Changing Their Story

I am not shocked that Obama is full of sh*t --  all politicians are.  But I am constantly surprised at just how awful the press has become.

Here was the Arizona Republic towing the government line, attempting to stampede the country into subsidizing the auto companies because bankruptcy would be a disaster:

Advocates for the nation's automakers are warning that the collapse of the Big Three - or even just General Motors - could set off a catastrophic chain reaction in the economy, eliminating up to 3 million jobs and depriving governments of more than $150 billion in tax revenue.

Industry supporters are offering such grim predictions as Congress weighs whether to bail out the nation's largest automakers, which are struggling to survive the steepest economic slide in decades.

Even if just GM collapsed, the failure could bring down the other two companies - and even the U.S. operations of foreign automakers - as parts suppliers run out of money and shut down....

Automakers say bankruptcy protection is not an option because people would be reluctant to make long-term car and truck purchases from companies that might not last the life of their vehicles.

There was absolutely no background on the chapter 11 process, or any mention by this reporter or in any subsequent AZ Republic article that bankrupcy meant anything but liquidation and disaster. Not even a hint that many large companies, including the largest company based in Phoenix -- US Airways -- have operated seamlessly through chapter 11.

It was left to bloggers like myself to remind folks that the businesses and assets don't just go *poof* in a bankruptcy, and in fact it is generally in creditors' interests to have the company continue to operate.

So, now that Chrysler is heading for bankruptcy, Obama's incentives are now to make chapter 11 look friendly instead of menacing.  And the AZ Republic is finally, after 6 months of coverage, explaining what this really means:

Bankruptcy doesn't mean the nation's No. 3 automaker will shut down. A Chapter 11 bankruptcy filing would allow a judge to decide how much the company's creditors would get while the company continues to operate. The goal is for the whole process to happen quickly, Obama said, perhaps within a couple months.

I thought this was priceless:

[Obama] said a group of investment firms and hedge funds were holding out for the prospect of an unjustified taxpayer bailout.

"I don't stand with them," Obama said at the White House event.

I actually don't think this is true -- as secured creditors, they are FIRST in line in a bankruptcy.  Obama has effectively told them to voluntarily move to the back of the line, and they reasonably said "no way."  Obama is miffed that they have not taken his royal direction, but I think they are correct they will get more out of a process run by bankruptcy law rather than one run by political pull.

But, even if hedge funds had this expectation of a taxpayer bailout, who in the hell do you think has given them reason to have this expectation?  Can anyone say "moral hazard?"


  1. ChrisR:

    Agree 100%. Media has become so shrill that they risk being ignored, for good reason. Bankruptcy does not mean the company disappears. Here in Canada, our former national airline, Air Canada, is about to go bankrupt for the 2nd time. But you can still book seats, the planes are still flying, etc.

    Bond holders should hold out, they should be at the start of the line. Otherwise why would anyone buy a bond issue in the future?

    btw, it's "toeing the line", not "towing". You tow a line to reel in a fish, but you toe the line on the ground.

  2. Josh:


  3. John:

    I agree with Josh and so does Google: towing -> ~52,000; toeing -> ~72,000

  4. John:

    "Obama is miffed that they have not taken his royal direction, but I think they are correct they will get more out of a process run by bankruptcy law rather than one run by political pull."

    And who is going to say that in this Brave New World that Obama isn't going to try to extend his royal direction into the court proceedings?

  5. K:

    "Here was the Arizona Republic towing the government line.."

    Right! Here is the rare case in which a mistake produced a second valid meaning. The writer probably meant "toeing" i.e. "obeying." But "towing" works too. It brings to mind the image of advertising banners streaming behind a biplane.

    And the AZ Republic has made itself about as relevant to news as the biplane is to airline travel.

  6. K:

    Second comment:

    Rough guess about the impact of the Chrysler and almost certain GM bankruptcies.

    The government protection of GM and Chrysler will probably ruin Ford too.

    Ford won't get any concessions from its unions now. The unions will just tell Ford to go bankrupt so they too can get a US guaranteed safety net.

    And with the unions holding a large part of the stock at Chrysler and GM the government will feel trapped into putting in more and more money. And the boards will have to keep giving it to the unions.

  7. stan:

    I think the frustration expressed by the tea parties is as much about the news media as it is the irresponsible, corrupt govt. It's bad enough that the politicians are not just full of it (and blatantly in our face about it), but the "speaking truth to power" BS artists who call themselves journalists are serving as cheerleaders for the corruption.

    I'm looking for someone to go John McEnroe on DC and the news media. We need a damn good temper tantrum. "You can't be serious!" would make a good battle cry.

    All the news that fits (their narrative), they print.