So is this the end of our economy as it previously stood?

[eleison]

Originally posted by: MrMatt

Originally posted by: jpeyton

One of Chrysler's lenders, JPMorganChase, noted in court that the holders of 92 percent of the automaker's debt had agreed to the restructuring...

So greater than 9/10 of Chrysler's lenders agreed to the restructuring plan, but the OP doesn't care because...?

What I find absolutely hilarious is that Indiana (one of the 8% who didn't approve) spent $2 million in legal fees to avoid $6 million in losses. Nominate that one for FAILblog.

Because the President is ramming it down their throats.

Here's the definition of a bond:

Bonds are debt, whereas stocks are equity. This is the important distinction between the two securities. By purchasing equity (stock) an investor becomes an owner in a corporation. Ownership comes with voting rights and the right to share in any future profits. By purchasing debt (bonds) an investor becomes a creditor to the corporation (or government). The primary advantage of being a creditor is that you have a higher claim on assets than shareholders do: that is, in the case of bankruptcy, a bondholder will get paid before a shareholder. However, the bondholder does not share in the profits if a company does well - he or she is entitled only to the principal plus interest.

To sum up, there is generally less risk in owning bonds than in owning stocks, but this comes at the cost of a lower return.


So you're telling me they WILLINGLY gave up this right? All for the privilege of being paid a lower return the whole time too? b.s.

Calm down... can I assume the Obama juice is wearing away? The koolaide is starting to lose it affect? 🙂 welcome to the real world. Its not great.. However, midterm elections are coming in about a year. Get your friends together.. express your outrage by voting. In a couple years after that, you get to vote again -- maybe you wouldn't make the same mistake...

 

[First]

Originally posted by: alphatarget1

Originally posted by: TruePaige

Originally posted by: Evan
The idea that a few exceptions to this rule will discourage investment in any significant way simply because of extraordinary circumstances that happen a handful of times every 100 years, is quite inane.

You posted....exactly what I wanted to.

Tell that to the investors/nations who are dumping US long term treasuries...

Which is both not a big deal over a long period of time and not actually happening in the first place. The weak selling of 10 year notes today hardly shows otherwise either.

 

[smashp]

Originally posted by: jpeyton

One of Chrysler's lenders, JPMorganChase, noted in court that the holders of 92 percent of the automaker's debt had agreed to the restructuring...

So greater than 9/10 of Chrysler's lenders agreed to the restructuring plan, but the OP doesn't care because...?

What I find absolutely hilarious is that Indiana (one of the 8% who didn't approve) spent $2 million in legal fees to avoid $6 million in losses. Nominate that one for FAILblog.

cough *politics* cough

Just like the guber down in SC

 

[Craig234]

Originally posted by: LegendKiller
Extraordinary situations sometimes require extraordinary solutions. Plenty of bonds are still being bought and sold right now, the future of the capital markets is quite secure.

A bigger problem right now is with cases such as General Growth Properties (GGP), where collateral was allowed to be quasi-consolidated with the company, rather than kept in the securitizations as the documents, known case law, and legal structure, provide. If securitization structures were to undergo attack from unsecured creditors and potentially substantively consolidated, it could change the way the one of the biggest part of the capital markets work. However, I doubt anything will happen to alter history too drastically.

What we seem to have in the OP is the culture shock of "wait, I heard the economy had crashed, but that's only supposed to affect other people!"

 

[smashp]

Originally posted by: eleison

Originally posted by: MrMatt

Originally posted by: jpeyton

One of Chrysler's lenders, JPMorganChase, noted in court that the holders of 92 percent of the automaker's debt had agreed to the restructuring...

So greater than 9/10 of Chrysler's lenders agreed to the restructuring plan, but the OP doesn't care because...?

What I find absolutely hilarious is that Indiana (one of the 8% who didn't approve) spent $2 million in legal fees to avoid $6 million in losses. Nominate that one for FAILblog.

Because the President is ramming it down their throats.

Here's the definition of a bond:

Bonds are debt, whereas stocks are equity. This is the important distinction between the two securities. By purchasing equity (stock) an investor becomes an owner in a corporation. Ownership comes with voting rights and the right to share in any future profits. By purchasing debt (bonds) an investor becomes a creditor to the corporation (or government). The primary advantage of being a creditor is that you have a higher claim on assets than shareholders do: that is, in the case of bankruptcy, a bondholder will get paid before a shareholder. However, the bondholder does not share in the profits if a company does well - he or she is entitled only to the principal plus interest.

To sum up, there is generally less risk in owning bonds than in owning stocks, but this comes at the cost of a lower return.


