Admit it... you knew it was coming

It was almost like waiting for the other shoe to drop.


Recall last spring when General Motors CEO, Ed Whitacre, was on national television flat-out lying to the American public regarding paying off their TARP loan when in reality they were simply using another TARP line of credit to do so?

Now, if you were looking for a reason to not buy from Chrysler as well, you just may have found it.

American taxpayers have already spent more than $13 billion bailing out Chrysler. The Obama administration already forgave more than $4 billion of that debt when the company filed for bankruptcy in 2009. Taxpayers are never getting that money back. But how is Chrysler now paying off the rest of the $7.6 billion they owe the Treasury Department?

The Obama administration’s bailout agreement with Fiat gave the Italian car company a “Incremental Call Option” that allows it to buy up to 16% of Chrysler stock at a reduced price. But in order to exercise the option, Fiat had to first pay back at least $3.5 billion of its loan to the Treasury Department. But Fiat was having trouble getting private banks to lend it the money. Enter Obama Energy Secretary Steven Chu who has signaled that he will approve a fuel-efficient vehicle loan to Chrysler for … wait for it … $3.5 billion.

Technically speaking, the DOE loan program is for specific, qualifying re-tooling projects but when your re-election campaign efforts will rest, in large part, on the health of the two domestic auto-makers to which you are wed, why bog down that $3.5 billion in bureaucratic red tape.

So, to recap, the Obama Energy Department is loaning a foreign car company $3.5 billion so that it can pay the Treasury Department $7.6 billion even though American taxpayers spent $13 billion to save an American car company that is currently only worth $5 billion.

Kind of tough to cram onto a campaign button but you leave out enough of the details, it just might fit.

Tales from Bailout Nation Pt. XXVIII

And the beat goes on...

General Motors Co.'s recent stock offering was staged to start paying back the government for its $50 billion bailout, but one group made out much better than the taxpayers or other investors: the company's union.

Thanks to a generous share of GM stock obtained in the company's 2009 bankruptcy settlement, the United Auto Workers is well on its way to recouping the billions of dollars GM owed it — putting it far ahead of taxpayers who have recouped only about 30 percent of their investment and further still ahead of investors in the old GM who have received nothing.

The boon for the union fits the pattern established when the White House pushed GM into bankruptcy and steered it through the courts in a way that consistently put the interests of the union ahead of many suppliers, dealers and investors — stakeholders that ordinarily would have fared as well or better under the bankruptcy laws.

The union's health care and pension trust fund earned $3.4 billion through the sale of one-third of its shares in GM last week. Analysts estimate that it would break even if it sells the remaining two-thirds of its shares at an average price of $36 — close to where the stock traded shortly after the offering hit the market. GM shares closed at $33.45 on Wednesday.

Analysts predict that stocks will have to rise anywhere from $52 to $103 a share for the U.S. taxpayer to break even. Currently, the U.S. taxpayer is $9 million in the hole.


At the bottom of the linked article, we get this:

John Paul McDuffie, a professor at the Wharton School of Business, said the full funding of the union's pension and health care trust fund through the bankruptcy process represents progress because it helped solve one of most "persistent and difficult" bones of contention between GM and its union.

GM and the UAW had been at loggerheads for years over how to deal with GM's so-called "legacy" costs — funding the generous worker health care and retirement benefits it promised in earlier eras.

The bankruptcy settlement enabled GM to proceed with a hard-won 2007 plan it negotiated with the union to spin off those huge liabilities and let them be funded in the future by the trust fund that received the stock.

If this plan was already "won" then why was it part of the sweetheart bankruptcy deal?

Translating McDuffie then: Thorny legacy cost issue? Wave magic wand and give union trust fund exceedingly favorable stock treatment regardless of what had been negotiated previously. Problem solved.


We suppose that what is also part of the outrage with respect to this tax-payer funded bailout is that even if you tried to justify this unholy arrangement, where is the evidence that the federal government will not simply swoop in again to salvage a poorly-run business that makes horrible business decisions and manufactures products that no one wants to purchase?

Oh, and did we mention no guarantees against a tax-payer funded bailout with the attendant arm-twisting and smearing of those voicing objections to the bankruptcy proceedings and the lying about how the bailout money was paid back?

Tell it to this guy.

Craig Coffey, a retiree in Nevada who invested $55,000 in bonds in the old GM that are now worthless, was outraged that the union is on its way to recovering all its money before investors get even a cent of compensation.

"We just sat and watched [the stock offering]. We got nothing," he said. "Screwed again."

Former Obama hack wants you to know there is more to his book than profane Rahm Emauel quotes

Steve Rattner, former HMFIC of Obama's automotive task force penned "Overhaul" to give the public an inside look at the bailout of Chrysler and General Motors but is bummed out that people are focusing more on Rahmbo's colorful language.

Colorful language like "f... the UAW" which is, coincidentally, the title of one of the chapters in Rattner's book of which he thinks everybody is paying to much to much attention to Rahm's cursing.

