If you have paid attention the past few weeks, you have no doubt heard the plaintive wails of the non-Tarp Chrysler lenders, their attorneys, and our brave defenders of all things Galt hollering about the rule of law and fiduciary duty and the sanctity of contracts and blah, blah, blah. Hell, even if you have not been paying attention, you had to have heard the screams. At long last, after wading through hundreds of tear-stained columns at Clusterstock (far more than any individual should ever be forced to read in a lifetime, but I did it all for you), unable to get the frightful sound of Henry Blodget shrieking out of my head, I have finally found someone less sympathetic than me (plus, unlike yours truly, he knows what he is talking about):
Attentive readers will remember that I asserted several substantive points1 in my tirade. First, the negotiations over debt recovery by Chrysler’s secured lenders in the company’s restructuring were just that, negotiations, not a cookbook allocation of value according to rigid, unvarying legal precedents. Second, while acting unequivocally like the schoolyard bully throughout, the Obama Administration did nothing fundamentally wrong or even unexpected by pushing hard to further its own political objectives. It certainly did not run roughshod over the rule of law or undermine the bankruptcy process, as some wilder-eyed commentators have claimed. Third, it completely failed to surprise me that the administration wiped the floor with the dissident creditors in both private and public, given its vastly superior negotiating position. And finally, I personally found the whiny, martyred tone of the public pronouncements from said dissidents both morally and aesthetically repugnant.
***Far from representing evidence that the Administration has set out sub rosa upon a course of stealthy expropriation, creeping socialism, or outright fascism, the final outcome in the Chrysler case simply represents the triumph of bare knuckled negotiation from a position of overwhelming strength, within the settled confines of existing law and practice. The government simply did what any hedge fund driven by fiduciary duty and self interest would have done if it held the reins: it dictated the terms it wanted to see, and it told the creditors to pound sand if they didn’t like it. The creditors, on the other hand, seemed to sally forth onto the field of battle without fully considering who was supplying their reinforcements (the Treasury), where they were fighting (in the forum of public opinion, as well as the arena of commerce), and the outside chance that their primary opponent might be smarter than a bag of hammers (and therefore realize and exploit its advantages). In return, they got schooled, but good.
I see little reason to give credence to those alarmists who see the Chrysler case setting a dangerous precedent. With the admittedly substantial exception of General Motors—whose existing creditors should be busy stocking up on Vaseline, ball gags, and Motrin—I cannot fathom why the government would want to get more broadly involved in corporate restructurings. The process causes massive amounts of brain damage, absolutely nobody likes the result—with the possible exception of the lunatic fringe on the left—and it sets up the Administration for all sorts of political pain in the future. There is absolutely no upside and tons of downside, which is a situation so anathema to politicians that most of them spend their entire careers dodging difficult decisions that would land them in such soup. Obama cannot be happy about it, unless he is an idiot or a nut. I will hazard an educated guess that he is neither.
If you think that felt good, that was just the foreplay. Go read the whole thing. Also, he references O Brother, Where Art Thou?, which means that Balloon Juicers have now been subjected to two references to that film today. Can we make it to three?
At any rate, you really have to read the crap the lenders were trying to pull, straight from the pages of the notoriously LIEberal Wall Street Journal:
Many of the lenders believed the administration wouldn’t let Chrysler file for bankruptcy. “The plan was to call the government’s bluff. The game was to game the government,” said a manager of a distressed-debt fund.
***The lenders spent a week haggling over how to respond to Mr. Rattner. The big banks at first proposed the group offer to cut the debt in half and get no equity stake. That outraged some hedge funds and distressed-debt firms that didn’t face the banks’ broader concerns and that were accustomed to fighting in the trenches for their interests. The reply, sent April 20, reflected the hardening position of the hedge funds: The lenders would cut just $2.4 billion in debt, in exchange for 40% of Chrysler’s equity.
The offer landed with a thud. Rep. Peters said the lenders were seeking much more than market value for their debt, “which amounts to a taxpayer subsidy.” It was just 10 days until the government’s deadline to reach agreements with the UAW, Fiat and lenders if Chrysler was to get more government money.
They then turned down the government’s cash deal.