So you're telling me they WILLINGLY gave up this right? All for the privilege of being paid a lower return the whole time too? b.s.

Calm down... can I assume the Obama juice is wearing away? The koolaide is starting to lose it affect? 🙂 welcome to the real world. Its not great.. However, midterm elections are coming in about a year. Get your friends together.. express your outrage by voting. In a couple years after that, you get to vote again -- maybe you wouldn't make the same mistake...

Now if only we would hear some Alternate IDEAS and SOLUTIONS to the problems we face rather that " Your F'ing it up"

 

[Veramocor]

Two important points:

Point 1: What would the liquidated value of Chrysler been? Remember if you don't give the unions anything they might not return to work. Then you have a bunch factories that are not running and a few brands that have been tarnished. What was the current best market offer for Chrysler? $0 dollars from Fiat. If it can be shown in liquidation the bond holder would make more money then they have a point but has that even been shown?

Point 2: The bond holders received actual cash. The supposed value that the unions got was 55% in a company that will likely go bankrupt again (losing 100 million a day if the companies lawyers are to be believed). 55% of 0 is 0.

If I had a choice between the cash or the 55% the unions received I'd take the cash.

 

[jpeyton]

Well this thread got thoroughly busted.

Nominate it for the P&N hall of shame?

 

[Cuda1447]

Originally posted by: jpeyton
Well this thread got thoroughly busted.

Nominate it for the P&N hall of shame?

I hardly think it got busted...

 

[zephyrprime]

Originally posted by: MrMatt

Originally posted by: jpeyton

One of Chrysler's lenders, JPMorganChase, noted in court that the holders of 92 percent of the automaker's debt had agreed to the restructuring...

So greater than 9/10 of Chrysler's lenders agreed to the restructuring plan, but the OP doesn't care because...?

What I find absolutely hilarious is that Indiana (one of the 8% who didn't approve) spent $2 million in legal fees to avoid $6 million in losses. Nominate that one for FAILblog.

Because the President is ramming it down their throats.

Here's the definition of a bond:

Bonds are debt, whereas stocks are equity. This is the important distinction between the two securities. By purchasing equity (stock) an investor becomes an owner in a corporation. Ownership comes with voting rights and the right to share in any future profits. By purchasing debt (bonds) an investor becomes a creditor to the corporation (or government). The primary advantage of being a creditor is that you have a higher claim on assets than shareholders do: that is, in the case of bankruptcy, a bondholder will get paid before a shareholder. However, the bondholder does not share in the profits if a company does well - he or she is entitled only to the principal plus interest.

To sum up, there is generally less risk in owning bonds than in owning stocks, but this comes at the cost of a lower return.


So you're telling me they WILLINGLY gave up this right? All for the privilege of being paid a lower return the whole time too? b.s.

They didn't give up any rights. The bondholders will get something and the shareholders will get nothing. Chrysler is a llc not a public company. The two shareholders of Chrysler are Daimler and Cerebus. If Chrysler were allowed to continue as it is, both Daimler and Cerebus would have been in hock for a ton of debt that Chrysler racked up. The shareholders of Chrysler went along with this deal because it actually lets them get off the hook of Chrysler's debt. The bond holders are going along with the deal because without the free money from the government, Chrysler wouldn't fetch much money in liquidation proceedings even if the bond holders retained their rights as secured creditors.

 

[smack Down]

The bond holders sure are a whiny bunch.

Get a 2.2 Billion dollar bailout and start bitch that some other group gets a larger bailout and that not fair.

 

[smashp]

Man I wish someone would have told me that the other Day was the End of the economy as it previosly stood

 

[Double Trouble]

Originally posted by: sactoking
"It was technically legal, the best kind of legal"- stolen and changed from #1.0 in Futurama

On the flip side, while technically legal it still is troubling in that an argument can be made that it effectuated a bypass of debt holders by allowing stakeholders to retain assets without fully repaying the debt holders.

Do I fault Obama, Geithner, et al? Nope, they gamed the system. Will I buy a Chrysler/Dodge/Ram? Nope, I choose not to purchase from Union-owned auto companies.

This is right on the money.

There's no way I'm buying a vehicle from a government or union owned manufacturer. The SCOTUS decided it was in accordance with the constitution, so you can't argue that what was done is unconstitutional, but they gamed the system: short term gain, long term loss.

And no, it's not going to impact how many bonds are purchased, they still serve the same purpose. It's going to impact the price of raising capital. People will still buy bonds, but they will get a higher yield to account for the additional risk of getting railroaded like the GM and Crystler bondholders were.

