Obama Seeks Absolute Power

The Chrysler bankruptcy case stinks to high heaven.

Tom Lauria, an attorney with the law firm of White & Case, is representing most of Chrysler's non-TARP creditors. Or was. The status of those creditors is subject to change by the minute. Yesterday, Mr. Lauria did an interview with Frank Beckmann of WJR Radio, in which he told Beckmann that one of his clients had dropped out of the case because of threats from the White House. Here's the audio of the entire interview.



In case you're having trouble with the audio, here's the relevant portion of the transcript.

Beckmann: Tom, let me make the argument against you in another way. We've heard the President say this, "I wouldn't want to stand on their side." Ron Gettelfinger says "Everyone else has made concessions. These people won't; they're greedy." Why not take a concession that is being asked of everybody else and is being accepted by everybody else, including other hedge funds that had bought some of these bonds in Chrysler?

Lauria: Well that's a great question, because let me tell you it's no fun standing on this side of the fence opposing the President of the United States. In fact, let me just say, people have asked me who I represent, and that's a moving target.

I can tell you for sure that I represent one less investor today than I represented yesterday. 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.

Beckmann: Was that Perella Weinberg?

Lauria: That was Perella Weinberg.

There is so much to this story it's difficult to know where to begin. The investors in question are small potatoes, relatively speaking - their total claim is about one billion dollars. They hold a contract that says they get paid before anyone else does by Chrysler, first-lien, and offered to settle for 60 cents on the dollar. Obama refused, offering only 29 cents. They issued a press release Thursday night stating their position - bizzyblog has it, along with some insightful editorializing. I am reprinting only the press release here.

Statement From Non-Tarp Lenders To Chrysler

Last update: 10:47 a.m. EDT April 30, 2009

NEW YORK, Apr 30, 2009 (BUSINESS WIRE) — As of last night’s deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country’s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money.

As much as anyone, we want to see Chrysler emerge from its current situation as a viable American company, and we are committed to doing what we can to help. Indeed, we have made significant concessions toward this end - although we have been systematically precluded from engaging in direct discussions or negotiations with the government; instead, we have been forced to communicate through an obviously conflicted intermediary: a group of banks that have received billions of TARP funds.

What created this much-publicized impasse? Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler’s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars. In contrast, over at General Motors, senior secured lenders are being left unimpaired with 100% recoveries, while even GM’s unsecured bondholders are receiving a far better recovery than we are as Chrysler’s first lien secured lenders.

Our offer has been flatly rejected or ignored. The fact is, in this process and in its earnest effort to ensure the survival of Chrysler and the well being of the company’s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.

We have a fiduciary responsibility to all those teachers, pensioners, retirees and others who have entrusted their money to us. We are legally bound to protect their interests. Much as we empathize with Chrysler’s other stakeholders, the capital is just not ours to contribute to their cause by accepting a deal that is outside the well established legal framework and cannot be rationalized as being commercially reasonable.

We are continuing to discuss our position with the United States Treasury. We have made a proposal which we earnestly believe is fair and would appropriately recognize our legal position.

As President Obama implied yesterday, it is likely that Chrysler will have to file Chapter 11 whether or not all lenders agree to any particular proposal. Chapter 11 is often used to help implement an agreed deal and dispose of unwanted legacy liabilities. We are hopeful and optimistic that we will reach a positive resolution of our issues so that all stakeholders will move forward together to implement Chrysler’s “quick trip” restructuring in an un-contested proceeding. Our Group will never initiate a bankruptcy filing on Chrysler - that is a decision for the Company and the Administration to make.

As we all appreciate, laws are the foundation of our economy and society. Despite recent travails, our country remains the economic envy of the world and the United States remains a vital engine of global growth. The rule of law made it that way. We urge that people remember this and not succumb to unproductive and unwarranted finger pointing.

Sincerely,
The Committee of Chrysler Non-Tarp Lenders
SOURCE: The Committee of Chrysler Non-Tarp Lenders

The executive branch of the federal government has ventured squarely into territory that belongs to the judiciary, and is setting the terms of contracts by threatening to use the White House press corps to destroy private firms. Let that sink in for a moment, then read on.

ABC's Jake Tapper, perhaps the only real journalist left in the mainstream media, has more...much more.

A leading bankruptcy attorney representing hedge funds and money managers told ABC News Saturday that Steve Rattner, the leader of the Obama administration's Auto Industry Task Force, threatened one of the firms, an investment bank, that if it continued to oppose the administration's Chrysler bankruptcy plan, the White House would use the White House press corps to destroy its reputation.

The White House said the story was false.

"The charge is completely untrue," said White House deputy press secretary Bill Burton, "and there's obviously no evidence to suggest that this happened in any way."

Thomas Lauria, Global Practice Head of the Financial Restructuring and Insolvency Group at White & Case, told ABC News that Rattner suggested to an official of the boutique investment bank Perella Weinberg Partners that officials of the Obama White House would embarrass the firm for opposing the Obama administration plan, which President Obama announced Thursday, and which requires creditors to accept roughly 29 cents on the dollar for an estimated $6.8 billion owed by Chrysler.

[snip]

Perella Weinberg Partners, which owned Chrysler debt through its Xerion Fund, was one of Lauria's clients in this bankruptcy, but no longer is. Before the Thursday deadline, Joseph Perella and Peter Weinberg tried to join the larger creditors -- JP Morgan Chase, Citigroup, Morgan Stanley, and Goldman Sachs -- who are owed roughly 70% of Chrysler's debt and had already agreed to participate with the administration's plan.

All four financial institutions are recipients of up to $100 billion in federal government bailout funds, though the Obama administration insists the matters were kept completely separate.

Officials of Perella Weinberg Partners could not be reached for comment.

[snip]

President Obama singled out Lauria's clients for criticism when he announced the Chrysler plan on Thursday.

"While many stakeholders made sacrifices and worked constructively, I have to tell you some did not," the president said. "In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none."

Lauria said the president's assertion that his clients weren't willing to make any sacrifice is false. The clients were willing to take 50 cents on the dollar from Chrysler for their debt, he said.

President Obama also said of Lauria's clients, "I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don't stand with those who held out when everybody else is making sacrifices."

"He stands my clients up as basically the reason Chrysler is going into bankruptcy," Lauria said. "He wrongly says they're not willing to make any sacrifice. And then he says he does not stand with us."

Lauria said the president saying he doesn't stand with his clients "kind of sounds like 'You're fair game.' In whatever sense. People are scared. They have gotten death treats. Some have been told people are going to come to their houses. God forbid if some nut did something, I'm just wondering how the president would feel."

We have a gang of Chicago thugs in power in this country and they are willing to stop at nothing. They own the media, they are assuming control of the judiciary by force and they have zero respect for the rule of law. They are refusing to accept repayment of TARP funds from some of our largest banks, increasingly obviously so that they can maintain complete control of those banks. Lauria stated in the radio interview that "...they have been told by the government who is in complete control of Chrysler, oddly enough..." - in control of Chrysler. In control of GM. In control of Citi and Bank of America. In control of the media. In control of who gets medical care and when. In control of every aspect of our lives.

For God's sake, people...wake up and see what is happening to your country before it's too late. These people must be stopped. They make Hugo Chavez look like a lightweight.