".

Obama tried to sort out Chrysler without bankruptcy, these guys told him to pound sand, and he responded by saying he "doesn't stand with them".

This ain't jackboots.

You're right, Brett. Obama is going to want to tighten up regulations on the FIRE sector. He's going to want to do that because the FIRE sector has acted with extraordinary irresponsibility, and both common sense and popular sentiment requires that he tighten up regulation on the FIRE sector.

These guys are idiots, because they're handing him popular support for tighter regulation on a platter, with a bow tied around it.

They'll lie in the bed they've made.

[joe from Lowell]

The last time Erick Erickson informed us about the Obama thugocracy, it was about his steely determination to bring back the Fairness doctrine.

The time before that, he was informing us about a scary Negro who carved a B into some nice young lady's cheek.

Don't worry, Erick; I'll treat your latest warning with all the respect it deserves.

[MikeF]

Just what, precisely, is the beef here? Did Obama say anything that was not true? Did he make a misleading statement, or lie by omission? What?

This:

They were hoping that everybody else would make sacrifices, and they would have to make none.

is a misleading statement. The secured creditors were willing to take a 40 or 50 percent haircut. Now, maybe that's just the haircut they expect to be imposed by bankruptcy court, but the fact that the administration's plan leaves them with less than they would get in chapter 11 means that under said plan some parties must get more than they could expect in chapter 11. Which puts the lie to the idea that everyone but the holdouts were making "sacrifices". The only ones making sacrifices were the banks that took TARP money, and god knows what behind-the-scenes promises or threats led those institutions to make their noble sacrifices.

And this:

Some demanded twice the return that other lenders were getting.

contains a lie by omission - there are different types of debt, and some creditors will get much more than others in bankruptcy. There is an implication that some lenders altruistically accepted super-low returns for the good of Chrysler and the USA, while in reality they were just unsecured, lower-tier creditors who would be getting just as badly screwed in bankruptcy court.

[gwangung]

It's preparing public opinion for subsequent, much more substantial attacks on them.

These bozos are ENTIRELY DEFENSELESS ON THIS????

C'mon, Brett...that's just doesn't make sense. These folks have the resources and clout to fight back. And they sure as hell weren't blameless in this.

[gwangung]

The secured creditors were willing to take a 40 or 50 percent haircut. Now, maybe that's just the haircut they expect to be imposed by bankruptcy court, but the fact that the administration's plan leaves them with less than they would get in chapter 11

Why is this a fact? Clarify.

[russell]

From Erickson's RedState post:

The clients were willing to take 50 cents on the dollar from Chrysler for their debt, he said.

That's lovely.

Here's a question: what was the total face value of Chrysler last week? Was there enough to come up with 50 cents on the dollar for these guys? Was there enough to come up with 50 cents on the dollar without leaving every other creditor of Chrysler with squat?

If not, what they were actually asking for is either 50 cents at the expense of every other creditor, or they were asking Uncle Sam to pony up to make up the difference.

Uncle offered 33 cents, which sum Uncle would make happen by paying $2.25 billion of taxpayer money. They told Uncle to piss up a rope.

See you in court, dudes. Good luck.

[Warren Terra]

I largely agree, of course, with Russell's 11:09; the only question would have to do with the Right's insistence that this was "secured" debt, and whether in a bankruptcy situation these debtholders would indeed be in an advantageous situation compared to other parties involved, able to get their hands on the assets that "secured" their loans despite the other claims and without spending so much on lawyers as to make the difference moot. I rather suspect that the people involved in negotiating all this, on both sides, have an excellent command of the relevant details.

