Armed Polite Society
Main Forums => Politics => Topic started by: Monkeyleg on June 02, 2009, 09:51:16 AM
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I've been reading about the GM bankruptcy filing, and the deal that Obama got the parties to agree to.
As I understand it, the bond holders had $27 billion invested in the company, and they've agreed to a 10% equity stake in the new company. The UAW is making $10 billion in concessions and in return is getting a 17.5% stake. Is $27 billion>$10 billion, or am I really terrible at math?
Also, this section of a Wall Street Journal article struck me:
Bondholders had until Saturday evening to voice support for a new offer that would give them a 10% share of the restructured company and warrants for another 15%.
An ad hoc committee representing major bondholders agreed to support the offer and encouraged other big investors to back the deal. A group of dissident bondholders represented by Thomas Lauria, also a lawyer for holdouts in the Chrysler case, fought against the deal. He argued that small, individual bondholders were left with no voice as the Treasury negotiated directly with GM's large institutional holders.
It was up to Treasury, which brokered the deal, to determine whether enough bondholders agreed for the offer to stand. A spokesman for the bondholder committee said approximately 54% of the bonds have indicated their support and that 975 institutions either sent support letters or gave indications of support.
The government sweetened the offer last week after bondholders overwhelmingly rejected an earlier proposal that would have left them with 10% equity in the new GM.
Analysts' estimates have bondholders coming out of the new deal with around 10 cents on the dollar, compared to as little as nothing under the old offer.
It sounds to me as though the administration initially offered the bond holders a deal that really, really stunk, but then "sweetened" it to where it only stunk.
Ten cents on the dollar. I guess the Chrysler bond holders got beat up so bad that it was easy to get the bond holders for GM to take 10 cents instead of the 29 cents the Chrysler bond holders held out for.
What happened? Did Geithner hold a gun to the bond holders' heads while Obama assured them that their brains or their signatures would be on the new agreement?
Blackjack Barack, the Godfather of Government.
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The bondholders should have been paid back first. But that was the old economics, the old contract law, the old America.
You are wasting your time analyzing these "deals" in traditional economic terms. They are politically and ideologically driven. The concept of shareholders and debtors has been replaced by social "stakeholders," as clearly articulated by our President yesterday. Capital is being humbled before labor here; that's the philosophy of the people in power. I guess they believe that capital doesn't come from labor because in the end they don't really believe in what we have called savings and investment. Their idea of "investment" is to spend taxpayer's money and their idea of "savings" is jobs that haven't been lost, yet. People who have been foolish enough to save and invest are going to see their wealth transferred to more favored groups, groups more amenable to state control.
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Now, I want to make it clear that I am not absolving the current administration or congress for their actions in this. They are fully responsible for this atrocity.
However, I can't help but think:
Thank you, President Bush, for delaying these bankruptcies so that the Obama administration gets to decide them rather than what the law says.
Thanks for "abandoning the free market in order to save it". Great way to end your presidency.
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What happened? Did Geithner hold a gun to the bond holders' heads while Obama assured them that their brains or their signatures would be on the new agreement?
No, Chrysler bondholders were personally threatened, not GM bondholders. One specific holdout was "was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under the threat that the full force of the White House press corps would destroy its reputation if it continued to fight." AFAIK, no threats were directly made to GM bondholders. Current wisdom is that GM bondholders saw the beating the Chrysler bondholders took, and just cut their losses.
GM stock has been delisted from the Dow and NYSE. It's now trading as GMGMQ on the penny market. If you owned GM stock, it will be worthless either now or in a short period of time. Current shareholders will get nothing from the bankruptcy court.
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This is really very simple. It is Chicago politics writ large, very large. Bond holders get screwed. The UAW makes out like a bandit. The guys who drove the company into the ground now get to pick up the pieces. Sweet! The Dems buy off the UAW with taxpayer money and get it back into their campaign coffers laundered and ready for the next campaign.
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Follow the money. Indeed. See how much of the money goes from taxpayers back to the Democratic machine.
Meanwhile, here's Ralph Nader's take on the whole mess:
"Today's bankruptcy declaration in federal court by General Motors is an avoidable, crude weapon of mass devastation for workers, dealers, auto suppliers, small businesses and their depleted communities. For GM's voiceless owners -- the common shareholders -- it is a wipeout.
