When the history is written on Pres. Obama’s strained relationship with American business leaders, I think that the GM non-bankruptcy bankruptcy will be tagged as the the first critical shot fired (by the President).
Just in case you forgot, here’s a recap excerpted from Reason:
Many experts suspect that GM could have obtained private bankruptcy financing if it had presented a credible restructuring plan addressing the cause of its malaise: the uncompetitive costs of its unionized work force.
If it couldn’t, then the government could have offered guarantees to private lenders for the amounts they loaned, which likely would have been smaller than the bailout.
But the administration took matters in its own hands, using taxpayer dollars to commandeer the bankruptcy process to protect key constituencies, while giving short shrift to others.
- It gave Chrysler’s secured creditors, who would have had priority in a normal bankruptcy, 29 cents on the dollar.
- Chrysler’s unions, on the other hand, got more than 40 cents, even though they are equivalent to low-priority lenders.
This made a mockery of longstanding bankruptcy law, something that will make credit markets wary of lending to political sacred cows in the future.
I think CEOs could have lived with Obama firing Richard Waggoner as CEO … and then firing his replacement, Fritz Henderson … and then firing his replacement, Ed Whitacre.
But, ignoring the rule of law and subordinating secured creditors to one of Obama’s core constituencies — overpaid union hacks – was over the top.
If there were any hopes of turning around the relationship, the Administration’s moves to keep Boeing from operating a plant in right-to-work South Carolina dashed them
The Homa Files 
July 24, 2011 at 7:45 am |
[…] Administration subordinated secured creditors beneath their unsecured union cronies, making a complete mockery of established bankruptcy laws … and, oh yeah, violating a sacred […]