Also, I've seen someplace that these people were speculators who bought the debt for thirty cents on the dollar, and are being pushed to accept 33 cents - if these numbers are correct, it's not a great return, indeed quite possibly one that will in the end mean a small loss, but surely that's what "speculation" is supposed to mean. Indeed, if the original debtholders sold out to these guys as thirty cents on the dollar, then it would appear that they got a fairly good price from the market; maybe we should be celebrating that?

finally, let me say (admittedly somewhat delayed) that I am personally affronted by D'd'd'dave's 2:13 in which he apparently invents an entire conversation involving Obama and other personalities issuing explicit threats to pervert the administration of the nation for their partisan ends, and then names me and uses this indented conversation to in some way suggest that my earlier disagreement with his characterization of Obama's actions was incorrect. I could, of course, invent scenes in which the people whose cause D'd'd'dave is advocating do all sorts of heinous acts and then act as if my having done so proves something about them - but what would be the point?

[d'd'd'dave]

My apologies Warren. I did not mean to suggest you were associated with heinous acts.

//in which he apparently invents an entire conversation involving Obama and other personalities issuing explicit threats to pervert the administration of the nation for their partisan ends//

It was obviously a work of fiction. In my opinion it is near the truth (although the version Russell gives at 4:27 is persuasive). Others, I'm sure, will disagree. It has been common for the left to ascribe the worst possible motives to Bush/Cheney/et al. So I'm sure you can understand the concept of trying to understand another's actions by imagining what they had to be thinking to take the action they did.

The only thing I meant to imply in reference to you at 2:13 was that I knew the difference between extortion and blackmail and chose to use the term extortion because that is what I thought must be happening.

[Phil]

d'd'd'dave, it might behoove you to remember this and this. Or not. You're a big boy, make your own choices.

[russell]

The folks in question apparently do hold secured debt, which means if the bankruptcy proceedings proceed by the book they will get paid first.

So the private equity guys may be correct, they may get a better deal out of forcing bankruptcy. If so, everyone else will get a correspondingly worse deal.

Which is kind of Obama's point. Rather than spread the pain out, they're gonna hold out for the best deal they can get, and everyone else can pound sand.

The government was trying to put together a deal which would avoid bankruptcy. I'm not sure if that was a good idea or a bad idea, but that's what they were trying to do.

Apparently, and I say "apparently" because we don't know the details of the negotiation, some parties were asked to take less than they might hope to get in bankruptcy. To help take the sting out of that, Obama offered $2.25B in public money.

That wasn't good enough. The folks in question said they'd go for $2.5B, Obama said sorry, that's a step too far. Then, he didn't blink.

So, it's off to court.

We don't know the content of the conversation between the private equity firm and the white house. It's a "he said, she said" situation. We do know, however, what Obama actually did say when he announced the bankruptcy, and it was pretty damned mild.

So, to me, the private equity folks come out of this looking like selfish, intractable clowns. YMMV.

I'm quite sure some amount of this is theater, and I suspect that it may be a warm-up for debate over FIRE sector regulations that are currently being proposed.

The private equity folks currently operate in a virtually unregulated environment right now, so dire warnings about a coming "iron fist" of regulation seem, to me, to be, shall we say, an overstatement. To me it seems more accurate to say that, perhaps, they will subject to some regulation going forward.

This might mean a handful fewer billionaires. If that's the price we all pay for a more stable financial sector, it seems like small beer to me.

To make a very long story belatedly short, I see a bankruptcy lawyer for a private equity firm that actually took the deal screaming in public, after the fact, that he was forced to do so by threats that his client would be ruined -- ruined! -- by a White House full court press. Names would be named, reputations would be ruined.

All of which turned out to be "I don't stand with them".

I'm not sure what this guy's goal is here, but I don't think he's achieving anything useful for his client.

[Slartibartfast]

Beating the hell out of dissenters

See, I thought this meant that he nailed their collective heads to the telly.

[KCinDC]

I'm wondering what universe these hedge fund managers are living in in which they still have reputations to have ruined.

[ScentOfViolets]

Just what, precisely, is the beef here? Did Obama say anything that was not true? Did he make a misleading statement, or lie by omission? What?