The proximate cause of the bankruptcy was supposed to be the inability of GM and the government's auto task force to reach an accommodation with GM's bondholders. But late last week, the bondholder problem was moving toward rapid resolution, and was clearly resolvable. Why then are GM and its multibillion government financier proceeding with bankruptcy?
The bankruptcy and the GM restructuring plan are the product of a secretive, unaccountable, Wall Street-minded government task force that assumed power because of a Congressional abdication of historic magnitude. By all rights, the restructuring plan should have been submitted to Congress for deliberative review and decision.
There is little doubt that GM's chronic mismanagement and the deep recession require restructuring and scaling back the auto giant. But the bankruptcy and restructuring plan appear poised to do so in ways that will needlessly harm the stakeholders meant to be helped by Washington's rescue of GM?
Many, many jobs will be lost that could be preserved. There is reason to question whether too many plants and brands are being closed -- a matter that should have been taken up in Congress. Just the closing of hundreds of (GM and Chrysler) dealerships will cost more than 100,000 jobs. These sacrificed jobs will fray communities and impose enormous expenses on government entities that will have to provide unemployment and social relief, while suffering lost tax revenues.
The unionized workforce will see the wage and benefit structure slashed -- even though auto manufacturer wages make up less than 10 percent of the cost of a car -- so that new jobs at GM will no longer be a ticket to the middle class. This will drag down the wage structure of the entire auto industry -- exactly the wrong direction for the country.
America's manufacturing base will be further eroded, as GM pursues its Grand China Strategy -- increasing manufacturing outside of the United States, and increasingly from China, for import back into the United States. Unanswered questions persist about how GM's valuable operations in China, and unrepatriated profits, will be treated in bankruptcy, or excluded from bankruptcy.
Victims of defective GM products may find themselves with no legal avenue to pursue justice. In the Chrysler bankruptcy, with complete disregard for the real human lives involved, the Obama task force and auto company have maneuvered effectively to extinguish the product liability claims of victims of defective cars.
In a worst case scenario for the GM bankruptcy -- involving an extended court proceeding or severe impairment of consumer confidence in the GM brand -- all of these problems will be magnified. Again, given the path to resolution with the bondholders, this is an avoidable gamble.
The GM/task force bankruptcy plans appear geared to saving the General Motors entity -- but at a harsh and often avoidable cost to workers, communities, suppliers, consumers, dealers, and the nation's manufacturing capacity. It will also prove to be a complex political nightmare for President Obama.
With the company entering bankruptcy, the next challenge will be to ensure that the government exercises its ownership rights to undo and mitigate, to the extent possible, these damages. Among other measures, this should involve revisiting the serious drag-down, concessionary wage terms imposed on the United Auto Workers; demanding a moratorium on GM's outsourcing of production of cars for sale in the United States; and establishing successorship liability for the new GM, so that victims of dangerous and defective GM cars can have their day in court."
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You are wasting your time analyzing these "deals" in traditional economic terms. They are politically and ideologically driven. The concept of shareholders and debtors has been replaced by social "stakeholders," as clearly articulated by our President yesterday. Capital is being humbled before labor here; that's the philosophy of the people in power. I guess they believe that capital doesn't come from labor because in the end they don't really believe in what we have called savings and investment. Their idea of "investment" is to spend taxpayer's money and their idea of "savings" is jobs that haven't been lost, yet. People who have been foolish enough to save and invest are going to see their wealth transferred to more favored groups, groups more amenable to state control.
Well said, longeyes!
I wonder how many more dozens of billions of dollars we, the people are going to be required to pour into General Motors before it completely collapses. So-called "redistribution of the wealth" always ends up enriching the state, impoverishing the people.
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This is really very simple. It is Chicago politics writ large, very large. Bond holders get screwed. The UAW makes out like a bandit. The guys who drove the company into the ground now get to pick up the pieces. Sweet! The Dems buy off the UAW with taxpayer money and get it back into their campaign coffers laundered and ready for the next campaign.
Ding ding ding! Let there be a winner!!