*** Update ***
I have no idea where I got the picture. I saw it on a livejournal somewhere a while back and saved it and completely forgot to write down where it came from, so if you are responsible or know who is, let me know so I can give the appropriate credit.
slag
OK. That picture is pure genius.
CaliMatt
obama is totally the pater familias!
J.
I’m sorry, but what has that got to do with Miss California, Carrie Prejean, losing her top but keeping her crown? Did you not see The Daily Show segment “The Pageant of the Christ” last night or Matt Lauer’s hard-hitting interview with Ms. Prejean and the Donald this morning on The TODAY Show? Clearly this is today’s big news story, or am I missing something?
Face
TLDR…Chrysler’s cars suck ass and always have.
Xenos
You can link to Todd Zywicki’s whinefest at the WSJ today, or better yet, to Scott Lemieux’s wonderment at how Obama managed to violate the rule of law while following standard creditor-in-possession Bankruptcy court brinksmanship.
El Cid
You say “lunatic fringe on the left” like it’s a bad thing. Dude, that’s where I’ve been living. I’m on that crazy, extremist fringe which has pretty much been correct about everything for the last 30 years, so, welcome to the ledge, peeps.
I’m so insane I would have been raising the CAFE standard and raising emissions restrictions for 2 generations; I wouldn’t have been giving $100K tax deductions for small businesses to buy brand new Hummers and Land Rovers (or any 6500lb+ vehicle) with; hell, I would never have even favored the SUV’s by letting manufacturers pretend they were work vehicles and gotten higher profits from lower taxes than passenger vehicles, thus subsidizing both consumers and manufacturers to prefer SUV’s.
But that’s just the sort of craaaaaazy fringe I am.
BombIranForChrist
I see that you are not a fan of Clusterstock. I was a reader of Ritholz’s The Big Picture until he started publishing long technical essays by people who start blog posts with “Good evening” instead of the more appropriate “sup, fellas”.
Anyway, so that left me without a financial blog. I heard Clusterstock was good, so I checked it out and … uh … no. It’s not good.
So I am curious. What financial blogs do you like? Any?
asiangrrlMN
@El Cid: Right there with you on the ledge, El Cid.
I liked the gist of this guy’s article, even though I didn’t much care for his tone. I will let it slide, though, since he gave such a thorough scolding to the imbeciles on Wall Street who just don’t get it. I’m just waiting for Vlad to stop by to screech about how Obama is breaking the law!!!!!!!!
Yeah, suck on it, bitches. You just got hedged by the hedge fund master! Word.
TenguPhule
Fuck him for that.
DFH were right so suck that Galt!
Comrade Stuck
Big Dan Teague: So long boys. See you in the funny papers.
demkat620
@asiangrrlMN: @El Cid:
Move over, bitches and save me a seat!
I’ve said it before and I’ll say it again;
Heads. On. Pikes. It is the only way they will learn.
John Cole
@BombIranForChrist: I like Clusterstock because I know that is where the wingnuts are getting their opinions. I read the Market Ticker with Denninger when I am thinking about digging a bomb shelter and buying a goat and generator. I like Calculated Risk because not only are the posts top-notch, but there are some really good commenters.
Montysano (All Hail Marx & Lennon)
“Nepotism!! Cronyism!! Rascalism!!”
El Cid
I don’t get too mad at it very frequently. At least now we’re sort of the ‘eccentric uncle’ lunatic fringe; back when it was all the mainstream rage to, say, get all the sober mainstream to support Uncle Ronnie’s death squads in Central America so we could keep Nicaragua’s Sandinistas et al from invading Texas, they really, really hated us.
asiangrrlMN
@demkat620: No fucking kidding. We got a prez who seems willing to flex a little muscle. How do you like me now, bitches?
P.S. As for actually liking what’s happened, um, no. It was just inevitable. Like I didn’t want W. to fail–I just knew he would.
P.P.S. A big damn right for jcricket. See, we don’t have to fucking cater to the minority party.
jcricket
Could we please repeat this sort of negotiation for everything the Democrats are trying to do? Stop backing down at the first sign of Republican resistance. Call their bluff, make them go nuclear, etc.
