The Needs of the Many Outweigh the Needs of the Few

[wwswimming]

almost.

what he said was,
"A top Obama administration lawyer urged the Supreme Court on Monday to allow Chrysler's bankruptcy to proceed, noting that the needs of the economy outweigh the needs of the deal's detractors.

U.S. Solicitor General Elena Kagan filed a request that the court deny an appeal by Indiana pension funds that had invested in Chrysler and say they will lose $6 million because of the bankruptcy."

http://money.cnn.com/2009/06/0...postversion=2009060812

i admit, it's not a major news item.

but, being a Trekkie, i noticed the Trek influence. :sun:

 

[K1052]

He must not have seen Star Trek 3

 

[theeedude]

This one I disagree with Obama on. The needs of many also include access to credit, and if you trample on creditors rights, it will increase risk premium and rates for borrowing going forward, which will make it harder for other companies to get credit to grow themselves in the broader economy, in turn hurting the needs of many. Most obvious victim would be Ford, since if the government and courts don't uphold creditor's rights for Chrysler and GM's lenders, Ford's creditors will demand a higher interest rate to lend money to Ford due to this additional risk of government interference.

 

[dphantom]

Originally posted by: senseamp
This one I disagree with Obama on. The needs of many also include access to credit, and if you trample on creditors rights, it will increase risk premium and rates for borrowing going forward, which will make it harder for other companies to get credit to grow themselves in the broader economy, in turn hurting the needs of many. Most obvious victim would be Ford, since if the government and courts don't uphold creditor's rights for Chrysler and GM's lenders, Ford's creditors will demand a higher interest rate to lend money to Ford due to this additional risk of government interference.

This also is my major disagreement with how Obama is handling this. It appears the Federal Government is overriding the senior lenders in favor of junior and this "could" have very serious repercussions down the road.

It bears close scrutiny how this all shakes out and how the credit markets react long-term.

My guess is rates will go up and credit will become increasingly expensive making any recovery even longer.

 

[heyheybooboo]

[/quote]

The Indiana pension funds bought their $42.5 million in debt in July 2008 for 43 cents on the dollar.

[/quote]

So, effectively, they are getting $.6744+ on the dollar for their 'investment'.

 

[halik]

Originally posted by: senseamp
This one I disagree with Obama on. The needs of many also include access to credit, and if you trample on creditors rights, it will increase risk premium and rates for borrowing going forward, which will make it harder for other companies to get credit to grow themselves in the broader economy, in turn hurting the needs of many. Most obvious victim would be Ford, since if the government and courts don't uphold creditor's rights for Chrysler and GM's lenders, Ford's creditors will demand a higher interest rate to lend money to Ford due to this additional risk of government interference.

THIS

I can't believe people don't understand the point - if you change secured bonds into "secured until obama decides otherwise" bonds, cost of capital via debt will skyrocket.

The reason why secured debt is cheap is because it is secured. Since you get collateral in case of default, you don't need anywhere as much compensation as a lender.

Think about it - what kind of interest rate would your bank charge you on your car loan if Obama says they can't repo your car if you default.

 

[smack Down]

Originally posted by: senseamp
This one I disagree with Obama on. The needs of many also include access to credit, and if you trample on creditors rights, it will increase risk premium and rates for borrowing going forward, which will make it harder for other companies to get credit to grow themselves in the broader economy, in turn hurting the needs of many. Most obvious victim would be Ford, since if the government and courts don't uphold creditor's rights for Chrysler and GM's lenders, Ford's creditors will demand a higher interest rate to lend money to Ford due to this additional risk of government interference.

That is a nice theory and all, except for its total detachment from reality. Notice that just about all the lenders agreed to accept the government's hand out and not a single one proposed a different approach?

 

[smack Down]

Originally posted by: halik

Originally posted by: senseamp
This one I disagree with Obama on. The needs of many also include access to credit, and if you trample on creditors rights, it will increase risk premium and rates for borrowing going forward, which will make it harder for other companies to get credit to grow themselves in the broader economy, in turn hurting the needs of many. Most obvious victim would be Ford, since if the government and courts don't uphold creditor's rights for Chrysler and GM's lenders, Ford's creditors will demand a higher interest rate to lend money to Ford due to this additional risk of government interference.

THIS

I can't believe people don't understand the point - if you change secured bonds into "secured until obama decides otherwise" bonds, cost of capital via debt will skyrocket.

The reason why secured debt is cheap is because it is secured. Since you get collateral in case of default, you don't need anywhere as much compensation as a lender.

Think about it - what kind of interest rate would your bank charge you on your car loan if Obama says they can't repo your car if you default.

Except that Obama let them repo the "car" and even gave them 2.2 Billion to sell the car which the lenders have accepted and no one has found anyone willing to pay more then the 2.2 billion that Obama is giving the lenders.