This:

They were hoping that everybody else would make sacrifices, and they would have to make none.

is a misleading statement. The secured creditors were willing to take a 40 or 50 percent haircut. Now, maybe that's just the haircut they expect to be imposed by bankruptcy court, but the fact that the administration's plan leaves them with less than they would get in chapter 11 means that under said plan some parties must get more than they could expect in chapter 11. Which puts the lie to the idea that everyone but the holdouts were making "sacrifices". The only ones making sacrifices were the banks that took TARP money, and god knows what behind-the-scenes promises or threats led those institutions to make their noble sacrifices.

Isn't this statement rather . . . misleading? You're conflating relative and absolute haircuts, and negotiation/bankruptcy haircuts. You also don't seem to differentiate between 'not willing' and 'not able'.

And this:

Some demanded twice the return that other lenders were getting.

contains a lie by omission - there are different types of debt, and some creditors will get much more than others in bankruptcy. There is an implication that some lenders altruistically accepted super-low returns for the good of Chrysler and the USA, while in reality they were just unsecured, lower-tier creditors who would be getting just as badly screwed in bankruptcy court.

Posted by: MikeF

You know all of this for a fact, eh? I haven't heard this from anyone but you. Further, I think that a lot of us already knew the difference between secured and unsecured debt; you're just saying that Obama didn't go into enough detail. Which begs the question of enough detail for who? You? Me? Some unspecified third party? While I already knew this, and I can't speak for you, it seems that you knew this as well, so it can't be a 'lie of omission'.

Care to try again?

[ScentOfViolets]

I'm not sure what this guy's goal is here, but I don't think he's achieving anything useful for his client.

Posted by: russell

I agree with most of the post this was extracted from, but I think this deserves an extra comment. What happens if in bankruptcy court, it turns out that these funds get less than what they expected, maybe even less than what was offered in those negotiations? Or what if this leads to increased regulation of hedge funds and higher taxation for their investors?

Can you say 'gross neglect of fiduciary responsibility'? Sure. I knew you could. In short, in just showing 'fiduciary responsibility', these hedges may have set themselves up for some pretty antagonistic lawsuits from some pretty irate and pretty wealthy investors.

My point here is that 'fiduciary responsibility' is well on it's way to becoming just another set of buzz words, like 'activist judges' or 'liberal'. This is happening because certain people think they have sole proprietorship of the meaning of that term, and they think they can use it as a shield to ward off any criticism. No. That's not going to happen. Showing 'fiduciary responsibility' would have meant that these hedges took what was offered to build up some bankable good will, maybe to be used later in negotiations over how to further regulate the industry.

See? I can use that term too. And with at least as much good faith.

[russell]

Now, maybe that's just the haircut they expect to be imposed by bankruptcy court, but the fact that the administration's plan leaves them with less than they would get in chapter 11 means that under said plan some parties must get more than they could expect in chapter 11.

It could also be the difference between $2.25B and $2.5B in taxpayer dollars.

$2.25B was Obama's final offer, $2.5B of federal money was apparently what the hedges were holding out for.

$250M is a big piece of $1B, which is, again apparently, what the folks in question were owed.

But, when it comes to nitty gritty detail, we're all speculating. It'll get ironed out in court, and they'll get what the judge gives them.

[gwangung]

Showing 'fiduciary responsibility' would have meant that these hedges took what was offered to build up some bankable good will, maybe to be used later in negotiations over how to further regulate the industry.

Passing the possible long term gain for the "sure" short-term gain.

Isn't that the essence of the modern business mindset?

[MikeF]

Isn't this statement rather . . . misleading? You're conflating relative and absolute haircuts, and negotiation/bankruptcy haircuts.

No, my point was that Obama changed the goalposts mid-sentence by shifting from "sacrifice" meaning an absolute sacrifice (what "everyone else" was willing to make) to a sacrifice relative to what the parties expect out of chapter 11 (what the hedges were willing to make "none" of).

