The New Mafia is headed by the Obama Family

Thursday, May 28, 2009

The most appalling, egregious move on Obama’s part has been in the treatment of Chrylser and GM’s bondholders. The recent wheeling and dealing (or however you say it in Austrian) going on with the GM bondholders give us an even clearer picture of what occurred with Chrysler and how Obama uses and operates the government. While the media turns their heads. While the media spins Obama’s garbage. Obama is running the government like a mafia godfather using his executive power to rob ordinary citizens. It is Obama’s most recent war in the name of fairness that brings hard evidence to light on how morally bankrupt Obama truly has become.

There are three undisputable facts that have been made evident by Chrysler and GM restructuring plans. First, Obama is willing to reward political cronies at all cost. Second, Obama has no qualms gambling with the US economy to do so. Third, Obama has no respect for the rule of law or any American who operates outside of the political groups who supports him.

To start out, I must expose the standard media template that is being irresponsibly repeated in the media like a broken record. We have been spun a host of stories on how the bondholders are greedy and trying to get more money from the government than they deserve. Most importantly, the actions of the bondholders are going to send the country into depression.

The problem with the coverage is this; why isn’t anyone questioning Obama’s leadership in the matter? According to the media and everyone in Obama’s administration, this is the only possible plan that could be hatched from his think tank. All the while, no one really questions why the UAW is making out so sweet on the deal. Obama offered the UAW 17.5% GM and 45% of Chrysler. This offer was not made to save jobs, to save wages, but to ensure the safety of the UAW worker’s pension, while at the same time giving control of the companies to political allies. As I’ve pointed out before, the UAW supported Obama big time with campaign contributions and with paid commercials. Why give the bondholders the short end of the stick? As I’ve also mentioned in previous posts, the bondholders were not involved in management decisions and they do not hold stock like an investor does. The purpose of a bond is to be safe in that bondholders will not lose their investment. Bondholders bought automaker debt, which was to be secured by first lien status against the company’s assets.

Let’s take a look at these evil bondholders who must be robbed so that the UAW can have a large interest in owning the automakers. There is Jim Modica. He and his wife are retirees who have all their life savings in GM bonds a total of $700,000. They live off of the yearly interest of $80,000. Normally, this is a good and secure investment as they would be able to recoup their investment in bankruptcy. That was until Obama got involved. Now Jim may loose his entire life savings while Obama tramples on contract law like he did with Chrysler. There is Chris Crowe a 50 year old home inspector who had bought bonds to pay for his son’s education and upcoming property taxes. Once again, a good safe investment until Obama decided to reward his UAW cronies. Obama has offered these bondholders 10% and rumored today 15% of GM stock, which is worthless. Sorry Jim and Chris, if only you ran the UAW Obama would have broken the law on your behalf.

What is more reckless is that Obama is gambling on the fact that his mafia style politics will be able to overcome all bondholder opposition. His gambling chip is nothing less than the US economy. There is a chance Chrysler’s bankruptcy may take a turn into chapter 7 liquidation as a federal judge listens to arguments and complaints from the Indiana State Treasurer who is looking to recoup losses to the state road fund and the teachers/police pension funds. Those funds lost millions when Obama robbed the state in the Chrysler chapter 11. It may be unlikely that this judge will rule in Indiana’s favor, even though the law of the land is on Indiana’s side. What happens if the case goes to the Supreme Court? I find it unlikely that they would side with Obama on this issue. As the debate rages many believe Fiat will withdraw if the bankruptcy is not concluded by June 15th. With thousands of Chrysler jobs and the economy at stake, one must ask what Obama was gaining in his actions? Did the UAW have a legal claim higher than the State of Indiana? No! Would it have been against the law if the Chrysler pensions were given the bondholders deal in reverse? No! Is what Obama did against the law and therefore robbery? Yes!

The bondholders are not only robbed, but many were also bullied. Three people from three different hedge funds claimed that they were bullied by Obama’s Car Czar. Not hard to believe when the following occurred after the AIG bonuses:

"Arrayed around a long mahogany table in the White House state dining room last week, the CEOs of the most powerful financial institutions in the world offered several explanations for paying high salaries to their employees — and, by extension, to themselves.

“These are complicated companies,” one CEO said. Offered another: “We’re competing for talent on an international market.” But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.” “My administration,” the president added, “is the only thing between you and the pitchforks.”

