“I want to disabuse people of this notion that somehow we enjoy, you know, meddling in the private sector.” – President Barack Obama, April 29, 2009
“After consulting with my auto task force, industry experts, and financial advisors, I decided to give Chrysler and Fiat 30 days to reach an agreement. The standard I set was high: I challenged them to design a plan that would protect American jobs, American taxpayers, and the future of a great American car company.” – President Barack Obama, April 30, 2009
It is quite audacious of President Obama to declare he does not enjoy meddling in the private sector one day, and then boast about personally saving “a great American car company” the next. But Obama did not stop there. He then went on to question the patriotism of those “speculators” who defied White House management of the auto industry:
Now, while many stakeholders made sacrifices and worked constructively, I have to tell you, some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout.
I don’t stand with them. I stand with Chrysler’s employees and their families and communities. I stand with Chrysler’s management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. … it was unacceptable to let a small group of speculators endanger Chrysler’s future by refusing to sacrifice like everyone else.
The most galling part of this statement, is Obama’s claim that it was the rebellious investors who wanted a taxpayer bailout. The only reason the investors that held out could hold out is because they were the only ones at the table who were not at the government trough. These investors underscored that point when they released a letter titled “Statement From Non-Tarp Lenders of Chrysler” reading in part:
[W]e represent many of the country’s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money.
[T]o facilitate Chrysler’s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars. In contrast, over at General Motors, senior secured lenders are being left unimpaired with 100% recoveries, while even GM’s unsecured bondholders are receiving a far better recovery than we are as Chrysler’s first lien secured lenders.
We have a fiduciary responsibility to all those teachers, pensioners, retirees and others who have entrusted their money to us. We are legally bound to protect their interests. Much as we empathize with Chrysler’s other stakeholders, the capital is just not ours to contribute to their cause by accepting a deal that is outside the well established legal framework and cannot be rationalized as being commercially reasonable.
As we all appreciate, laws are the foundation of our economy and society. Despite recent travails, our country remains the economic envy of the world and the United States remains a vital engine of global growth. The rule of law made it that way. We urge that people remember this and not succumb to unproductive and unwarranted finger pointing.