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NYT: Obama Blames Lenders For Chrysler

A surprising report, buried in the business section of the New York Times:

An unidentified man carries boxes marked "Chrysler LLC" into U.S. Bankruptcy Court in New York, May 1, 2009.

The Lenders Obama Decided to Blame


May 1, 2009

Peter A. Weinberg and Joseph R. Perella are part of a band of Wall Street renegades — “a small group of speculators,” President Obama called them Thursday — who helped bankrupt Chrysler.

That, anyway, is the Washington line.

In fact, Mr. Weinberg and Mr. Perella, with sparkling Wall Street pedigrees, are the epitome of white-shoe investment bankers. And their boutique investment bank, a latecomer to Chrysler, played only a small role in the slow-motion wreck of the Detroit carmaker.

But now the two men, along with a handful of other financiers, are being blamed for precipitating the bankruptcy of an American icon. As Chrysler’s fate hung in the balance Wednesday night, this group refused to bend to the Obama administration and accept steep losses on their investments while more junior investors, including the United Automobile Workers union, were offered favorable terms.

In a rare flash of anger, the president scolded the group Thursday as Chrysler, its options exhausted, filed for bankruptcy protection. “I don’t stand with those who held out when everyone else is making sacrifices,” Mr. Obama said.

Chastened, and under intense pressure from the White House, the investment firm run by Mr. Weinberg and Mr. Perella, Perella Weinberg Partners, abruptly reversed course. In a terse statement issued shortly before 6 p.m. Thursday, Perella Weinberg Partners announced it would accept the government’s terms.

It was too late.

Whether the other Chrysler holdouts will capitulate as well remained unclear. At least one, Oppenheimer-Funds, insisted it would not back down.

But whatever the outcome, this bit of brinkmanship — which many characterized as a game of chicken with Washington — has become yet another public relations disaster for Wall Street

After weeks of increasingly rancorous negotiations, Perella Weinberg and 17 other financial firms — including Oppenheimer-Funds and Stairway Capital, a hedge fund that specializes in troubled companies — rejected the administration’s plan. It was, they argued, simply unfair.

These investors together hold about $1 billion of Chrysler’s secured debt. The Treasury offered to pay all of Chrysler’s senior lenders $2.25 billion in cash if they forgave most of the company’s debts. Perella Weinberg and the others demanded more, arguing they would receive at least that much, and possibly more, under ordinary bankruptcy proceedings.

But this is no ordinary bankruptcy. JPMorgan Chase and other large banks involved in the negotiations are, to greater and lesser degrees, beholden to Washington. Many have received billions of taxpayer dollars, as well as other generous subsidies. For the banks, defying the administration was never a serious option, according to people close to the talks with lenders, who asked not to be identified because they had signed confidentiality agreements…

The dissident creditors said they had a fiduciary responsibility to seek the best possible returns for their own investors — which, the group said, include teachers’ unions, pension funds and endowments.

The government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades,” the group said in a statement Thursday. The creditors suggested banks that had received bailout money were being strong-armed by the administration, a view some of the bankers privately said they shared.

Now, however, Perella Weinberg and others will have to see what the bankruptcy court decides the creditors should get. If the other holdouts object to the reorganization plan — and it was unclear whether they would — they stand little chance of prevailing in court, bankruptcy lawyers said. The administration hopes to complete the proceedings within 60 days, and the political pressure to go along is unlikely to let up…

Even those involved in the negotiations see little upside in fighting. “There’s zero chance this group will be able to get anything more in bankruptcy court given that 90 percent of the lenders are lined up against them,” said a hedge fund manager who owns about $10 million of Chrysler’s secured debt and voted for the government’s proposal…

These investment managers and the investors they represent were simply cheated in this deal.

Meanwhile, it seems like only yesterday (though it was really last December), that Chrysler was ‘thanking’ its investors:

Thank You for Investing in Chrysler – America’s Car Company

Chrysler is committed to:

  • Providing cars and trucks you want to buy, enjoy driving, and will want to buy again.
  • Delivering products with the best quality and value in our Company’s history.
  • Improving fuel economy to support America’s energy security and environmental sustainability.

