We all knew it would happen. Chrysler has declared bankruptcy. Big surprise.
The government has announced that Chrysler wont be paying back the $7,200,000,000 [7.2 billion] in aid that it received. $3,200,000,000 [3.2 billion] of that money was given to Chrysler just last week–its hard to believe that the administration was ever planning on getting this money back.
But, in yet another case of the government not learning its lesson, it has actually pledged to “loan” Chrysler another $4,700,000,000 [4.7 billion]! And on top of this, Chrysler is planning on asking for an additional $1,500,000,000!
What is going on here?
The government has received an 8% in the bankrupt company–which it claims is compensation for the taxpayers for risking taxpayer money. The whole company isnt worth the amount of money that the government has loaned to Chrysler! Chrysler is bad news and has been for years. Did you know that Diamler AG actually paid Cerberus nearly $700,000,000 for Cerberus to take over the company in 2007?
Heres an idea, how about you compensate us by not wasting our money on bailouts!
But it gets worse. President Obama’s administration has allegedly “strong armed” Chrysler’s investors to force them into agreeing to a deal.
“The sources, who represent creditors to Chrysler, say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler. One person described the administration as the most shocking “end justifies the means” group they have ever encountered. Another characterized Obama was “the most dangerous smooth talker on the planet- and I knew Kissinger.” Both were voters for Obama in the last election.
One participant in negotiations said that the administration’s tactic was to present what one described as a “madman theory of the presidency” in which the President is someone to be feared because he was willing to do anything to get his way. The person said this threat was taken very seriously by his firm.”
The Wall-Street Journal reports a similar story–and also reports the lack of media coverage about this.
Basically, many bondholders have agreed (willingly or after being forced) to give up their claims. Many of their positions in Chrysler’s debt have been wiped out because of this deal. These bondholders were individuals, companies, and pension funds who loaned Chrysler money, risking their own wealth to help Chrysler through a bad situation. If Chrysler’s bankruptcy is accepted by the judge, these lenders will lose the money they loaned Chrysler. This is nothing more than the government stealing money from one group and handing it to another.
In the future, lenders will think twice about loaning money to aid struggling businesses, especially if there is a chance that the government will cancel their loans.
And that group that got the handout just happens to be the UAW. Under the administration’s plan, restructuring, the UAW now owns 55% of Chrysler. The US and Canadian governments also own large stakes in the company. The UAW endorsed President Obama and actively encouraged its members to vote for him.
But what sunk Chrysler in the first place? If you guessed the UAW, you guessed correctly. According to Chrysler’s own numbers from 2007, their average worker cost the company $75.86 per hour. Around the same time, Toyota’s workers were costing the company about $40 per hour.
President Obama’s administration stole money from bondholders and equity from Chrysler’s investors and gave it to the UAW. This is thievery and should be condemned as such in the strongest terms possible.
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