See how little Republicans actually end up with if, given the actual strength of the Democratic majorities and the popularity of the positions the Democrats are offering.
Anton Sirius
Actually, there are already two O Brother references in that Epicurean post: ‘bag of hammers’, and the ‘kickin’ sitcheyation’ in the link title…
robertdsc
Well, when the President himself won’t back his own pledges, what’s the point?
Cramdown, torture photos, DOMA, DADT, it’s all gone down the tubes.
demkat620
@robertdsc: I am telling myself that this is all part of Obama’s secret plan to destroy the Republican Party. Wait until they are under the bus and then hit them on the social stuff.
At least that’s what I try to tell myself.
Krista
So you’re jealous, then…
Cat Lady
@John Cole:
The commenters at Calculated Risk alerted me to the digital bank runs that happened after Lehman fell, when one of the money market funds broke the buck, in time to liquidate the family 401(k)s, when the TED spread was going craaaazy. I’m too old to have ever recovered from what ensued, and I am eternally grateful to CR.
HyperIon
@demkat620:
sounds to me like you are in denial.
Montysano
@robertdsc:
What’s it been now…… 120 days or so? Talk to me in 2 years and we’ll see what’s actually “gone down the tubes”.
If the courts compel Obama to release the torture photos, it will give him some cover. Then he can stand up and say “Sadly, I have no choice”.
Patience. The torture issue is a serious minefield and needs to be handled delicately.
robertdsc
No. Agreeing to release the photos and then doing a u-turn is completely unacceptable. It would also have been a direct smack in the face to Darth Cheney, something that fucker has needed for a long time.
An executive order barring implementation of DADT would keep for now. Legislation is pending.
As for cramdown, the President campaigned on it. He announced it as part of his plan to fight the housing crisis. But when the chips were down, the White House did nothing to save it. That gave the fuckup “centrist” Dems cover to vote against it.
LV-426
@Face:
Really not that long, give it a shot.
Full of win right there.
gwangung
@robertdsc:
Right there with you…
But it’s so disheartening that there’s been a lot that HAS gone right with Obama, that the list of all the stuff gone bad shows what kind of shape we were in under W….
Calouste
@robertdsc:
Obama realized that he doesn’t have to spend large amounts of political capital on the repeal of DOMA now, when the states are doing the work for him and the whole thing is most likely going to end up with the Supremes anyway. And even if DOMA was repealed now, that wouldn’t automatically invalidate all those statutes and constitutional amendments states have against same sex marriage. That would take quite some time as well.
kay
@robertdsc:
The capitulation on cramdown was reprehensible.
I don’t even think it makes sense, on any level. Millions are going to lose those houses, adding to inventory, and, incidentally, destroying families. They’re underwater, and they can’t pay the excess over the foreclosure value anyway. What was the point? It’s nonsensical.
Foreclosure is really profound. It’s unlike any other financial event. It ripples.
The US has this 200 year myth attached to owning property. When the bank takes a house, it’s complete chaos. That family loses the support of whatever community they have cobbled together, not to mention the kids lose a freaking school district.
They got hit so hard they can’t get back up. They’ll be down for years. It’s heart breaking to listen to them. I listen and just do a slow burn. I’ll never forget it.
Montysano (All Hail Marx & Lennon)
@robertdsc:
You’re trapped in the 24 hour news cycle mentality, trying to figure out a president who plays a longer game. Like I said: if, in a couple of years, he hasn’t made good on DADT, torture, etc, I’ll be first in line to criticize him.
Besides: why do we want to smack Darth Cheney? I want him to just keep running his mouth. Mr. 18% Approval is doing some heavy lifting for our side.
Dennis-SGMM
@LV-426:
The whole paragraph is worth quoting.
This.
Brian J
I had heard such complaints from many on the right–first through Greg Mankiw’s blog, I believe–about what the administration did. At first I was unsure of what to think, primarily because this is an area that seems simple enough but is apparently more complicated than I thought. I did wonder, however, whether the creditors were pissed that the administration did something outside the bounds of any normal negotiations, or if they were just angry that they didn’t get to sail through the process receiving everything they asked for. As time went on, it seemed like the latter.
