RKMBs Forums .::Important::. Politics and Current Events Democrat Leaders Want Automaker Bailout

Yes, I know that that's Obama's talking point. As I already pointed out and your article as well:

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So you say they were not holding out for more bailout money despite the fact that they indeed were. They didn't come to the table asking for bankruptcy but asked for more bailout money after refusing several offers Doctor.

They were looking for more money, yes. The government could have offered them a larger stake in the reformed company, but didn't. They felt they could make more money in bankruptcy. The hedge funds have a responsibility to their investors to make them the most money. These are the same investors you and whomod were crying over when Wall Street tanked after the first financial bailout was voted down because they lost money in their retirement accounts. But now that Obama and the Dems want to push through a certain plan, you don't give a fuck about them.

According to bankruptcy court precedence, they are entitled to better treatment. They invested money into the company. The unions didn't, which were simply taking money from the company and getting a better shake than the hedge funds. And they weren't just holding out for more bailout as Obama and the Dems are describing it. They would have taken a stake in the reformed company, which is what the unions are getting, but were being tossed to the sidelines. Did you not even read the article that you posted a link to?

“Junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full,” the dissidents said in the statement.

In bankruptcy court, the absolute priority rule is regularly modified, lawyers said. Two-thirds of the lenders can force the holdouts to go along with them in a procedure called a cramdown.

But if, as you claim, 2/3 of the investors can get together and essentially strip the secured creditors of their rights, there is no validity to the Democrat talking point that the secured creditors are "holding up" anything, is there?

It further contradicts your claim that the secured creditors are "not automatically entitled to better treatment." It demonstrates that they are, in fact, entitled to better treatment unless and until certain events occur.

You'll have to point out where they said they would have taken a stake in the company because it looks to me that other than wanting more money their issue wasn't that they were not getting a stake in the company but that others were and they feel they should be paid in full before anyone else gets anything.

Reading is fundamental.

The stake is money. The company would be values at x-amount of dollars. The stake they were offered is below the amount they wanted.

Still my major sticking point is that if they were going to file bankruptcy why did we waste billions in the initial bailout? That money is gone, never to return. The bankruptcy should have happened in December.

so if Bush hadn't did the bailout they would have been forced into bankruptcy, you give him points for giving Obama options, the best of which was bankruptcy...brilliant!

How can you say it's a fair deal when dollar for dollar they are being offered less than the UAW per dollar for dollar?

Does it sound fair because Obama said so?

The dollar amounts owed to each of the parties involved.

Wait a minute, you tell us they got a fair offer and you don't know how much they were owed? Are you saying it's fair because Obamassiah says so, or because you know?

But what are the amounts?

If the Obama administration expected the senior creditors of Chrysler to fold their tents under political pressure, they may have gotten a rude shock today. Thomas Lauria, who accused the White House of threatening the creditors withn humiliation at the hands of the White House press corps, has filed a motion to halt the administration’s machinations on behalf of the UAW in the Chrysler bankruptcy. Lauria and his allies claim that the Obama administration has violated the Constitution in their bid to devalue the senior creditors’ holdings on behalf of junior creditors, and have some precedent to support the allegation.

The heart of the argument starts on page 8 (via HA commenter Outlander):

III. The Taking of Collateral through a Direct or Indirect Use of TARP Authority is Unconstitutional.

13. The Treasury Department relies on TARP as the purported authority to justify the disparate treatment under the 363 Sale, even though TARP was enacted after the Senior Lenders’ liens on the Debtors’ property were already in place. The Supreme Court long ago recognized, however, that a secured creditor’s interest in specific property is protected in bankruptcy under the Fifth Amendment. Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 594 (1935). That case involved a Depression-era statute that was intended to help bankrupt farmers avoid losing their land in mortgage foreclosure. The statute in Radford provided that the bankrupt debtor could achieve a release of the security interests either (i) with the lender’s consent, purchasing the property at its then appraised value by making deferred payments for two to six years at statutorily-set interest rates; or (ii) by seeking from the bankruptcy court a stay of the proceedings for up to five years during which time the debtor could use the property by paying a rent set by the court, which payments would be for the benefit of all creditors, with a purchase option at the end of that period. Id. at 856-57.

14. Justice Brandeis noted that the “essence of a mortgage” is the right of the secured party “to insist upon full payment before giving up his security [i.e., the property pledged].” Radford, 295 U.S. at 580. In invalidating the statute, the Court stated that “[t]he bankruptcy power . . . is subject to the Fifth Amendment,” and that the pernicious aspect of this law was its “taking of substantive rights in specific property acquired by the bank prior to the act.” Id. at 589-90 (emphasis added). Thus, Congress could not pass a law that could be used to deny to secured creditors their rights to realize upon the specific property pledged to them or “the right to control meanwhile the property during the period of default.” Id. at 594. That is precisely what the Treasury Department would have Chrysler do here, with respect to the Chrysler Non-TARP Lenders’ property rights that were acquired prior to the enactment of TARP.