You know all of this for a fact, eh? I haven't heard this from anyone but you. Further, I think that a lot of us already knew the difference between secured and unsecured debt; you're just saying that Obama didn't go into enough detail.

When I heard Obama's speech, I had not been following the Chrysler situation closely at all. My reaction, not knowing which parties had secured vs. unsecured debt, was roughly along the lines of "screw those greedy bastards". I suspect most people who watched the speech without being familiar with the specifics had the same reaction, and I suspect that's the reaction Obama was trying to provoke. After learning some more details, I felt somewhat played - Obama had made a direct comparison between apples and oranges without acknowledging that they were different fruit.

So sure, I'm only speaking for myself, but it seems, to me, that Obama was being disingenuous in conflating different types of debt obligations and also in changing the implicit meaning of "sacrifice" mid-sentence. I don't like it, but of course it's not thuggery - just playing somewhat dirty to score some points on the easy targets.

[Brett Bellmore]

"Bankable good will"? I rather doubt there actually is such a thing, where politicians are concerned. And that would have to be a heck of a lot of "good will" given that the haircut Obama was offering them was around the level of their ankles.

[russell]

And that would have to be a heck of a lot of "good will" given that the haircut Obama was offering them was around the level of their ankles.

Does anyone have a clear idea of what the actual numbers are here?

My understanding is that the hedges -- the folks who walked away -- hold about $1B of Chrysler debt.

What did they pay for it?
How much would they have received under Obama's proposal?
How much can they expect to receive in bankruptcy?
How much of the $250M difference between Obama's $2.25B offer and the $2.5B they asked for have gone to them?

I've seem speculation on the numbers that ranges from a 50% greater loss that what they will receive from bankruptcy, to not quite as large a profit as they were hoping for.

That's a pretty big range.

To some degree the question here seems to hang on the length of the "haircut". It would be useful (even if it isn't any of my business, personally) to know what we're actually talking about.

As far as what's on the public record, the difference (on both sides) between a deal and no deal appears to be $250M. I'm curious to know what that sum means to the parties involved.

[russell]

oh yeah, google is my friend.

Here is what I found.

The US has lent $4B to Chrysler to date. That $4B will be forgiven, and we will put up another $8B to make the deal work. We may or may not get that money back, it depends on how the new and improved Chrysler does.

Cerberus loses their current 80% stake, period. They get nothing.

Daimler gives up $2B in debt and a 19% share in return for being forgiven $660M worth of pension obligation.

The UAW VEBA gets $4.6B in cash over 13 years plus 55% of the new Chrysler in payment of $10.6B worth of pension obligation. UAW workers give up a COLA, annual bonus, two paid holidays, and retirees give up vision and dental care.

Fiat gets 20% of the new Chrysler in return for small car technology exchange. They also get three board seats, and will probably have the most hands-on executive role following bankruptcy.

Secured bondholders get $2.25B for the $6.9B in debt they hold, which amounts to 32 cents on the dollar. Estimates of what they would get in bankruptcy outside of the deal range from 30 to 50 cents on the dollar.

The folks who have dug in their hells hold about 10% of the secured debt, or just less than $700M. They will be able to make their case before the judge to explain why they should be considered ahead of the secured debt holders who hold the other 90% of the secured debt and who have agreed to the deal, and/or ahead of Fiat or the UAW.

They'll get what the judge gives them.

[MikeF]

Your google-fu is strong, russell. This thread is probably stone cold by now, but I found one interesting nugget:

http://www.bloomberg.com/apps/news?pid=%2020601109&sid=aowmZkX0TzEE&refer=exclusive

about 2/3 of the way through the article it is mentioned that the "absolute priority" rule under which secured creditors get first crack at a bankrupt entity's assets is not as absolute as the name implies: frequently, if 2/3 of the senior creditors agree, the court allows them to force the dissident creditors into a cram-down. So their actual ability to get equity out of the bankruptcy may be very limited in practice.

