Chrysler Seized By Obama

In case you've missed it, president Obama has used taxpayer money to buy shares in a failing US automaker (and given much of the controlling interest to the autoworkers' union. He has also attacked the investors into selling their priority shares for 1/3 of their value after declaring them to be common shares.

In his attacks he called the investors "hedge fund managers" and told them they needed to sacrifice for their country ... even though Obama hasn't sacrificed anything over the deal except for other people's tax dollars.

This is going to make people very unlikely to invest in the US economy. I will certainly avoid investing in any US automakers.

I've seen a couple articles on RCP criticizing Obama on the issue, but it has stayed out of the mainstream media spotlight. Here is an excerpt from a Bloomberg article:

The Obama administration brokered a deal that gave labor unions a 55 percent equity stake in Chrysler, putting their interests ahead of the secured interests of bondholders.

The bondholder response to the deal was positively creepy.

Politicians were probably offering them a worse deal than they could expect to get in bankruptcy court. Bondholders that have been participating in the government bailout program for banks -- and thus are especially susceptible to political pressure -- agreed to accept the deal. But many of the independent investors balked.

...

Stories circulated that the Treasury Department exerted extreme pressure behind the scenes when investors refused to take the deal. Public pressure was exerted as well.

President Barack Obama went to the podium to criticize the recalcitrant investors, and Democratic Representative John Dingell of Michigan pressed the threats even harder: “The rogue hedge funds that refused to agree to a fair offer to exchange debt for cash from the U.S. Treasury -- firms I label as the ‘vultures’ -- will now be dealt with accordingly in court,” Dingell said.

I recommend reading the whole article. There's a good comparison to the mafia making an offer "they can't refuse".

It also mentions that the Big Three automakers in the US spend 1.7x as much on car production as Japan! This is an expense imposed from runaway labor unions that get passed onto the customer. No, thanks Chrysler, Ford, GM. I'll stick to my Honda Civic.