The United States is home to 74% of our employees and over 3300 dealers in communities across this country. Of every dollar we spend, 78% is spent here at home. On behalf of the 1 million people who depend on Chrysler for their livelihoods, thank you for investing in Chrysler, and America.

Bob Nardelli
Chairman and CEO , Chrysler LLC

The unions and the other people who depend upon Chrysler for their livelihoods just shafted these self-same investors.

And yet this is called “another public relations disaster for Wall Street.”

This article was posted by Steve on Friday, May 1st, 2009. Comments are currently closed.

23 Responses to “NYT: Obama Blames Lenders For Chrysler”

  1. curvyred says:

    It gets scarier and scarier everyday – is this still the United States of America – I am beginning to wonder.

    Do we have a dictatorship on our hands?

    • JohnMG says:

      In the real world, these investors would get equitable treatment at the least. But the only thing Obama knows is thug tactics. What else would you expect from a community organizer. The only game they know is to play both ends against the middle. Given any other situation, tactics like these would have Obama on the carpet facing racketeering charges.

      But no, “He won”!

  2. RightWinger says:

    How about badly made Chrysler models did the company in. You can find dozens of websites with thousands of complaints about Chrysler cars and how horrible most of there were. The Daimler Chrysler merger did more to destroy Chrysler than any such dribble Lil’ Barry could put on the backs of lenders.

    My first car was a Dodge Shadow. It ended up being a piece of garbage that sucked money out of me like a vampire at a blood bank with all its problems. A flood ended up destroying it which turned out to be a blessing. My second car was a Dodge Daytona. After it got over 100,000 it encountered numerous problems too, but it still ran better than the Shadow. Then one day the 1999 Dodge Intrepid caught my eye and I loved it. For the first 59,999 miles, the car ran very well. Then no sooner than the warranty expired, everything went wrong with it. Transmission had to be replaced at 70,000 and that was just the beginning of another money pit. I spent more on maintenance over 2 years than I did in the first 4 years paying the car off. That was the last straw on me “buying American”. Now I drive a Honda Accord.

    I would reconsider buying an American made car, but if they are not reliable or “nationalized”, then I am sticking with a foreign car from now on.

    • retire05 says:

      RightWinger, let me explain something to you that might explain your bad luck with Chrysler products.

      In 1972, I had a Chrysler engineer sitting at my kitchen table. He worked at the Fenton, Missouri truck assembly plant (now closed down) where all the picksups and vans were made. It was the largest truck assembly plant Chrysler had, being even larger than the one in Michigan.

      The engineer explained how Chrysler was designing “three year throw aways”. They were designed to be cheap, available to even low income families, but would only be reliable for about three years before they started needing major work. The entire concept was to make a car that would cost more to repair than it would to buy a new one. Hence, the “3 year throw away” term. It would be cheaper to throw the car away than to buy a new one because at that time, the maximum length of time you could finance a car/truck was three years. As soon as it was paid for, you would need a new one, just as cheap but equally as unreliable in the long term.

      Since I was deeply involved with Chrysler at the time (my spouse working for them), I knew the cutbacks that Chrysler was making to make a cheaper vehicle. Quality control went out the window, as QC was expensive. The trick was to build a lot of vehicles, QC be damned, just get them on the street.

      This program would accomplish two things: it would keep Chrysler building cars and would keep UAW members working.

      But Americans were spoiled. They were used to buying a vehicle that was practically indestructible. Hell, in the early ’70’s it was not unusual that people were still driving vehicles they had bought 20 years before.

      The plan backfired. Chrysler gained the reputation of building unreliable vehicles. And Ford, trying to end the reputation of FORD (found on the road dead) started building cars, vans and pickups that were reliable. By the ’80’s, Ford truck sales far surpassed Chrysler, with GM being a close second.

      Now to the Chrysler bondholders: a number of companies, not hedge funds, invested in senior bonds with Chrysler. These were companies that managed retirement funds (401(k) plans and IRAs) as I have explained before. The “senior” bond is on top of the pecking order when bankruptcy is filed and some of these bonds are even insured.
      The Treasury Department, lead by Turbo Tax Tim, decided that these bondholders would be represented by J.P. Morgan, who received TARP funds, and not by the bondholders themselves. What Turbo Tax Tim was trying to do was prevent the bondholders from having much say in the amount of money they would get.

