Posted on 05/04/2009 1:08:57 PM PDT by mojito
Are you following the disembowelment of Chrysler’s secured creditors with an eye not just toward what it means for the moribund car company but for what it could do to the very concept of secured debt? Has it dawned on you what the consequences will be if the President gets his way and consideration is given to creditors not according to contracts, rules, and established legal precedents but according to which group is most politically favored? And do you believe the President advanced the cause of economic recovery by publicly excoriating “speculators” who once hoped to profit by lending money against hard assets to an ailing company?
Profit? There’s no profit to incentivize risk taking in this country, only sacrifice!
Law? There’s no law to protect the politically unfavored in this country, only derision!
According to U.S. bankruptcy code, secured creditors - that is lenders who have a contractual security interest or claim to specific collateral - have to be paid before unsecured creditors. Unsecured creditors' claims are prioritized according to explicit rules defined by law. With the exception of short-term payments approved by a bankruptcy judge to keep a company running during the reorganization process, each priority level has a right to be paid in full before creditors with the next lowest priority get a dime. That is why secured debt can be had at a lower interest rate than unsecured debt. In fact, that is why troubled companies have any ability at all to raise money. Credit flows because everyone knows the rules of the game, even in bankruptcy.
Well, at least they used to.
(Excerpt) Read more at realclearmarkets.com ...
Mexico and Venezuela come to mind...so does Mugabe.
It’s being done ‘for the children’?
it’s worse than that. it’s hacking at the basis of the economy.
a banana republic can keep functioning, even with nationalization.
Obama and his capos!
If the laws of contracts can be eliminated, what then about the laws protecting members of the Government. Is not the status of contracts as sacred as the status of looter lives?
Let’s see what the Judge says. Unless they can hammer the non-Tarp bond holders to give in, the Judge will decide.
In spite of this and other things..the market is going up.
I haven’t looked a Corp Bonds, but SP and Moodies should have something to say about this when it is done.
They don't have to use a teleprompter to announce it ...
Banana republics don't have economies that have credit markets. They rely on other countries that do.
I was referring more to the politics, were dictators are free to do as they like and strong-arm whoever they like, the law be d***ed.
*********************
I hear crickets.
But if you are too busy you must read the following:
"Why would anyone lend money to heavily unionized companies knowing that if things went wrong, the president and his men could trash their security interests by executive decree, hold them up to public vilification, and subject them to future retribution by regulators?"
"The fate of Chrysler and its workers pale in comparison to the wrecking ball that would be taken to economic order if bankruptcy judge Arthur Gonzalez approves the administration’s plan to give Chrysler’s secured creditors the shaft. "
The sheeple, oops I mean People voted for change. Most still don’t know what they’ve done.
If they get away with this - NYS will be given the go-ahead to take what they want from the Indians. They’ve been chomping at the bit to rip the treaties to shreds for years.
I pray the bankruptcy judge likes contract law and the Constitution!
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_hassett&sid=atacn_gbYxHI
We’re going to need a Five Year Plan for the auto industries so that their workers can carry the glorious banner forward into the future.
Obama has gone after the concept of private contracts before. Some of his ideas for mortgage bailouts were to basically force a re-write of the mortgage, with little regard to the fact that a mortgage is a private contract.
I hope people wise up to the fact that we’ve hired a marxist dedicated to the concept of eliminating the United Satates as we knew it and putting in its place a communist Workers Paradise.
Interesting Obama has opted to not protect creditors which the LAW requires he do.
I think the Republicans may need to ask for a special counsel to investigate if threats were made to creditors for not agreeing to White House terms. If threats were made then Obama should be impeached. No one is above the law.
The commie dictators tell you they are commie dictators and also tell you to GET F---ED, OTHERWISE NO DIFFERENCE.
“I think the Republicans may need to ask for a special counsel to investigate if threats were made to creditors for not agreeing to White House terms. If threats were made then Obama should be impeached. No one is above the law.”
Republicans!! You think they give a Sh*t??? They’re part of the problem, too.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.