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No, Chrysler bondholders were personally threatened, not GM bondholders. One specific holdout was "was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under the threat that the full force of the White House press corps would destroy its reputation if it continued to fight." AFAIK, no threats were directly made to GM bondholders. Current wisdom is that GM bondholders saw the beating the Chrysler bondholders took, and just cut their losses.
I wondered if the Obama Administration threatened bondholders and creditiors with a big steaming bowl of "alphabet-agency soup" (IRS, SEC, EPA, etc.) if they didn't swallow the gov't deal....this pretty well confirms it....
Fascist gov't with a Chi-town twist....that's what we can look forward to over the next four years....
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I just heard that Saturn and Hummer are being sold off, and that the Chinese are interested in Hummer.
Imagine. American jobs being lost to the Chinese to produce a formerly American vehicle.
The government owning GM isn't going to work, and most people don't think it will work. So why again are we spending billions to do this?
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Not to fear. GM will at long last produce the cars The American People really need (didn't say 'want").
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So why again are we spending billions to do this?
So we can feel all warm and fuzzy inside?
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So why again are we spending billions to do this?
So we can feel all warm and fuzzy inside?
Nyet Comrade.
The spending was to take over a huge portion of America's industrial capabilities. The Banks are next. Obama and his thugs are not allowing the banks to return the TARP money given to them.
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Our local conservative talk show host did a segment this afternoon on the nationalization of GM. He made the point that, if someone would have told him a year ago that the government would own GM, he would have said they were nuts. The speed at which Obama is moving is alarming. What's even more alarming is that nobody seems upset.
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It will end with our being TOLD what cars we can buy. How else can those who know command those who don't, for their best interest, of course?
I wouldn't say no one's upset. The people who count--meaning those who aren't asleep--are very upset.
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Addendum about no one appearing to be "upset."
I think what's going on is that a lot of Americans are in shock. They didn't expect this and have never seen anything like it. It's political shock and awe, a blitzkrieg maneuver.
It's the kind of emotional paralysis you see with abused spouses. Will it last? I highly doubt it, but sometimes it takes a lot of contusion before people finally get the message.
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It's more and more like "Atlas Shrugged", only I think it will have a violent ending/beginning.
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likening it to a battered spouse is fairly spot-on. And along with that, please remember that it takes a battered spouse an average of 7 attempts before actually making good on leaving their abuser...
How does that connect? Expect several "mini revolts" before America gets serious...
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Violating the bondholder contracts is unAmerican, not like it's supposed to be.
Violating the Union contract is what should have been done all along.
What is it about the two contracts that makes one sacred, and the other not a contract at all?
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I just heard that Saturn and Hummer are being sold off, and that the Chinese are interested in Hummer.
Imagine. American jobs being lost to the Chinese to produce a formerly American vehicle.
The government owning GM isn't going to work, and most people don't think it will work. So why again are we spending billions to do this?
Go up to Clem's post.....I fully agree...it's payback to the UAW for helping elect democrats....
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Hopefully in the near future the UAW's job training program will be :
Repeat after me "You want fries with that"
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As far as crooks, stealers, and thugs go, bank and automotive CEOs have nothing on the UAW and AFL/CIO
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No, Brimic, they would have to learn to say, "nin xu mai qi che?" (You want buy car?).
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Violating the bondholder contracts is unAmerican, not like it's supposed to be.
Violating the Union contract is what should have been done all along.
What is it about the two contracts that makes one sacred, and the other not a contract at all?
One was freely chosen, one was coerced through intimidation and .gov interference?
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One was freely chosen, one was coerced through intimidation and .gov interference?
There was gov't interference when GM took the easy way out and caved to the union?
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There was gov't interference when GM took the easy way out and caved to the union?
Well, considering that both fed & state law grant much power to the unions even before anyone gets to the negotiation table, yes.
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That should send a clear message to investors- don't buy bonds or stocks in Union companies.
The effects of the GM nationalization will be felt in many ways we could only begin to imagine.
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Our local conservative talk show host did a segment this afternoon on the nationalization of GM. He made the point that, if someone would have told him a year ago that the government would own GM, he would have said they were nuts. The speed at which Obama is moving is alarming. What's even more alarming is that nobody seems upset.
Shareholders and bond holders are upset. However, the bold holders have been told that their historical first claim on assets is no longer the case. They will get pennies on the dollar, and they best be grateful to get even that. I noticed the anti-shareholder vibe in the media and the Administration. Not good.