15. Relying on purported authority provided by TARP, the Treasury Department is demanding that Chrysler’s assets be stripped away from the coverage of the Senior Lenders’ liens – thereby impairing the rights of the Senior Lenders to realize upon those assets – so that those assets may be put in New Chrysler and used to the benefit of unsecured creditors in this proceeding, who will then be paid much more than the Senior Lenders. But, even assuming that TARP provides the Treasury Department with authority to provide funding to the Debtors and impose the transfer of collateral away from the Senior Lenders, TARP was enacted long after the Senior Lenders contracted with the Debtors and received senior liens on the Debtors’ property. Radford specifically disallowed the use of a law to retroactively alter existing liens on property.

16. Here, the proposed sale of the Debtors’ assets will leave the Senior Lenders with a diluted pool of assets and no further interests in the operating assets covered by their specific liens. The Constitution forbids this application of a law retroactively to undercut the Senior Lenders’ pre-existing property rights in favor or inferior creditors.

17. Finally, that the Treasury Department would take these unconstitutional actions to help the United States address difficult economic times is not an answer. Indeed, the same justification was expressly rejected in Radford, where Justice Brandeis noted that a statute which violated secured creditors’ rights, but which was passed for sound public purposes relating to the Great Depression, could not be saved because “the Fifth Amendment commands that, however great the nation’s need, private property shall not be thus taken even for a wholly public use without just compensation.” Id. at 602.

18. What is really striking here is that what is being proposed by the Sale Motion would strip the Collateral away and allow it to be put to use as new capital in New Chrysler for the benefit of existing and other creditors – even though the Chrysler Non-TARP Lenders have been given no opportunity to realize upon that Collateral to the point of full repayment ahead of at least $14 billion of selectively identified unsecured creditors.

One might think that a Constitutional scholar like Barack Obama would have already known that, but either this precedent escaped him or he doesn’t care about it at all. Brandeis acted to uphold contract law, especially in the face of a government interest in paying off politically-connected unsecured creditors ahead of the senior creditors. There is no other reason for Brandeis to make that decision, as only government could insert itself into the contractual relationship during a bankruptcy proceeding — just as Obama has done with Chrysler.

Lauria’s argument seems very compelling here, especially given Brandeis’ rather clear assertion that bankruptcy proceedings have to fall within the 5th Amendment — and that government can’t implement a taking to satisfy its own arbitrary aims by ignoring the relationship of the creditors to the default. We’ll see whether the court rebukes Obama.

Chrysler gets court OK on loan, seeks Fiat sale

04 May 2009Even without an extended shutdown, Chrysler expects delays of up to six months in the launch of a redesigned Jeep Grand Cherokee for the 2011 model year. It expects the availability of replacement parts to be restricted within weeks as well.

Chrysler salaried employees are being required to take two weeks of unpaid vacation.

"I think that it is very realistic to sell assets and get that done in a very short period of time, but that won't solve the bankruptcy case entirely," Sheryl Toby, an attorney with Dykema Gossett in Bloomfield Hills, Michigan, told Reuters on the sidelines of an event in New York.

Toby, who has worked on auto industry cases for 20 years, said other issues such as those surrounding dealers and suppliers will be discussed for extended periods.

DISSENTERS THREATENED - LAWYER

The U.S. automaker, which has been operating with $4 billion of emergency U.S. government loans, failed to reach a deal with all of its secured first-lien lenders last week to restructure its debt, forcing Chrysler into the courts.

The decision by some lenders to hold out set off a political firestorm.

President Barack Obama called the holdouts "speculators" who hoped for a better deal from the U.S. taxpayer, and Michigan lawmakers threatened to pull state business from them.

Tom Lauria, an attorney at White & Case who represents an ad-hoc group of the dissenting secured lenders, told the court that publicly identified group members had received death threats "which they perceive as being bona fide."

As a result, the group will seek to disclose its membership to the court under seal on Tuesday, Lauria said. Lenders who received death threats have notified police and the FBI, he said.

The first-lien lenders were owed a collective $6.9 billion, and four large banks led by JPMorgan Chase & Co (JPM.N) that controlled about 70 percent of the debt had approved a plan to take $2 billion cash.

A group of investment funds led by Oppenheimer Funds and Stairway Capital had objected to the payout terms as unfair and filed an immediate objection on Monday asking Gonzalez to block the Fiat deal and the government's offer to provide bankruptcy financing to Chrysler.

JPMorgan lawyer Peter Pantaleo, of Simpson Thacher & Bartlett LLP, told the court Chrysler had 90 percent of the debt agreed, more than enough to support the sale.

The $2 billion payout would amount to about 29 cents on the dollar, but a liquidation analysis prepared by an adviser to Chrysler suggested the payout could be as little as 9 cents on the dollar if the automaker were forced to liquidate.
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when Russia told BP to take an offer or theyd take the company without any compensation the liberals cried foul...where are they now?

Not a valid comparison.

That's true. In Russia, the dictatorial president is warning against socialism.

It's not the government's plan to own the auto industry ...

MSNBC:

• Under a restructuring plan put forth this week by GM, the ailing automaker would give majority ownership to the federal government to stave off bankruptcy. That handoff would amount to an extraordinary partial nationalization of the maker of Buicks, Cadillacs and Chevys that has been an independent company since 1908.

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I doubt it would be a long term arrangement.