      A deal was cut with the major banks that held Chrysler debt. But as the facts of the deal came out, that these banks were the very banks that had benefited the most from TARP, like Citibank and Bank of America, it was obvious that some kind of back room deal was cut by the administration to get these banks to lower their claim to the Chrysler debt by almost 90%. Now, top that off with the next back room deal cut with the UAW that would allow the UAW to claim almost 55% of Chrysler through its retirement fund. Add Fiat, that would hold 20-35% of Chrysler without one damn dime of investment.

      So now you have the UAW holding 55%, Fiat almost 35%, the federal goverment 8-10% and there is nothing left. So Turbo Tim offered the bondholders 29 cents on the dollar. A buyout, so to speak. The administration wanted the bond holders to take the major hair cut but when the rest of the deal came out, the bondholders, holding seniority in the debt game due to bankruptcy laws, told the administration to stuff it and informed the administration they would take their chances in bankruptcy court.

      And what did the administration do? Obama attacked the bond holders, referring to them as “hedge funds” (remember, the evil hedge funds?) and calling them unpatriotic because these investors were not willing to be scalped. Obama showed that anyone who balks at his game playing will be demonized. Just like he demonized the Tea Party goers during his speech at Fox Senior High School in Arnold, Missouri, which oddly enough, was the major city where the Fenton, Missouri Chrysler Plant workers lived (betcha didn’t know that, did you?). When the Fenton Truck Plant shut down, Arnold took a hellofa hit with unemployment. How do I know? When my spouse worked for Chrysler, we lived in Arnold. And half the friends I had there lost their jobs at Chrysler. There was a reason that Obama chose Arnold for his 100 Day speech. Now you know why.

      What was the deal cut with the banks? Did the administration promise to lessen their debt to the American taxpayer they aquired through TARP funds? The administration is not saying and neither are the banks. But look for former CEO of Bank of America to start singing like a bird, now that the stockholders have thrown him out.

      This administration is truely the Wizard of Oz. You have to look behind the curtain. There was a reason he went to Arnold, Missouri out of all the cities in the nation he could have taken his road show to. There was a reason he referred to the bondholders as “hedge funds”. There are back door deals being made to prop up no one but the UAW who campaigned for him and filled his campaign coffers mightily. There is a reason Gittlefinger (head of the UAW) backtracked on the initial deal cut with Chrysler and GM made when the Big 3 first went to D.C. to beg for bailout money, saying he had decided to take his chances with the incoming administration and that he thought the incoming administration would be more sympathetic to the “plight” of the UAW. The deal had already been cut. Get the TARP banks to reduce their debt claim, scalp the bondholders, and get Fiat in on the deal to gain technology at no cost to Fiat.

      Look behind the curtain.

    • Liberals Demise says:

      Truly fascinating!!

      We are really screwed if the bamboozelers’ continue untouched!!

    • Odie44 says:


      Amazing, insightful post. And scary too.

    • proreason says:

      There isn’t any mystery here.

      The UAW is being handed a business they never invested in so that as many of their overpaid jobs remain as possible in the short term. The prattle about bond-holders, bankruptcies, new investors, hedge funds, etc is flak/distractions to move your eye to the shell that doesn’t have the pea.

      It’s a payoff for putting TMCC in power.

      The UAW is responsible for the failure of the business. The laws of economics prevailed. With government backing, the unions kept their compensation at an uneconomic level. Failure of the business was inevitable. Perhaps other bad business decisions were made, but none of the other reasons are as certain as the uneconomic compensation package of the UAW.

      The ultimate result will soon be inferior vehicles that Americans are somehow forced or induced to buy. Reason 1 is that the UAW’s wages will continue to be uneconomic, and probably moreso. Reason 2 is that the government will continue to meddle and make businsess decisions to keep the politicians in power, not to make good cars.

      GM and Ford will also fall, GM because it is in the same situation as Chrylser. Ford because a more successful business model cannot be allowed to endure. The foreign companies must also be crushed.

