I Find Your Lack of Faith Disturbing

I am trying to figure out what kind of thinking this post from Kevin Drum represents:

According to people "familiar with the talks," several of Chrysler's bondholders have rejected the government's deal, which amounted to paying them off a little more than 30 cents on the dollar.  So that means it's probably Chapter 11 time.  Blecch.  I hope the holdouts all end up getting less from the judge than they would have gotten from Obama.

There is only one possible reason** for Obama's attempt to avert a Chrysler bankruptcy -- he is trying to divert value from one group who would get it under a bankruptcy to another group.  There can be no other explanation for what he is trying to do, and in fact evidence is pretty strong that he has been trying to get creditors to take less so unions, who supported his election, can get more.

What has happened is that creditors have refused to get bullied by this near-unprecedented intervention by a US President in a bankruptcy case and are holding out for what they feel is the best way to recover as much as possible of what they are owed (no one is coming out whole).  In this context, Drum's pique really seems petty.  Rather than press for the money they are legitimately owed, the creditors should have bowed down, I guess, to the King's wishes and given up their money to those courtiers who were smart enough to back the King's coronation.

What Drum is probably most upset about is that it is now clear that both Bush and his guy Obama have spent tens of billions of dollars of taxpayer money to absolutely no end, just delaying a bankruptcy that would have been better for economic recovery if it had happened six months ago.

** There is one other explanation -- Obama may feel like he is better able to mediate a bankruptcy than a bankruptcy court and judge with decades of experience in the field.  I hope this kind of hubris is not the case, but for this administration it is very possible.  Obama is every bit as unaware of his inability to achieve his goals through shear force of will in domestic policy as GWB was in foreign policy.


  1. JohnnyReb:

    I vote for option #2. Yes he is really that arrogant.

  2. raja_r:

    "shear force "

  3. morganovich:

    this is pretty breathtaking:

    "While the administration was willing to give the holdout creditors a final opportunity to do the right thing, the agreement of all other key stakeholders ensured that no hedge fund could have a veto over Chrysler's future success," said an administration official.

    "Their failure to act in either their own economic interest or the national interest does not diminish the accomplishments by Chrysler, its planned alliance partner Fiat and other stakeholders in the company", the official said.

    can they be serious? could they possibly be convinced that they are more able to determine the economic best interest than the professional investors who hold the debt?

    and this from the team that just said "bankruptcy is not a sign of weakness" in the announcement speech.

    what color is the sky on this world they describe?

  4. Mark:

    Why are you surprised at all? The core basis of the political liberal is that they have more knowledge of an individual's best interest than the individual themselves. The modern political liberal, like Barrack Obama, is a Statist who does not accept or at best minimizes the value of individual interest.

    We live in a world were words are defined by the terms of these Statist. Words like fairness and compassion are what they define them to be.

  5. DKN:


    The One has a different definition of "the right thing". What happened to GM is his idea of "right", i.e., investors with a $29B stake got 10%, a union with a 10% stake and an incestuous relationship with the administration got 40%, and the Gov got the balance in voting shares. GM will now be run for the benefit of the union-gov't alliance, subsidized by taxpayer dollars.

    Next up after Chrysler: Health Care, Banking/Finance, Energy, Media.

    Time will tell, but I have the creepy feeling that what The One has in mind for the U.S. economy is what early-mid 20th century "Progressives" had in mind: something rather closely modeled after Moussolini's Fascism.

  6. DKN:

    Meant: a union with a $10B stake...


  7. morganovich:


    most frightening is the obvious willingness to repudiate/circumvent the most successful and effective set of bankruptcy law in the world. the knock on effects from a loss of confidence in BK rules would be immense.

    lenders would not lend if outcomes were unpredictable in the event of liquidation. if they did, they would demand higher rates. this is econ 101 stuff. anyone ought to know this.

    his proposals around Chrysler are so short sighted and poorly considered that the best analogy i can think of is swerving your car wildly to avoid an accident, missing the other car you were in danger of hitting and escaping unhurt but triggering a 200 car mass pile up behind you as they all respond to your actions. describing it as "avoiding an accident" misses the point entirely.

  8. DKH:


    Maybe coyote meant that Obama's goals would be transferred by parallel forces, rather than perpendicular ones? :)


    I think there's a lot of incompetence in Obama's decisions rather than simply a desire to divert value to a favored group. A lot of what he does seems so ham-handed and arbitrary to me that I'm not sure there's a great deal of competence to go around. But I would agree that a lot of his actions could be explained by a desire to win votes from various groups by taking from others.

    (As opposed to politicians who want to win votes from various groups without taking from others? Riiiiiight.)

  9. scott Wiggins:

    Now we know why he grinned like a skinned cat when he met Chavez...Would have liked to have been a fly on that wall...He is a communist at heart. He means to steal Chrysler and GM for the unions and the government. I've been listening to the demonization of bond-holders for weeks as the administration set about softening up the public for events to come. Chavez would be pleased....

  10. Mesa Econoguy:

    “Attention. This is Lando Calrissian, administrator of this facility. The Empire has taken control. “