The argument that 90% of the other bondholders agreed to the deal means very little. If the market thinks that the other bondholders buckled under political pressure (as I do), then they will price this risk into bonds, and this will inevitably push up the price of raising capital for companies. Short term gain (saving Crystler from going under), long term loss (higher cost of raising capital, slower economy).

 

[Fingolfin269]

What I find shocking is that there are really people out there who will side with Obama (insert any other President name here as well) no matter what he does. I just can't fathom the idea of always agreeing with someone else unless it's because I'm afraid to look inside and see why it is that I must always agree. What a boring life that must be.

 

[RyanPaulShaffer]

Originally posted by: MrMatt
Why would anybody invest significant capital into the system that the U.S. has set up at this point? Laws and contracts are openly and blatantly disregarded, and NO ONE will invest capital and risk the feds changing the rules in the middle of the game as they're doing now. It's like all these ultra-liberal retards are screaming 'stick it to the fat cats..hURRRRRR" and not realizing the government is making up the rules as they go along. It's not screwing the fat-cats, it's screwing the common man in a year or two. That's why the economy isn't going to recover. The constitution is being destroyed and shat on by the retard we (well 51%) of the country elected, as the supreme court looks the other way.

Now look at Chrysler. Secured bond holders are put behind nonsecured labor unions, all for the sake of winning votes next election, and garnering political power. You can't do that...I mean you just took an investment (in this case the secured bonds) and eliminated one of the main perks of them. Paying out a union in the Chrysler bankruptcy at 83%, while secured bond-holders get 17???? Are you shitting me?

How does ANYONE consider themselves a democrat at this point? I voted democrat in every election at every level over my entire life, and ran screaming when Obama was our candidate. I thought he'd make things worse, since Bush was a fiscal liberal, and Obama was too. But I ardently said after the election that people saying Obama would ruin the country, or end up shoving us into socialism were flaming fanatics. But for the love of all things sacred, what is he doing now??? What kind of smug liberal-douche would support what this overly-pious transparent jackass is doing? For the people that support things like the Chrysler sale and how it's orchestrated...have you EVER taken an economics course in your life? Do you have even the vaguest of notions as to how our economy is supposed to run?? I'm not flame baiting here, I just can't understand how ANYONE could support this horse-shit that's going on right now.

You make some good points, but your stance would be much stronger without all of the name calling.

 

[RyanPaulShaffer]

Originally posted by: LegendKiller
Extraordinary situations sometimes require extraordinary solutions. Plenty of bonds are still being bought and sold right now, the future of the capital markets is quite secure.

A bigger problem right now is with cases such as General Growth Properties (GGP), where collateral was allowed to be quasi-consolidated with the company, rather than kept in the securitizations as the documents, known case law, and legal structure, provide. If securitization structures were to undergo attack from unsecured creditors and potentially substantively consolidated, it could change the way the one of the biggest part of the capital markets work. However, I doubt anything will happen to alter history too drastically.

You are making some pretty wild claims there, when the news is reporting otherwise:

http://www.ft.com/cms/s/0/68ca...ab7e-00144feabdc0.html

"US long-term interest rates rose to the highest level of the year on Wednesday, threatening the ?green shoots? of recovery, after the latest sale of 10-year government debt met with a tepid response from inflation-wary investors."

"The next test of the US Treasury?s issuance program looms on Thursday with the sale of $11bn in 30-year bonds. An auction of 30-year bonds last month went badly as investors signalled their concerns about the budget deficit."

That doesn't sound like "plenty of bonds are being bought and sold right now" or that the market is "quite secure".

😕

Edit: Apparently LegendKiller was referring exclusively to the corporate bond market. Still, the precedence of secured bond holders getting the shaft in the GM and Chrysler cases will definitely undermine confidence in the value of your secured bonds. To say this will not affect the corporate bond market is naive, at best.

 

[Double Trouble]

Originally posted by: RyanPaulShaffer

Originally posted by: LegendKiller
Extraordinary situations sometimes require extraordinary solutions. Plenty of bonds are still being bought and sold right now, the future of the capital markets is quite secure.

A bigger problem right now is with cases such as General Growth Properties (GGP), where collateral was allowed to be quasi-consolidated with the company, rather than kept in the securitizations as the documents, known case law, and legal structure, provide. If securitization structures were to undergo attack from unsecured creditors and potentially substantively consolidated, it could change the way the one of the biggest part of the capital markets work. However, I doubt anything will happen to alter history too drastically.

You are making some pretty wild claims there, when the news is reporting otherwise:

http://www.ft.com/cms/s/0/68ca...ab7e-00144feabdc0.html

"US long-term interest rates rose to the highest level of the year on Wednesday, threatening the ?green shoots? of recovery, after the latest sale of 10-year government debt met with a tepid response from inflation-wary investors."