[gwangung]

frequently, if 2/3 of the senior creditors agree, the court allows them to force the dissident creditors into a cram-down.

Really???? If that's the case, why are they whining about being held up to sarcasm? Aside from the toothlessness of the sarcasm (compared to the money), it looks like there's a very good chance they're not going to get that much anyway...Why go to the trouble of a bankruptcy when they hold so little of the debt?

[MikeF]

Why go to the trouble of a bankruptcy when they hold so little of the debt?

I'm not familiar with the bankruptcy code, so I'm not sure whether the cram-down has to be allowed, or whether it's simply an option that the judge can accept. If the latter, then I guess it's possible that a judge might disallow a cram-down on the basis that the 2/3 majority may be acting unduly influenced by their TARP obligations. The article also raises the possibility that the dissidents could try to stall and stretch out the bankruptcy enough that the gov't cries uncle and gives them a better deal for the sake of expediency.

[gwangung]

Ah, thanks, that makes more sense.

[Sebastian]

Seems, if true, the story is troubling because it means that government aided entities are not going to be able to easily borrow money from anyone other than the government.

We have a well developed bankruptcy system with well understood rules. If creditors can't count on that for government aided entities, they will have to charge quite a bit more when they lend to government aided entities.

Now that hardly matters to Chrysler, which has an almost zero chance of surviving anyway. But it can't be good for anyone else.

[russell]

"We have a well developed bankruptcy system with well understood rules"

I actually do get this argument, and would hope that the way things are playing out right now doesn't become the norm.

That said, this is the 6th largest bankruptcy ever, occuring at a uniquely bad time, with potential ripple effects for hundreds of thousands of folks when 600K people a month are already losing their jobs.

I could be wrong, but I don't really see Obama as a guy who's trying to establish the federal government as the nation's industrial banker. In this particular case, I think he's just trying to knock heads to work out something like a least-bad overall deal for everyone.

I agree that the private equity guys have a valid legal point here, but I really do think they're doing themselves a disservice by holding out for the last nickel.

If nothing else, they've let Obama jiu-jitsu them into being the "doesn't play well with others" types in the public eye. That will not help them when financial reforms are proposed and debated.

Smart guys pick the right hill to die on.

[Sebastian]

"I could be wrong, but I don't really see Obama as a guy who's trying to establish the federal government as the nation's industrial banker."

I don't think he intends that either. But lots of government actions have unintended consequences. And it wouldn't be the federal government as the nation's industrial banker. It would be the nation's banker for industrial losers. Which is much worse.

"That said, this is the 6th largest bankruptcy ever, occuring at a uniquely bad time, with potential ripple effects for hundreds of thousands of folks when 600K people a month are already losing their jobs."

Right, but Obama's actions have done precisely nothing to change that. Chrysler isn’t likely to really make it back to corporate health in any normal sense. And if it does, it will do so as a much smaller company with many fewer employees. The bankruptcy system is really good at handling that kind of transition. I know we have heard objections that reorganization loan funding won’t be available. Well it sure as hell isn’t going to be available now. What idiot would lend money under reorganization when it is now clear that the government can and will change the rules on you whenever it feels like it—especially if it thinks you are trying to make money on the deal? Be that as it may, the government could provide the reorganization loans, and otherwise leave it to the experienced bankruptcy courts. The only reason I can think of for doing all this is that the administration wants to pretend that Chrysler and all the other car companies are going to come out of this with the full complement of employees intact. But even if the idea is to play hardball to ‘show other creditors in future negotiations that we mean business’ or something, it was really poorly conceived. Basically at this point you’d be a fool to invest in any company that the government might touch in the near future. Which is going to mean that some number of mildly shaky businesses are going to have a much harder time getting operating funds. Which means that they are more likely to fail now than they were yesterday.