      It is already heralded as a triumph for Government.

      In fact, it is a tragedy for the country and even for the workers of the UAW, who will soon join the rest of the country as our lifestyles slip to 1/2 or less than they were in June of 2008. As these actions ripple through the rest of the economy, lifestyles will revert to those of Communist Russia. It is inevitable, and will happen more quickly than you fear.

      The winners, as we all know, will be the commissars in the government, and the small handful of slimeballs in the UAW who supported the communist coup.

      Banks and the Automobile Industry are under control of the commissars. Next will come Health Insurance and the Utility companies, then the Medical business, Energy and destruction of private Education. That should all occur by 2012, leaving about 30-40% of the economy in private hands.

      Of course, a lot of it will be facist control of business instead of overt Socialism.

      But the impact will be the same.

      The entreprenurial middle class will be annihalated and never again able to challenge to absolute rule of the oligarchy.

      Which has been the goal from the first minute.

    • retire05 says:

      Top this all off with the reports that the Obama administration strong armed one of the bond holding companies, Pirella Wienburg, by threatening them with total ruination, initiated by the “White House Press Corp” if they did not fold and go along with the Administration. The lawyer that was representing Perella Weinburg said that PW pulled out of bankruptcy litigation after the White House made its threats.

      You can read about it here:


      Mark Levin linked to the lawyers interview where he said that Perella Weinburg was threatened by the White House.

      It has become quite clear to anyone with eyes wide open, that this Administration intends to nationalize as much of the American private sector as it can. And as the banks are nationalized, so will go the entire private sector. What FDR could not accomplish in the ’30’s, Obama will try to accomplish 75 years later.

      We are about to see the true meaning of “workin’ for da man”.

  3. proreason says:

    As someone who has eschewed work, business and investing for his entire life, how is it that Mr. Obama has become aware that “a small group of speculators” can bankrupt businesses?

    Mr. Soros, the President is holding on line 1.

  4. Colonel1961 says:

    Sounds like a couple of investors forgot to pay their tribute to Don Obama…

  5. JohnMG says:

    ……”In a rare flash of anger, the president scolded the group Thursday………“I don’t stand with those who held out when everyone else is making sacrifices,” Mr. Obama said……”

    Typical liberal nit-wit statement. I would expect this sort of invective from a 14-year-old punk, and maybe that’s what he really is….. mentally. How I would relish the opportunity to figuratively spit in his eye, for he hasn’t a clue how I respond to threats. And I’ve yet to see what HE is sacrificing. Every incident such as this should embolden the populace. If he thinks he can keep the country off-balance with his “one-crisis-after-another” game, let’s see how well he could deal with a recalcitrant public. My guess is he’d lapse into a screaming tantrum.

    Game on!!

    • Liberals Demise says:

      ………….followed by thumb sucking and bed wetting.

    • MinnesotaRush says:

      Careful now guys. He’ll sic MO on ya .. :-(

    • caligirl9 says:

      Everyone else is making sacrifices?

      Everyone but you and the nitwits who work for/alongside you, TOTUS.

      My back is killing me today and I’d much rather be on the floor with a hot pack and pain pills, but I am lucky enough to have work this weekend (and into next week if I finish the edit of that propaganda) and I’m pushing through the pain.

      I’m so sick of this guy’s tantrums. Please God, somewhere out there has got to be the second coming of a man of integrity like Ronald Reagan, a man of values who surrounds himself with intelligent and practical advisors.

    • Squito says:

      This may sound weird, but have you tried letting someone walk on your back, Cali? Last year sometimes after swim meets, I’d have one of my teammates step on my back. Might help.

  6. bousquem says:

    What really angers me is that the president thinks that people who invested money in the company should be expected to get hosed and lose alot of their investment so the unions can get away with more money when it was the unions who really helped bankrupt the company. I remember going with my parents to look at trucks years ago. The dodge truck the dealer tried pushing had scorch marks coming out from under the hood, 2 engine fires when it still had not been bought. My dad end up with a Mazda he drove for years until he decided to eventually switch to a chevy which has been relatively problem free since it got bought in 2001. I drive a ford taurus and have to say I love it and its cheap to repair. My next car is either going to be a ford or overseas car. I never trust dodge, chrysler, or jeep. I trust even less FIAT, there was/is a reason alot of people seem to think fiat is an acronym for “Fix it again Tony”, and I care even less when the goverment has a large hand in running that company.