"The next test of the US Treasury?s issuance program looms on Thursday with the sale of $11bn in 30-year bonds. An auction of 30-year bonds last month went badly as investors signalled their concerns about the budget deficit."

That doesn't sound like "plenty of bonds are being bought and sold right now" or that the market is "quite secure".

😕

You're talking about two different things. LK was talking about the bond market used by corporations to raise capital being secure. Indeed investors are buying and selling corporate debt. You're referring to the sale of government debt that's getting more difficult because investors see a significant risk of inflation. Those are two completely different scenarios. I think the corporate debt market will indeed go on, but the increased risk of shenanigans putting bondholders behind other creditors will push up the price of raising capital.

 

[Mani]

The few dissatisfied bondholders actually fared better than they would have in a liquidation. But hey, don't let facts get in the way of a wild rant.

 

[K1052]

Originally posted by: Mani
The few dissatisfied bondholders actually fared better than they would have in a liquidation. But hey, don't let facts get in the way of a wild rant.

Tell that to the people around here who maintain they were worth close to face value because of the valuable collateral they represented. It's insane but some people actually believe that.

 

[RyanPaulShaffer]

Originally posted by: Double Trouble

Originally posted by: RyanPaulShaffer

Originally posted by: LegendKiller
Extraordinary situations sometimes require extraordinary solutions. Plenty of bonds are still being bought and sold right now, the future of the capital markets is quite secure.

A bigger problem right now is with cases such as General Growth Properties (GGP), where collateral was allowed to be quasi-consolidated with the company, rather than kept in the securitizations as the documents, known case law, and legal structure, provide. If securitization structures were to undergo attack from unsecured creditors and potentially substantively consolidated, it could change the way the one of the biggest part of the capital markets work. However, I doubt anything will happen to alter history too drastically.

You are making some pretty wild claims there, when the news is reporting otherwise:

http://www.ft.com/cms/s/0/68ca...ab7e-00144feabdc0.html

"US long-term interest rates rose to the highest level of the year on Wednesday, threatening the ?green shoots? of recovery, after the latest sale of 10-year government debt met with a tepid response from inflation-wary investors."

"The next test of the US Treasury?s issuance program looms on Thursday with the sale of $11bn in 30-year bonds. An auction of 30-year bonds last month went badly as investors signalled their concerns about the budget deficit."

That doesn't sound like "plenty of bonds are being bought and sold right now" or that the market is "quite secure".

😕

You're talking about two different things. LK was talking about the bond market used by corporations to raise capital being secure. Indeed investors are buying and selling corporate debt. You're referring to the sale of government debt that's getting more difficult because investors see a significant risk of inflation. Those are two completely different scenarios. I think the corporate debt market will indeed go on, but the increased risk of shenanigans putting bondholders behind other creditors will push up the price of raising capital.

Gotcha. My bad. I will add an edit to my post.

Still, the precedence set in the whole GM and Chrysler bankruptcy fiasco is horrible. To say that it will not undermine confidence in the guarantee of your secured bond is naive (referring to LegendKiller's post).

 

[Mani]

Originally posted by: MrMatt

Originally posted by: Skitzer

Originally posted by: Phokus

and NO ONE will invest capital and risk the feds changing the rules in the middle of the game as they're doing now

yeah i wouldn't bet on that, sparky.

True ......... there's a sucker born every minute

This is true actually. The thing is, now that this precedent has been set, what kind of damage does it do to the bond market though?

Won't do anything.

 

[SammyJr]

Originally posted by: eleison

Originally posted by: MrMatt

Originally posted by: jpeyton

One of Chrysler's lenders, JPMorganChase, noted in court that the holders of 92 percent of the automaker's debt had agreed to the restructuring...

So greater than 9/10 of Chrysler's lenders agreed to the restructuring plan, but the OP doesn't care because...?

What I find absolutely hilarious is that Indiana (one of the 8% who didn't approve) spent $2 million in legal fees to avoid $6 million in losses. Nominate that one for FAILblog.

Because the President is ramming it down their throats.

Here's the definition of a bond:

Bonds are debt, whereas stocks are equity. This is the important distinction between the two securities. By purchasing equity (stock) an investor becomes an owner in a corporation. Ownership comes with voting rights and the right to share in any future profits. By purchasing debt (bonds) an investor becomes a creditor to the corporation (or government). The primary advantage of being a creditor is that you have a higher claim on assets than shareholders do: that is, in the case of bankruptcy, a bondholder will get paid before a shareholder. However, the bondholder does not share in the profits if a company does well - he or she is entitled only to the principal plus interest.