I swear I'm not a conspiracy nut, but I moreso see all of this as trying to implement the Chicago Model at a federal level. Destroy, drive off, or unionize any business that has any size or strength. Not because they are 'evil', but because they are power rivals. Any businesses who survive, allow them to 'thrive' if they accept the centralized power structure and are willing to play ball. Use taxes/pull to buy off enough folks to stay in power.
They want to replace the aristocracy of wealth or merit with the aristocracy of pull or connections. That's how Chicago runs, that's how Obama wants the US to run.
Not friggin good. Gods, we get rid of the militant neocons, and who replaces them? Chicago style organized corruption. When we throw the bums out, I wonder what brand of nightmare will replace the current one?
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Not friggin good. Gods, we get rid of the militant neocons, and who replaces them? Chicago style organized corruption. When we throw the bums out, I wonder what brand of nightmare will replace the current one?
(https://armedpolitesociety.com/proxy.php?request=http%3A%2F%2Fsterlingandsam.net%2Fwp-content%2Fuploads%2F2008%2F09%2Fthoh_kang_and_kodos.png&hash=9603197b3a49f3cd5d808275d3c56a2b4c127ef1)
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I find it hard to feel all upset for the bondholders losing their "historic" right to get paid before the actual employees, who were under a contract to do work in exchange for their money (whether you think they were overpaid or not).
I also don't think it is accurate to say the unions had coercive power that the bondholders didn't. Secured lenders can strangle a company faster than a union can organise a raffle.
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I find it hard to feel all upset for the bondholders losing their "historic" right to get paid before the actual employees, who were under a contract to do work in exchange for their money (whether you think they were overpaid or not).
Bond holders are owners of the company, Unions are mere tenents. A Union contract doesn't mean anything if the company goes out of business and there is no more need for labor.
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Shootinstudent, let's suppose you lent someone money to start a business, and you entered into a contract to cover your investment, making you a secured party in the business. If the business went under, would you expect to get as much of your money back as possible per the contract, or would you expect to share your money with employees who were laid off? The employees have no secured interest in the company. They worked for the company and were paid for their work. When they stop working, they stop getting paid. Or would you have it that they continue to get paid even when they're not working?
If the government overrides bankruptcy laws and gives bond holders whatever the government feels like giving them, companies are going to have a very hard time raising cash. Those investors can find safer havens for their money. Maybe they'll buy bonds in the new Hummer company in China. It sounds outrageous to say it, but the Chinese are now more trustworthy than the US government when it comes to business.
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That should send a clear message to investors- don't buy bonds or stocks in companies.
I fixed it for you. The law concerning investments was just changed radically and not for the better. Investing in any company that the US decides is critical enough to get involved with just became too risky to engage in.
I work on bond deals for a living. If our bondholders suspected that the US would say "screw you, you get paid last or not at all," we'd never see another bond sold.
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It will end with our being TOLD what cars we can buy.
We already are "TOLD" what cars to buy, and have been for a long time. If you don't think so, go try to buy a new car with no ABS, no catalytic converter, one that doesn't pass safety regs. There are tons of cars on the world market that we are not "allowed" to buy a drive in the US. You are already being told what cars you can buy.
I think it's somewhat amusing to see people get upset when they lose another increment of their liberties, when they already are boiling alive, but are just used to it. After a period of time, the new status quo will become comfortable and they will settle down, until the next straw is piled on. The slippery slope is a logical fallacy but a political reality.
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If bondholders are not going to get paid back first, they are going to demand a MUCH MUCH higher rate of interest. So much for reasonable borrowing for private enterprise.
All of this is basically an attack on capital, which for leftists is a form of theft anyway. They don't cotton to the idea that capital comes from somebody's savings, which comes from somebody's work, deferrerd gratification.
What we are seeing is a transfer of wealth from the saver/investor class to the government-dependent and -controlled worker class.
Who knew the revolution would start in bankruptcy courts?
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Well, there you have it.
Longeyes has his long-awaited-for revolution, sparked by GM's bankruptcy, and wrapped in a government conspiracy.
Considering it only took 33 posts to get to that point, the thread did amazingly well prior.
Put a fork in it, this one's done. =|