It’s always possible that the government could abuse its power, but that doesn’t appear to be the case here. It’s nice to have what I thought was the case confirmed. Thanks for posting that.
Stooleo
Isn’t Obama going to Egypt in a week or two? I don’t think inflaming the Middle East (again) would be such a great idea while he’s doing a good will visit. Make no mistake, I want these photos and all of the other torture stuff released but if this is the reason for the delay, I’ll cut him some slack.
Comrade Stuck
Obama can’t just bar enforcement of a standing Public Law with an executive order. Only George W. Bush could do that/
I realize it sometimes is hard to separate personal feelings from the complex politics of governing, especially when you have Cheney and his nasty lipped daughter out slinging the shit, but it would seem that folks by now have learned that Obama has a way of doing things that keeps the drama down and poll numbers up.
Calouste
@Dennis-SGMM:
That’s one way of putting it. Kind of like saying that downing a bottle of vodka doesn’t make me drive safer.
srv
Greenwaldo:
He doesn’t ever seem to realize that real dems are pretty good about dancing on the heads of pins as necessary, and it is necessary. A lot of innocents are going to be getting collatoralized in Afghanistan and Pakistan in the next year or so, and there won’t be any MSM pictures of those dead babies.
Mnemosyne
@Montysano (All Hail Marx & Lennon):
Exactly. The question of whether to release the photos was kicked back to the courts after the Pentagon complained. If the court orders them released and the administration still refuses, then I’ll be upset.
Does it suck that, politically, Obama can’t do everything we want on the timetable we want? Yes. Yes it does. But that’s the position that he and we are in right now. If we’re concerned about the torture photos not being released, we’re better off sending an e-mail to the White House than curling up into the fetal position muttering, “Same as Bush, same as Bush …”
robertdsc
I get that. I’m down with that and the President very much. I just don’t want the backsliding to continue precisely because he’s already made such progress.
satby
Well, the Republicans/conservatives have been men of constant sorrow for a while now.
Martin
Didn’t we go through this about a month ago? Obama was going against his promises, blah, blah, and then Obama went ahead and did a bunch of stuff and everyone calmed down again. Last time it was Obama covering up torture, then he released the unredacted memos, that nobody though would happen, called waterboarding torture in a major press conference, and that changed the rules of the game a bit.
It seems to me that there are parties that try to speed these efforts up, generally in an attempt to make them appear less honest and more partisan – or to force the administration to commit to actions they haven’t yet had time to work out fully, so Obama puts on the brakes a bit, runs off and works to advance things behind the scenes that has real substance, and then everything resumes.
Comrade Stuck
At first I was disappointed that Obama didn’t release these photo’s now but then I read some about it and even thought a little.
What would be accomplished? We would see more of what we saw with Abu Graib, and they are supposedly less bad. Me and other dems, would again get to point at the neocons Bush/Cheney et al and feel the rush of being right.
In the meantime, it would certainly inflame the Muslim world and if one person, soldier or civilian lost their lives because of it, would it be worth it then. I say NO.
They will come out at some point, and wouldn’t it be better if in conjunction with the US actually doing something about it, say like a Commission or Special Prosecutor?
Comrade Stuck
@robertdsc:
History has shown that what seems like backsliding with Obama, is actually the first of three moves to checkmate.
valdivia
@Martin:
what you said. Obama releases torture memos all we hear is how he is out to prosecute the Republicans for weeks on end. But *that* gets erased by his blocking the release of the pictures. So now people like Sullivan are saying he is covering for Cheney. Why are people so damn schizo? One day he is god the next he is bush. A little more balance in judging the guy and seeing how the moves play out would be much better IMHO.
HyperIon
I saw a WH briefing yesterday on CSPAN and was amazed at how glib Gibbs was. He was attempting to make (IMO lame) jokes with various members of the press corps. Several times he continued to banter even after a question had been asked by someone else. I thought he came across really smug; obviously he thinks he’s one of the cool kids.
I mention this because I just read a TPM post titled Very Lame which sounds like Gibbs behavior yesterday was not a fluke.