This is a clear threat from the President of the US against his own citizens.

Threats are nothing new to this President. He threatened to rescind stimulus money if Arnold lowered Union employee wages in the state. It’s rare the Obama administration makes any policy without a threat.

Rewarding political allies is also nothing new as there is mounting evidence that the Chrysler dealership closing were also politically motivated.

Where is the media? Where is the outrage from the left? Those who had hearings over Valerie Plame's ruined carreer and those who cheered over the prosecution of Scooter Libby. Where are the investigations? We had months of media coverage and hearings regarding Plame. How many months of hearings and coverage over the firing of a few dozen federal prosecutors? How much more should we investigate the robbing of more than a 1,000 Chrysler and GM bondholders?
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Update:

The following Time article is a perfect example of the Obama spinning, propaganda dribble coming out of the media on the automaker’s restructuring. It paints those opposing Obama as boardroom cronies, plays up Obama’s risk taking, car board’s brilliance, and all those hard sacrifices being taken by the UAW. It also tries to promote the bankruptcy of Chrysler as all part of the grand plan. The article also down plays the contract law being broken by Obama, the bullying of the Treasury Department, Obama's hand in making these automakers recovery more difficult as a result of his new emmision standards, the political relationship with the UAW and shrugs at the losses being suffered from soon to be closed dealerships. The author calls the autoworkers underdogs and in the next paragraph tells us the days of “mom and pop” dealerships are over. At the same time fails to explain why the bondholders had to go to the whipping post instead of the UAW. Why indeed? If Obama is going to break contract law, why do it for the UAW instead of the bondholders? Don't kid yourself Obama Media, this is all politics.

Left Coast Rebel has an excellent post giving another example of the mafia style government Obama is running. Check it out here.

9 comments

The Law said...

The administration is the only thing between the rich guys and the pitchforks? You damn right! The earnings of the top 1% have been steadily rising over the past 12 years as the earning of the middle class have been steadily been decreasing. Furthermore, Chrysler and GM have been making cars that do no compete against Japanese competiors! why do people keep forgetting this?! and I'm not talking about cars like the Prius, Genesis, and Civic Hybrid, I'm talking about the Toyota Tundra and Tacoma, and Nissan Pathfinder, and Honda CR-V! They have been running a losing economic model for over a decade. Thats an undisputable fact.

Chrysler and GM made a deal with the devil. There is no way, that given Obama's rhetoric, they could have expected to get government money with no strings attached. They could've (and should've) declared bankruptcy from the very beginning. Ford was like F you and your bailouts, we'll help ourselves, thank you very much! And they will come out the clear winner.

It is becoming apparent that continually propping GM and Chrysler is a big waste of money. It is probably a good move to cut your losses now. But Obama's relationship with the UAW is not the political side show you say it is. I think Obama doesn't care much for the top 1% of earners who's salaries increased as the working class wages decreased. So it's not just because the UAW supported his campaign, its also the people the people he campaigned to protect.

May 28, 2009 at 5:32 PM

tL,

My friend you need to update your arguments as they have nothing to do with the bondholders. Maybe you could make it with the stockholders.

Bondholders aren't "all the rich class", I pointed that out in my article. They were teachers/police pensions, road funds, retirees. They had nothing to do with decision making and does not deserve the strong arm.

Finally, the autoworkers sacrificed a lot. The UAW nadda. You made the classic mistake of thinking the UAW and the workers are the same. The autoworkers got cuts across the board yet there are no decreases in union dues in the deal and the UAW get to run the autocompanies. It's champaigne all around for union bosses. The best part is that the union bosses are part of that 1%.

On a side note. I'm a little disappointed that you have no problem with a President threatening citizens. It's one thing when you do it. Another thing when the executive branch does it. If I had an ax to grind with people on welfare and felt I could justify my anger, do I then as President get to threaten them?

May 28, 2009 at 7:01 PM
The Law said...

Forgive me, I'm not an economist by any means, so my understanding of some of the terms is at best elementary.

Could you explain to me, had Chrysler and GM filed for bankruptcy, what would happen to the bondholders?

May 28, 2009 at 9:22 PM
The Law said...

To clarify, I mean in the very begining back in september when the issue was to bail or not to bail, what wouldve happened to the bondholders if GM and Chrysler went bankrupt then?

