Wednesday, April 29, 2009

Is the Country Still America?

It's kinda hard to tell these days, with all the encroaching socialist agenda, if we're still living in a country nominally dedicated to the idea of creating a land of opportunity, where individual work can make you successful, instead of just political connections and corruption. They say all good things must come to an end, and sadly the US apparently is not immune from this age-old adage, no matter how much many good men and women have sacrificed to preserve America this long.

Take, for example, the Chrysler situation. The government is arranging a "pre-packaged bankruptcy" for the company, after giving them tens of billions of taxpayer dollars to squander on a failed enterprise. What, you ask, does a pre-packaged bankruptcy mean? Apparently, it means the government takes the company, gives it to whoever it wants, and gives its previous owners the finger.

In this case, the union retirement organization (effectively, the union) is getting a 55% stake of the company: makes sense, the unions are some of the largest and most financially generous supporters of the Obama administration. Fiat is getting a 35% stake, although I'm guessing this (like the BofA/Merril merger) is a shotgun wedding, with Fiat playing the part of the target: after all, it's tantamount to business suicide to put a huge investment into a failing company for a minority stake, where the majority share holder is the primary financial reason the company can never be viable! The US government is getting a token 8% stake, which they will write off in a year or two once the sheeple forget that some idiot put tens of billions of taxpayer dollars into the previous failed incarnation of the company, and the new iteration is failing again.

What about the existing bondholders, with a $6+ billion claim on the company's assets (which they valued at roughly $3 billion if sold off in pieces)? Well, they will likely get a $2 billion payoff from the Obamanation, a pat on the butt, and a lesson-learned that it's very risky to invest in US businesses in the Obamanation, when any day the government could snatch your assets away and give you the shaft in return. The corporate owner gets nothing, although they would expect the same thing in bankruptcy court if we were following the laws in our old pre-socialist country, so that's a wash. The executives get the boot, because they are wealthy capitalist pigs, which the government can apparently now replace at will in the People's Republic of America.

The real winners, of course, are the UAW workers, who had the good sense to get in bed with the current administration, and are now getting a great return on their bribes and "political contributions". Not only do they get to keep all their outrageous retirement plans and benefits (backed by the taxpayers, of course), they also get to keep working for full compensation despite the substantial reduction in demand for cars, and the horrible product quality which caused Chrysler to lag those other auto companies in recent years. Plus, they get to be a continued back hole for taxpayer money for the foreseeable future, another perk of their special relationship with the Party.

I miss America already.


  1. Nick - I wrote the following in reply to my '100 days post', it pertains here as well. I'm with you too, deep in my heart I am hopeful for America; as you say here though I am aware of the seemingly irreparable damage being done while the public accepts it/or is asleep at the wheel. I almost don't want to believe things that I read daily. America is the greatest 'experiment' ever and is being dismantled. Can we fight it and prevail? Where do we even start? How radical of a change in makeup to congress would we have to pull off? Would a '94 type congress takeover stop this and roll it back?

  2. There's no "encroaching socialist agenda". You just disagree with President Obama's policies. I didn't support Chrysler getting any bailout, but I don't buy this thing that it's all about unions. It seems like most businesses in my home town claim to be worker owned.

    When you go broke, you don't get to choose. I agree they shouldn't get a bailout, but if since they are, I don't understand why you're mad that the bailout went to the people who do the work.

    Maybe I'm just not knowledgeable, but what did the government "snatch way"? The company went broke. Why should shareholders and bondholders be any more entitled than worker? If you really want the government to stay out, why is it worse for the government to help workers than to help us?

  3. Let me see if I can explain (see here for a great explanation of the legal filings and current status):

    Chrysler is declaring bankruptcy to clear their debts, and nominally to emerge as a viable business entity. You are correct that you don't get to choose who gets the remaining assets: under normal US (non-Obamanation) law, there is a priority of creditors, with secured and unsecured interests, who get paid out according to their interests if the company is dissolved. For the company to not be dissolved, the creditors must agree to reduce their interest, or swap it for some other interest. Usually they are incentivized to do this because the business is worth more as an ungoing concern than as a dissolved entity, and their reduced share in the ongoing concern is worth more than their "cash-out" payout value.

    In this case, there are a set of "primary" creditors who have first rights to $6.9 billion of Chrysler's ~$39 billion in assets, which were being asked to take a ~65% reduction in their asset value. Now some of these were banks, who were willing to go along with the government plan, presumably because they are scared of losing other payoff benefits if they do not (a sort of blackmail, or quid-pro-quo if you prefer). The other creditors, though, who are not sucking on the TARP hose, are rightfully upset that the government a) didn't bother talking with them at all, and b) is asking them to give up 65% of their financial stake, with nothing in return, while lower priority creditors (eg: US government, unions, etc.) get equity, payouts, future profits, or other compensation.

    The government, in their proposal, is thumbing their nose at the fundamental rule of law in the US, and crafting a reorganization to benefit their primary contributors. It's not the shareholder that are getting anything (they are being wiped out entirely), it's the secured creditors which have primary rights to Chrysler's assets if they cannot pay their debts. It would be as if you lent someone money with something as collateral, they decided not to pay, and the government stepped in, took their collateral from you, gave it to them, and punched you in the face.

    You're damn right I'd prefer the government to stay out of the business of rewriting private contracts, arranging sham "pre-packaged bankruptcy" reorganizations to trample all over the rule of law, and arbitrarily re-assigning private assets as they see fit. And you know what? You should too, no matter what you think of Obama's policies or how bright and shiny his "remade" America looks to you. I don't want the government operating outside the law for anyone's benefit: not the unions, not the shareholders, not the executives, not the janitors. I want the g-damn rule of law in a free country which the founding fathers called America, not this pseudo-socialist fascist Obamanation.

  4. Liberals are to thin skinned to debate
    They can not debate the issues like adults, and need to resort to calling people names. They need to resort to insulting, and downright nasty tactics. They don't seem to understand the word "civil"

  5. I was not aware of that the government stepped in an changed the order of who gets paid in a bankruptcy. If it's true, I wonder if people hurt by this could challenge it in court as a takings without just compensation.

  6. That's what the whole pre-arranged deal was about: compensating the lower-tier debt holders (eg: the union) more than the primary secured debt holders (eg: the funds with direct secured investments). Their recourse is just that: force the company to declare bankruptcy, where hopefully the rule of law will prevail, instead of the dictatorial desires of the Obama administration. When Obama says he doesn't stand with the creditors who forced a bankruptcy proceeding, what he's really saying is that he doesn't stand for upholding the laws of the country, when they are against the will of the leader of the Obamanation.