To sum up, there is generally less risk in owning bonds than in owning stocks, but this comes at the cost of a lower return.


So you're telling me they WILLINGLY gave up this right? All for the privilege of being paid a lower return the whole time too? b.s.

Calm down... can I assume the Obama juice is wearing away? The koolaide is starting to lose it affect? 🙂 welcome to the real world. Its not great.. However, midterm elections are coming in about a year. Get your friends together.. express your outrage by voting. In a couple years after that, you get to vote again -- maybe you wouldn't make the same mistake...

Voting Palin would be a bigger mistake.

 

[LegendKiller]

Originally posted by: RyanPaulShaffer

Originally posted by: LegendKiller
Extraordinary situations sometimes require extraordinary solutions. Plenty of bonds are still being bought and sold right now, the future of the capital markets is quite secure.

A bigger problem right now is with cases such as General Growth Properties (GGP), where collateral was allowed to be quasi-consolidated with the company, rather than kept in the securitizations as the documents, known case law, and legal structure, provide. If securitization structures were to undergo attack from unsecured creditors and potentially substantively consolidated, it could change the way the one of the biggest part of the capital markets work. However, I doubt anything will happen to alter history too drastically.

You are making some pretty wild claims there, when the news is reporting otherwise:

http://www.ft.com/cms/s/0/68ca...ab7e-00144feabdc0.html

"US long-term interest rates rose to the highest level of the year on Wednesday, threatening the ?green shoots? of recovery, after the latest sale of 10-year government debt met with a tepid response from inflation-wary investors."

"The next test of the US Treasury?s issuance program looms on Thursday with the sale of $11bn in 30-year bonds. An auction of 30-year bonds last month went badly as investors signalled their concerns about the budget deficit."

That doesn't sound like "plenty of bonds are being bought and sold right now" or that the market is "quite secure".

😕

Edit: Apparently LegendKiller was referring exclusively to the corporate bond market. Still, the precedence of secured bond holders getting the shaft in the GM and Chrysler cases will definitely undermine confidence in the value of your secured bonds. To say this will not affect the corporate bond market is naive, at best.

Corporate bond rates haven't increased because of this, which would be a direct reflection of perceived risk. I think, by and large, people acknowledge that this was an extraordinary situation that required extraordinary solutions.

 

[BoberFett]

Originally posted by: LegendKiller
Corporate bond rates haven't increased because of this, which would be a direct reflection of perceived risk. I think, by and large, people acknowledge that this was an extraordinary situation that required extraordinary solutions.

I wouldn't expect an across the board increase. I would expect it to be directly related to the perceived risk based on the volatility of the particular company which was issuing the bonds. In an industry looking ripe for government intervention I would expect a lot higher rate than one in a rather innocuous industry.

 

[Craig234]

Originally posted by: Fingolfin269
What I find shocking is that there are really people out there who will side with Obama (insert any other President name here as well) no matter what he does. I just can't fathom the idea of always agreeing with someone else unless it's because I'm afraid to look inside and see why it is that I must always agree. What a boring life that must be.

The real issue is the right - how blindly loyal some were to some of the worst public figures we've seen in a long time. Terrible like Reagan/Bush 41 and 43/Cheney/Gingrich, but really sucmmy ones too like Tom DeLay and James Inhoefe. Tom DeLay puts tinpot tyrants in banana reublics to shame, but had the support to become the 'hammer' in the House.

That's the problem; the people yo describe are mythical, AT posters who give unconditional support to Obama right or wrong. In fact this came up recently where I pointed out similar statements about many members were wrong, and only one poster was suggested as fitting the description. I disagree that even that one poster fits it, but evenif he did, that's one poster.

So, you appear to have a misguided understanding of the posters here both on the left AND on the right in that youdon't see how you are better describing thr right here.

 

[LegendKiller]

Originally posted by: BoberFett

Originally posted by: LegendKiller
Corporate bond rates haven't increased because of this, which would be a direct reflection of perceived risk. I think, by and large, people acknowledge that this was an extraordinary situation that required extraordinary solutions.

I wouldn't expect an across the board increase. I would expect it to be directly related to the perceived risk based on the volatility of the particular company which was issuing the bonds. In an industry looking ripe for government intervention I would expect a lot higher rate than one in a rather innocuous industry.

Theoretically you could be correct, I haven't looked into specific bond issues. However, as I previously said, I think everybody realizes what was going on and what the possible outcomes were. In hindsight the current solution might not have been the best but it is what we took and it certainly wasn't the worst solution.

This doesn't change the whole landscape of the economy or the capital markets. Saying that is very rash, alarmist, and overly broad.