 

[UberNeuman]

I didn't know Charles Dickens wrote for Star Trek....

 

[OCGuy]

Amen, comrade!

 

[halik]

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: senseamp
This one I disagree with Obama on. The needs of many also include access to credit, and if you trample on creditors rights, it will increase risk premium and rates for borrowing going forward, which will make it harder for other companies to get credit to grow themselves in the broader economy, in turn hurting the needs of many. Most obvious victim would be Ford, since if the government and courts don't uphold creditor's rights for Chrysler and GM's lenders, Ford's creditors will demand a higher interest rate to lend money to Ford due to this additional risk of government interference.

THIS

I can't believe people don't understand the point - if you change secured bonds into "secured until obama decides otherwise" bonds, cost of capital via debt will skyrocket.

The reason why secured debt is cheap is because it is secured. Since you get collateral in case of default, you don't need anywhere as much compensation as a lender.

Think about it - what kind of interest rate would your bank charge you on your car loan if Obama says they can't repo your car if you default.

Except that Obama let them repo the "car" and even gave them 2.2 Billion to sell the car which the lenders have accepted and no one has found anyone willing to pay more then the 2.2 billion that Obama is giving the lenders.

If the secured creditors though they couldn't get more than what Obama offered, we wouldn't be having this conversation. They have an economic incentive to get the best deal possible and that obviously wasn't the 27c/dollar Obama offered.

Why do you insist on arguing that the gov't has a better idea of what the assets are worth than the people with money at risk?

 

[smack Down]

Originally posted by: halik

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: senseamp
This one I disagree with Obama on. The needs of many also include access to credit, and if you trample on creditors rights, it will increase risk premium and rates for borrowing going forward, which will make it harder for other companies to get credit to grow themselves in the broader economy, in turn hurting the needs of many. Most obvious victim would be Ford, since if the government and courts don't uphold creditor's rights for Chrysler and GM's lenders, Ford's creditors will demand a higher interest rate to lend money to Ford due to this additional risk of government interference.

THIS

I can't believe people don't understand the point - if you change secured bonds into "secured until obama decides otherwise" bonds, cost of capital via debt will skyrocket.

The reason why secured debt is cheap is because it is secured. Since you get collateral in case of default, you don't need anywhere as much compensation as a lender.

Think about it - what kind of interest rate would your bank charge you on your car loan if Obama says they can't repo your car if you default.

Except that Obama let them repo the "car" and even gave them 2.2 Billion to sell the car which the lenders have accepted and no one has found anyone willing to pay more then the 2.2 billion that Obama is giving the lenders.

If the secured creditors though they couldn't get more than what Obama offered, we wouldn't be having this conversation. They have an economic incentive to get the best deal possible and that obviously wasn't the 27c/dollar Obama offered.

99% of the bond owners have accepted the 27c/dollar.

Why do you insist on arguing that the gov't has a better idea of what the assets are worth than the people with money at risk?

Two reason, the people with money at risk are the same fools who lent money to Chrysler in the first place. The only remain person trying to stop sale is the Indiana Treasurer you know part of that evil goverment.

 

[halik]

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: senseamp
This one I disagree with Obama on. The needs of many also include access to credit, and if you trample on creditors rights, it will increase risk premium and rates for borrowing going forward, which will make it harder for other companies to get credit to grow themselves in the broader economy, in turn hurting the needs of many. Most obvious victim would be Ford, since if the government and courts don't uphold creditor's rights for Chrysler and GM's lenders, Ford's creditors will demand a higher interest rate to lend money to Ford due to this additional risk of government interference.

THIS

I can't believe people don't understand the point - if you change secured bonds into "secured until obama decides otherwise" bonds, cost of capital via debt will skyrocket.

The reason why secured debt is cheap is because it is secured. Since you get collateral in case of default, you don't need anywhere as much compensation as a lender.

Think about it - what kind of interest rate would your bank charge you on your car loan if Obama says they can't repo your car if you default.

Except that Obama let them repo the "car" and even gave them 2.2 Billion to sell the car which the lenders have accepted and no one has found anyone willing to pay more then the 2.2 billion that Obama is giving the lenders.

If the secured creditors though they couldn't get more than what Obama offered, we wouldn't be having this conversation. They have an economic incentive to get the best deal possible and that obviously wasn't the 27c/dollar Obama offered.

99% of the bond owners have accepted the 27c/dollar.

Why do you insist on arguing that the gov't has a better idea of what the assets are worth than the people with money at risk?

Two reason, the people with money at risk are the same fools who lent money to Chrysler in the first place. The only remain person trying to stop sale is the Indiana Treasurer you know part of that evil goverment.

6.6 out of the 6.9bil of bond holders were TARP banks, which means the gov't had significant negotiating power over them. I'm sure Bawney Fwank would unleash a shitstorm if they actively tried to resist the cramdown.