He says he hoped the tale would show how bold moves taken by the Obama administration saved the auto industry overall from an imminent collapse. But instead, he says, people are focusing on juicy quotes, such as when White House Chief of Staff Rahm Emanuel dismissed concerns of the United Auto Workers union, a staunch administration ally, with a colorful "f ——— the UAW."

"It was disappointing for me to have people focus on a phrase that I put in to humorize things, and not the meat of the book," Rattner says.

Maybe the reason people are not paying any never mind to the rest of the book is because, if the USA Today account is to be believed, it's one big fat lie.

But Rattner, a lifelong Democrat, thought it would prove that there were no sacred cows in the Obama administration. Even though the UAW is a longtime Democratic party stalwart, he says Obama made it clear that union workers, CEOs, bondholders, dealers, suppliers and anyone else with a stake in the industry would have to sacrifice.

If by sacrifice, Rattner means the UAW got to cut to the head of the line in front of secured creditors and others that would be served ahead of the UAW when it came to carve-up and divvy-out the scraps after the restructuring of General Motors, then yes, everybody did indeed make a sacrifice.

Combine this with GM CEO, Ed Whitacre, flat-out lying about the source of their TARP repayments (simply another line of TARP credit), and the whole sordid GM affair is nothing more than a bunch of lying liars lying about this big lie of a bailout funded on the backs of the American taxpayers.

We hate these people.

Letter to the Editor of the day

From yesterday's U-T, H. Robbins of San Diego writes:

I am having great difficulty understanding where the claimed savings are coming from with the forced closings of the auto dealerships. The dealerships are all privately owned and get little from the manufacturers except the right to buy cars, for cash. When business gets really bad, the dealers will shut down or declare bankruptcy. It does not appear that the companies gain any advantage from the mandated shutdowns.

We welcome more informed readership to broaden Mr. Robbins’ understanding and to perhaps eliminate some confusion which would go double for us.

Get to know a "speculator" (UPDATED)

(UPDATE #1):

The Obama administration is preparing to send General Motors into bankruptcy as early as the end of next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and reemerge as a global competitor, sources familiar with the discussions said.

Oh goody. We wonder which group of creditors is going to get the shaft this time around. And then there is this from a separate article on the same subject:

GM would aim to win bankruptcy court approval by July 1 for a plan to separate its good brands and assets into a viable company, which could then emerge from bankruptcy on a rolling basis. Officials have been cheered by the speed of Chrysler’s bankruptcy process, but hopes that GM can follow a rapid path through court are being dimmed by a building backlash from lawmakers. Some are claiming that creditors’ rights are being given short shrift while others complain about job cuts and the closure of dealerships.

Short shrift..? Who cares? That Officials are cheered should be the only thing that matters.

(here endeth the update)



Sorry, we’re not letting this one go. It’s going to continue to stick in our craw for a while.

Recall how the Chrysler bankruptcy cram down dissident bondholders were openly ridiculed by the President as being merely “speculators” who were standing in the way of progress by not stepping aside for the unions. So, just who were these speculators? Greedy Wall St. types? Nope. It turns out that many of these first-in-line secured investors that were forced to take 29 cents on the dollar were teachers and other public servants.

Indiana Treasurer Richard Mourdock revealed this week that his state's police and teacher pension funds have lost millions of dollars in the Chrysler "restructuring." Indiana's State Police Fund and Major Moves Construction Fund, which finances roads and bridges, together lost more than $1 million. And the Teacher's Retirement Fund "suffered, at a minimum, a loss of $4.6 million due to the action of the Federal government," reports Mr. Mourdock

There was a time when being a secured investor meant you got taken care of ahead of everyone else. Ancient history, we suppose.

Quote of the Day

... and then there were none.

"After a great deal of soul-searching and quite frankly agony, they concluded they just don’t have critical mass to withstand the enormous pressure and machinery of the U.S. government,"

That from Tom Lauria, who is representing the Chrysler bankruptcy cram-down dissidents.

Quote of the day

"Let me tell you it’s no fun standing on this side of the fence opposing the President of the United States. In fact, let me just say, people have asked me who I represent. That’s a moving target. I can tell you for sure that I represent one less investor today than I represented yesterday. One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under the threat that the full force of the White House Press Corps would destroy its reputation if it continued to fight. That’s how hard it is to stand on this side of the fence."

That from bankruptcy lawyer, Tom Lauria commenting on the shaft given to Chrysler bond holders who have been forced to take just pennies on the dollar which is in marked contrast to the far more favorable terms rigged by the Treasury Department for the UAW in the bankruptcy deal.

But in keeping with our inherent bi-partisan nature when it comes to governmental overreach, we saw this played-out in slightly different circumstances and methods when the big banks were essentially forced to take government money back in October of last year under a different presidential administration.

It should be obvious to anyone who has been paying attention that Bailout Nation requires no small amount of arm-twisting, intimidation, threats and general thuggery to keep going. That is because there are still some smart people out there in these private entities who realize that having the government in its back pocket is an impediment to holding on to top talent, operating the business independently and yes, turning a profit.

The President has said he doesn’t have enough time to run the auto industry and while that may be true, don’t ever confuse the day-to-day handling of a business with compelling that business to do your bidding.

H/T: Hot Air