J. Michael Neal
You people don’t seem to get that this was a negotiation where the administration held all the cards. Every single damned one of them. They were gracious enough to let the other side look at enough cards to realize they had a hand that was 10 High, but didn’t let go of them. Naturally, they won everything.
That’s not true with Congress. The administration doesn’t hold all the cards. They’re playing a bunch of different hands at once, and have better cards in some of them than in others. In none of them do they have complete dominance. There is no fucking way that their negotiations can be played the way that the Chrysler negotiations were. They realize that, because, apparently, they’re smarter than you.
JL
@Comrade Stuck: That’s what I think also. If the court orders the pictures released President Obama, will follow the law. It would be unfortunate for the republicans if they were released right before the 2010 election.
Steve V
Yeah, JC, where’d you get that pic? Classic.
Fencedude
@Comrade Stuck:
Sometimes the first step of an attack is backwards.
Edit: fencing analogy: Half a step back to bait your opponent forward, then beat and lunge!
Steve V
Sullivan thinks Obama’s changing his tune because his new general in Afghanistan is all over whatever nastiness occurred over there. That sounds plausible, and if it’s true it doesn’t really seem that the reversal on the photos would be a rope-a-dope kind of move. I think the admin is really just deciding it’s got too much on its plate right now and that the photos will come out eventually once the judicial process has played through, so why create yet another firestorm now.
I think the notion that the photos will harm the troops is probably wrong; I think it would play overseas (including in the ME) as an obvious part of a housecleaning by the new administration and that the country (including the troops) would be seen to be cleaning off the dirt from the previous admin. But they have better information than I do.
Comrade Stuck
@Fencedude:
And since Obama released the Bybee memos, Cheney demands his fav memeo’s released and the cat is out of the bag for more thrust and parry, with calls for even more memeo’s, and before you know it, a Commission is born. The curtains go up and all the rats are foiled in their tiny hearts.
HyperIon
@Steve V:
a lot of strange things (e.g., who is Trig’s mother?).
Actual proof for his position? None.
Steve V
Sure, Sullivan’s as wrong as anybody most of the time, but I figure any explanation of the reversal on the photos is welcome. It’s at least as grounded in reality as thinking that he really secretly wants to release them.
Comrade Stuck
To think that the Muslim World would view this as a noble effort by Obama to clean house is a lot naive. Maybe the leaders and a few others would. but not the Arab street.
Though it might be a stretch that this was a pre-planned rope-a-dope, at some point Obama knows the courts will decide yea or nea, and there wasn’t much political gain to be had by doing it now, except to give some in the dem base a case of heartburn. He did have a lot to lose if people died due to it, particularly if they were American troops. And Pakistan is now like a tinderbox, with no need to set it on fire needlessly, and to Obama’s fault.
Politically, he got Lindsay Graham, and some other wingnuts on the Teevee singing his praises. Meanwhile, the Supreme’s will make the decision and provide cover, one way or the other.
LD50
Yeah. That’d, uh, be a shame.
(cough)
Little Dreamer
@satby:
Not nearly long enough. I had eight years of sorrow under Bush (and every single day hurt like hell), I don’t think a hundred plus a few days is anywhere near long enough in the corner, sorry!
georgia pig
It’s easy to fall into Obama fanboyism but, if you haven’t figured it out by now, this guy has skills. Remember, Obama could have been one of those hedgies after getting out of Columbia, but he chose a different path than that chickenshit. These hedgies didn’t stand a chance against a guy who can take out Clinton and Karl Rove at the same time and was holding all the cards.
My impression is that he makes effective use of a trick — give a feint to get the first hit in the news cycle and cement the narrative, and then quietly let happen what you really intended to do all along. Usually, the morons he’s dealing with don’t understand that there rarely is a pure either/or situation and there are a million ways to skin a cat. Remember, everyone remembers the first story on page A1 and then forgets the followup on page A31 three weeks later. The first story on the Chrysler deal is that Obama “stands firm” and lets them go bankrupt. That gets all the Big Picture types singing his praises and derails the “Obama’s a socialist” nonsense. The more complicated reality is that there will still be a bailout, but that’s buried in the intricacies of bankruptcy court.
