Thursday, June 25, 2009

You couldn't make this up, either

On January 9, I wrote about Cerberus and GMAC.

Today, news is out that GMAC, which has merged with Chrysler Financial, has told Chrysler dealers to go to hell because they don't meet the tough financial standards of GMAC (which by the way, has sucked up billions in TARP money).

Track with me here.

In 2006, GM sells GMAC to Cerberus to gin up some much needed cash for the soon to be bankrupt automaker.

Cerberus buys Chrysler in early 2007, including Chrysler Financial.

The White House forces Chrysler into bankruptcy on April 30, 2009.

This leaves creditors of Chrysler with nothing.

CBS News reported it this way:

'These creditors, by the way, represent something of a cross-section of America: the University of Kentucky, Kraft Foods' retirement fund, the Bill and Melinda Gates Foundation, pension funds, teachers' credit unions, and so on.

A normal bankruptcy filing would be straightforward. Senior creditors get paid 100 cents on the dollar. Everyone else gets in line.

But President Obama and his allies don't want that to happen. So they interfered on behalf of unions (the junior creditors) and publicly upbraided the senior creditors who were asserting their contractual rights and threatening to head to bankruptcy court.

Last week Mr. Obama lambasted them as "a small group of speculators" who "endanger Chrysler's future by refusing to sacrifice like everyone else."

A document that the non-TARP creditors filed with the bankruptcy judge about the proposed sale to Fiat says: "The sale is far from an arm's length transaction, but rather, is the result of a tainted sales process dominated by the United States government... It is a sale that was orchestrated entirely by the Treasury and foisted upon (Chrysler)... Well before the filing, (Chrysler) had ceased to function as an independent company and had become an instrumentality of the government."

So if you're keeping score, you have a bankrupt company depending on the government for money negotiating with some TARP-funded creditors depending on the government for money and still more creditors who may hold insurance policies with AIG, which depends on the government for money. And we're already hearing similar allegations about General Motors and political interference.

One disturbing report came from a well-respected attorney representing the dissident Chrysler creditors. Thomas Lauria, the head of White & Case's bankruptcy practice, says that he was threatened by Steven Rattner, the White House's auto task force chief. (A White House spokesman denies making any threats.)

"I represent one less investor today than I represented yesterday," Lauria said on a Detroit radio show. "One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight. That's how hard it is to stand on this side of the fence." Lauria said that his clients were willing to compromise on 50 cents on the dollar, but the government offered them only 29 cents.'

So now, Fiat has bought Chrysler the bankrupt car company. But Cerberus held onto Chrysler Financial, and merged it with GMAC.

And the men and women whose familes have spent their lives as dealers of Chrysler products are now being told tough shit by our government and GMAC.

Somewhere, Gordon Gekko is smiling. And something really stinks.

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