Chrysler crucible exposes Obama overreach
"I want to disabuse people of this notion that somehow we enjoy meddling in the private sector."
Note his actions, not his words.
Obama has called bankers on the White House carpet, read the riot act to credit card executives and fired Rick Waggoner, former CEO of General Motors. Now, with the heat on Chrysler to merge with Fiat or file for Chapter 11 bankruptcy protection, the Obama administration effectively tried to hold Chrysler's debt holders hostage.
We'll leave the full discussion of Obama's assault on capital structure for another time, but suffice to say that Obama has continued to show a lack of understanding of the president's role in private enterprise. What is that role? None, actually. He has no authority, no mandate, no precedent for his overreach into the private sector. And though he said he didn't enjoy meddling in the private sector, the GM restructuring plan offers more evidence that Obama is saying one thing while doing another.
In the GM debt resolution plan that came out this week, bondholders are owed around $27 billion, more than the US Treasury and the UAW combined. The GM plan, with Obama's blessing, would convert the debts into common stock. So, since bondholders are owed more they should have a greater ownership stake, right?
Hardly. The Obama/GM plan would leave bondholders only owning 10% of GM while the US Treasury ends up with a 50% stake in GM and the UAW owns 39% of the company. GM bondholders have balked at the unfair plan and offered counter proposals.
Chrysler was forced into bankruptcy because some debt holders refused to be steamrolled by Obama and resisted being forced to eat outsize losses on their investments. Obama, again meddling in the private sector, ripped those bondholders for not making a deal at the point of the administration's gun. Bondholders decided to take their chances in bankruptcy court.
Sen. Bob Corker, R-Tenn., reacted to the Chrysler bankruptcy:
"It's been very apparent since last fall that this was going to be the ultimate outcome for Chrysler. I hope none of us in this country consider it normal or appropriate for an American president to be announcing the fate of a private company, rather than that company's CEO."
Obama's arrogance and hubris apparently don't allow him to see just how bizarre it really is for the president of the United States to announce a company's decision to file for bankruptcy. Nor did Obama note any abnormality when he offered his opinion on what kind of cars auto companies should be making. Nor did Obama hesitate when he - a guy who owns no stock and has no title at the companies - stood and guaranteed the warranties on automobiles.
Obama is out of bounds and overstepping. But, before the popular president can be reigned in, someone has to challenge him. So far, corporate America - with the exception of some of the Chrysler debt holders - has rolled over for Obama. Maybe this is the first signal to a president who either doesn't understand free markets or who outright disdains free enterprise, that he is not Obama the Omnipotent One.
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