It looks like he may be doing it again on the photos. Those photos will likely come out in due time due to court action, but now Obama can claim that he’s withholding them “to protect the troops.” You may disagree, but that’s not an unreasonable position and it will be instinctively popular with a lot of people. Hell, it should be — we all want the troops to be safe. The key to this tactic is that your feint has to be reasonable and supportable — Obama’s usually is. Get used to it, you’ll be seeing it for the next eight years. Simple-minded moralizers don’t get elected and, if they do, they usually can’t get shit done (see, e.g., Carter, Jimmy). God love him, but Glenn Greenwald couldn’t get elected dogcatcher. The main thing to be concerned about with Obama is the risk that he becomes infatuated with his own moves and quits moving the ball forward. We’ll see on that one.
Joe Lisboa
History has shown that what seems like backsliding with Obama, is actually the first of three moves to checkmate.
This.
Mnemosyne
When I was agonizing over who to vote for on Super Tuesday, the deciding factor for me was the story about Obama getting ready to vote on a bill in the Senate (I think it was something controversial, like birth control). He was all ready to vote for it, but then his staff came to him and said, “You should vote against it, and here is evidence X,Y and Z to show you why.”
He ended up voting against it.
That’s why I don’t freak out whenever Obama does something I don’t like. Unlike the last guy, he seems to actually pay attention to evidence and if you can show him why he’s wrong about something, he’ll change his stance. I’d rather have that than someone who kept running off half-cocked and getting slapped down (Bill Clinton, I’m looking at you).
asiangrrlMN
@Mnemosyne: I will buy that except for with DADT. I think this is one area in which he really isn’t invested. I keep seeing it get pushed back and for those of us used to the Dems only paying lip service to equal rights for LGBT folk, this is seeming all too familiar.
LD50
If memory serves, Clinton always ran off full cocked.
(Sorry.)
Quaker in a Basement
Gopher, John?
satby
@Little Dreamer:
No, dude, it’s the “Oh Brother Where Art Thou?” reference.
jj
As someone said earlier, Obama is playing chess, not checkers.
As gratifying as it would be to see Cheney et al hauled before a grand jury and to see the banks completely eviscerated, Obama has to spend his political capital wisely.
I get the distinct feeling that once Health Care reform is through, Obama will have the freedom to let slip the dogs of war on the assholes who have it coming.
Until that day, he’s moving the ball very slowly downfield.
Dusty
Personally, I don’t think there’s anything wrong with the left agitating for what it wants and criticizing Obama when he does something it doesn’t like, especially when it violates a prior promise. That’s what citizens are supposed to do. It’s also what the media is supposed to do, so I don’t have a problem with Paul Krugman criticizing the administration’s handling of the financial situation either.
Does Obama have a secret plan to prosecute torture? Maybe, maybe not, but, if he does, part of that plan is probably to take advantage of mounting public outrage against the Bush Administration’s torture policies to “force” him to move on it, so people should keep howling away at how craven he’s being. And, if he doesn’t have a plan and is just hoping this’ll all go away, they should howl away and make him come up with one. Either way, howling is really the correct action here.
Now, I don’t think it’s time to go all Club for Growth and start finding a super-lefty candidate to run in 2012 against him, but I don’t see anything wrong with people freaking out when they think Obama’s on the wrong path.
RememberNovember
pure pwnage:
“Did you really think you were going to get government help without a government (read political) agenda? What are you smoking?”
qq moar, betches.
RememberNovember
@Fencedude:
Obama’s a ball-player, he understands sometimes you gotta pass it back to the guy on the 3 pt line for the swish.
Mnemosyne
@asiangrrlMN:
Unfortunately, you may be right. All the better reason to keep the pressure on about DADT.
The one pass I’ll give him about it is that it was a law passed by Congress and it needs to be repealed by Congress. I didn’t like it when Bush would take it on himself to declare laws invalid, so I don’t want Obama to do it either. However, he could be leaning on Congress to get them to change it and (AFAIK) he’s not.
TenguPhule
Consider who we have in charge of the majorities in Congress, then be glad they haven’t started crucification round ups of Gays in the military.
Fucking useless wankers.