  7. pdsand says:

    “Now, however, Perella Weinberg and others will have to see what the bankruptcy court decides the creditors should get. If the other holdouts object to the reorganization plan — and it was unclear whether they would — they stand little chance of prevailing in court, bankruptcy lawyers said. The administration hopes to complete the proceedings within 60 days, and the political pressure to go along is unlikely to let up…

    Even those involved in the negotiations see little upside in fighting. “There’s zero chance this group will be able to get anything more in bankruptcy court given that 90 percent of the lenders are lined up against them,” said a hedge fund manager who owns about $10 million of Chrysler’s secured debt and voted for the government’s proposal…”

    I have trouble imagining what if anything this has to do with anything. The last I heard, bankruptcy courts operated under the rule of law, unlike Team Obama.

    “and voted for the government’s proposal”.

    Seriously? They were voting? In that case I think the 90% already won right? Oh yeah that’s right it wasn’t a vote, because Team Obama doesn’t oversee a democracy. And God bless the hold outs for not bowing like Obama meeting a Saudi king.

    • pdsand says:

      I guess I have to say, if Team Obama really controls this thing through bankruptcy court, and somehow gets a judge to go along with the results of the voting, clearly in spite of the law, then we really do live in a banana republic now.

  8. Douglas says:

    Is Obama intentionally trying to mimic the actions in Atlas Shrugged? This story certainly reads like Hank Reardon telling the feds to go screw themselves.

    Bravo to the bondholders. It’s their capital at risk.

    The union employees were all paid for their labor. They didn’t take the risk why should they get the remaining assets?

  9. Rusty Shackleford says:

    I guess, in some ways, this would be sheer comedy if it weren’t so sad.

    “Gonna jump down, turn aroun’, make dem green autos.
    Gonna jump down, turn aroun’, make ’em green all day.”

    “Swing low, sweet General Motuhs, comin’ fo ta carry ma loannnnnn,
    Swiinnnngg looooowwww sweeet General Motuhssss…comin’ fo ta carrryyyy mah looooaaannnnnn.”

    “Well ah looks ovuh Detroit….wutta ah seeeeeee?
    (comin fo ta carry mah loannnn?)
    O-bama and his g-men…..comin affuh meeeeee……
    (Comin’ fo ta carry mah loannnnnn)”

  10. MinnesotaRush says:

    This is on topic and very interesting .. informative. From “the Great One'”s website: WHITE HOUSE THREATENS LAWYER’S CLIENT

    Go to http://www.marklevinshow.com and click on the above stories link ..

    • Rusty Shackleford says:


      Thanks for that link. I listened to the interview and it sounds like exactly what he said, that “The executive branch is sticking its fingers in the judicial branch and usurping the Constitution.”

      I’m glad someone said it who has a stake in all this. Fair is fair, to be sure but it sounds like the shareholders are trying to do just that while the lying liar who lies, lies about them and their intentions.

      It really is criminal what this arrogant combination of president and administration are trying to do.

      I recommend listening to the interview, by all means.

    • proreason says:

      I happened to be listening to Mark when he talked about your post, MR.

      Scary stuff, very scary.

      TMCC (The Moron’s Criminal Cabal) threatened to sic the “press corps” on the bond holders who were resisting their order to take a miniscule sliver of the Chrylser remains, even though the bond holders have a legal contract that puts them at the head of the line in a bankruptcy. That’s why they bought the bonds.

      So you have a triple crime in progress:
      1. Abuse of power by threatening private citizens
      2. Denial of a legal contract (just the basis of the Constitution and our country, that’s all)
      3. Use of the press, for God’s sake, as the enforcer.

      Now you know why I call them a criminal cabal. The natural evolution of the Chicago mob. No different that a Banana Republic.

      This is beyond Orwellian.

      Certainly, this is a dream and it can’t be happing in the United States of America.

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