[Billare]

This government is undertaking, in my opinion, a criminal action in the Chrysler bankruptcy. Moreover, Obama is fully aware that what he is doing is illegal, which is why he hasn't asked Congress to intervene, but doing it through his twisted executive schemes. His actions would cause a huge scandal if exposed to the political process.

First of all, this isn't the normal method of Chapter 11 bankruptcy; instead, the Administration is negotiating a sale to another, different entity, a "Chrysler 2", under section 363. This is a conflict of interest because it is collusive bidding - the government is a stakeholder, as an equity holder and also as the recipient of political contributions, but is engineering the bid to the company that is ostensibly going to assume control of Chrysler, Fiat. Fiat will receive 35% of the equity, but it is strange that receives this control without putting up ANY MONEY AT ALL. Very typically, increasing the size of its stake will require politically-minded ideas like location of a Chrysler plant within the US. The UAW is owed unsecured claims of their health care fund, the VEBA, which under the government plan they will be "forced" to convert to 55% of the equity of the "New" Chrysler. For all this, they are offering $2 billion to the secured creditors.

Why is the Administration so eager for this bankruptcy to occur? Well, the general rule in Chapter 11 bankruptcy is that all creditors must agree to a re-organization plan or be proscribed one by the bankruptcy judge. However, the Administration wants a rapid-fire sale to Chrysler 2, because in order to effectively "block" the sale, the small number of dissenting creditors in question would have to put up more money in total ($2 billion) to bid on the assets than the Administration is offering. I will get to why there is no legal remedy in this situation later. Here is another conflict of interest, since the Administration is financing several of the larger creditors, the illegally-financed TARP banks, who will tend to accept less money than they would without this yoke. This is a collective action problem: under normal bankruptcy, you can block by dissent; under the Administration plan, there needs to be a kind of coordination between the secured creditors.

First of all, understand that Fiat, the company, isn't important to the scheme. That begs another question - why are they participating, and what is their relationship to the Administration? They are not actually putting up any money, because the Treasury is going to competely finance the sale of the assets that will be received by "New" Chrysler. You could call it a "shill" bid, there is essentially no third-party bidder. Indeed, why would anyone want to get involved in this messy political situation, especially if the UAW will strike if you don't give them the same kind of exorbitant deal they would receive under the government? Note also that that same question also hampers the dissenting creditors' bid. Not only will the UAW get a 55% stake in "New" Chrysler, after Daimler pays $600 million into the pension plan, the Pension Benefit Guaranty Corporation will assume the liabilities of "Old" Chrysler, on the taxpayer's dime. They get to appoint a director to the board, and the supposedly "neutral" government will get to appoint 4 directors.

The sale under section 363 is designed to pre-empt another rule under section section 1129(a)(7) of the bankruptcy code. It reads,

"With respect to each impaired class of claims or interests – (A)
each holder of a claim or interest of such class . . . (ii) will receive
or retain under the plan on account of such claim or interest
property of a value, as of the effective date of the plan, that is not
less than the amount that such holder would so receive or retain if
the debtor were liquidated under chapter 7 of this title on such
date. "

So basically, it is a rule that says any reorganization plan should get maximum value for priority level of claims. If it prevailed, the dissenting secured bondholders would be made as whole as possible. But, if the company is sold under the more majoritarian section 363 sale, they never get to exercise those claims; if the trumping bid is the government's $2 billion, all secured creditors are paid pro-rata, and their claims cease. That's why the Obama Administration is speaking its Double Speak: "surgical" and "quick" really means "illegal" and "fraudulent". But the Federal Government is playing both sides, so that's A-OK.

The success of this plan critically hinges on whether it is judged "sub-rosa" by the presiding judge, which offers remedy for the "fear that a debtor-in-possession will enter into transactions that will, in effect, “short circuit the requirements of [C]hapter 11 for confirmation of a reorganization plan.” So, instead of the alternative where we could have had an open, private process between many stake-holders, we are having a secretive and political process between compromised and possibly corrupt stake-holders.