May 28, 2009 at 9:24 PM

I'd be happy to.

It really depends on the bankruptcy type. Let's say worst case scenario GM and Chrysler shuts down completely. That's chapter 7 which is a liquidation. What happens here is all the assets of the company are sold off (like an estate sale). After the sale, all the people with some kind of interest stand in line to get their money. Your position in line depends on your lien status. In Chrysler's case, the bondholders would be first to get paid. If there is anything left over then suppliers would get paid. If there was anything left over from that the shareholders (stock investors) would split the remainder (usually a huge loss).

Now in chapter 11, which is a restructure their is some latitude for changing agreements. Usually, the bankruptcy judge sort of mediates between the company and bondholders to make sure there is a mutually agreeable outcome. The idea is that the company can potentially viable if it could restructure debts and obligations. Usually the bargaining chip is that the bondholders have an interest to agree to new terms to potentially recoup more of their investment. Let's say the bondholders own $50 in a company's debt, but the company's assets are only worth $10. Therefore, the bondholders may forgo forcing the company into liquidation in hopes that if the company turns around they might actually get paid more than $10. They might forgo receiving interest payments for a time period with no penalty. Accept higher interest payments for less principle. The key is that the bondholders interests are secure in the bankruptcy and there is often even a mutually beneficial solution in bankruptcy. That is why people invest in bonds.

In Chrysler's case, the bondholders were 80% secure in their investments, but received 29% as a result of the government. Had Chrysler failed in September and liquidated the bondholders would have got 80 cents on the dollar and the UAW would not have gotten anything. The bondholders have nothing to do with the management of the company, their investment is based in the assets of the company and not the company's performance. It doesn't make sense to punish them because the government took control in January.

I found a report that stated the Chrysler bondholders would have settled on 50 cents on the dollar and 35% interest in company stock. That does not sound unreasonable to me? Since they are gambling half their investment in a company who's stock is worthless. It would have been win-win for the company and bondholders...except the UAW's share of the company would have been much smaller.

May 28, 2009 at 10:29 PM
The Law said...

In other words, the bondholders became collateral damage in the government sanctioned takeover? I can agree that's kinda F'd up. I still wouldn't pin this as a malicious intent on Obama's part. A lot of people see unions as a charity case, a group of disenfranchised workers held down by the man. Having been a member of the worlds most powerful union (teachers union) I can tell you from personal experiences that unions are BIG probelms. Why does education cost so much? Unions. What is draining the life out of private enterprise? Unions. Now I think they should exist, but they need SERIOUS reform, and if I run for president, that would be my platform lol.

Obama is looking out for the people he campaigned for. Any politician would do the same. I guess the difference is the people he's looking for are not multi-millionaires...

May 29, 2009 at 12:44 AM
Devrim said...

An interesting read :

http://www.openmarket.org/2008/12/05/carmakers-recovery-assistance-program/

tL:
The President's job is to look out for the best interests of the country, not a group of people. You have a 401K ? It is highly likely you are one of these "evil" bondholders, bonds used to be the safe haven when economy was bad, not anymore.

May 31, 2009 at 2:18 AM

CG - I just wrote up a fairly blanketed expose on the GM thing as well, could you add to it any points that you see are needed? Great points here too, especially the personal story of the bond holder, I plugged you re: that in my piece.
LCR

May 31, 2009 at 1:37 PM
The Law said...

the argument you post here seems sound to me, my elementary understanind of economy at this level precludes me from offering a rousing counter-argument however lol.

This was the most compeeling argument to me, in CGen's response:

"In Chrysler's case, the bondholders were 80% secure in their investments, but received 29% as a result of the government. Had Chrysler failed in September and liquidated the bondholders would have got 80 cents on the dollar and the UAW would not have gotten anything. The bondholders have nothing to do with the management of the company, their investment is based in the assets of the company and not the company's performance. It doesn't make sense to punish them because the government took control in January.Before I analyze why Obama did that, I'm just reading up on econ 101 so I have a little better understanding of the terms. But as I see it right now though, this is a mistake on Obama's part, to have gotten involved this deeply with the auto bailout. I think he was too loose with the banks, and tried to make up for it with GM and Chrysler, but bit off more than he could chew.

June 1, 2009 at 6:40 AM

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