On your second point, people lent that money assuming that EVEN IF CHRYSLER GOES UNDER, THEY'LL GET THE COLLATERAL. Even as a shitty company, if you have assets that are worth $X, I'm willing to lend you money up to $X if you agree that if you stop paying I get those assets. If you look at your value at risk, at most you lose the expected yield, bulk of the principal (read: more than 27c/dollar) is safe.

 

[cwjerome]

Originally posted by: UberNeuman
I didn't know Charles Dickens wrote for Star Trek....

More like John Stuart Mill.

 

[smack Down]

Originally posted by: halik

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: senseamp
This one I disagree with Obama on. The needs of many also include access to credit, and if you trample on creditors rights, it will increase risk premium and rates for borrowing going forward, which will make it harder for other companies to get credit to grow themselves in the broader economy, in turn hurting the needs of many. Most obvious victim would be Ford, since if the government and courts don't uphold creditor's rights for Chrysler and GM's lenders, Ford's creditors will demand a higher interest rate to lend money to Ford due to this additional risk of government interference.

THIS

I can't believe people don't understand the point - if you change secured bonds into "secured until obama decides otherwise" bonds, cost of capital via debt will skyrocket.

The reason why secured debt is cheap is because it is secured. Since you get collateral in case of default, you don't need anywhere as much compensation as a lender.

Think about it - what kind of interest rate would your bank charge you on your car loan if Obama says they can't repo your car if you default.

Except that Obama let them repo the "car" and even gave them 2.2 Billion to sell the car which the lenders have accepted and no one has found anyone willing to pay more then the 2.2 billion that Obama is giving the lenders.

If the secured creditors though they couldn't get more than what Obama offered, we wouldn't be having this conversation. They have an economic incentive to get the best deal possible and that obviously wasn't the 27c/dollar Obama offered.

99% of the bond owners have accepted the 27c/dollar.

Why do you insist on arguing that the gov't has a better idea of what the assets are worth than the people with money at risk?

Two reason, the people with money at risk are the same fools who lent money to Chrysler in the first place. The only remain person trying to stop sale is the Indiana Treasurer you know part of that evil goverment.

6.6 out of the 6.9bil of bond holders were TARP banks, which means the gov't had significant negotiating power over them. I'm sure Bawney Fwank would unleash a shitstorm if they actively tried to resist the cramdown.

On your second point, people lent that money assuming that EVEN IF CHRYSLER GOES UNDER, THEY'LL GET THE COLLATERAL. Even as a shitty company, if you have assets that are worth $X, I'm willing to lend you money up to $X if you agree that if you stop paying I get those assets. If you look at your value at risk, at most you lose the expected yield, bulk of the principal (read: more than 27c/dollar) is safe.

Right I forgot there is a vast left wing conspiracy to make banks loose money.

Who says the collateral is worth X, a bunch of self serving speculators not a one of which is will to put a dime on the line and take over Chrysler's assets.

 

[halik]

Originally posted by: smack Down

Right I forgot there is a vast left wing conspiracy to make banks loose money.

Who says the collateral is worth X, a bunch of self serving speculators not a one of which is will to put a dime on the line and take over Chrysler's assets.

...wat?



They already put money on the line, now they're trying to collect it. Speculators or not, they're legally entitled to to those assets.

The fact that the other secured debt holders (tarp banks) conceded to the government due to various pressures is in no way relevant here and it doesn't not make their clam any less valid.

To use the previous analogy, it's akin to obama saying that instead of repoing the car when you default, you can only take back the wheels and couple of the doors.

 

[smack Down]

Originally posted by: halik

Originally posted by: smack Down

Right I forgot there is a vast left wing conspiracy to make banks loose money.

Who says the collateral is worth X, a bunch of self serving speculators not a one of which is will to put a dime on the line and take over Chrysler's assets.

...wat?

They already put money on the line, now they're trying to collect it. Speculators or not, they're legally entitled to to those assets.

Yeah, and they are getting the processed from the sale of the those assets.

What is the alternative that you think should happen instead of selling the assets to Fiat? Do you expect the assets fairy to plop down a factory under the speculators pillow?

 

[halik]

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: smack Down

Right I forgot there is a vast left wing conspiracy to make banks loose money.

Who says the collateral is worth X, a bunch of self serving speculators not a one of which is will to put a dime on the line and take over Chrysler's assets.

...wat?

They already put money on the line, now they're trying to collect it. Speculators or not, they're legally entitled to to those assets.

Yeah, and they are getting the processed from the sale of the those assets.

What is the alternative that you think should happen instead of selling the assets to Fiat? Do you expect the assets fairy to plop down a factory under the speculators pillow?

What is the point you're trying to make?

 

[smack Down]

Originally posted by: halik

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: smack Down

Right I forgot there is a vast left wing conspiracy to make banks loose money.

Who says the collateral is worth X, a bunch of self serving speculators not a one of which is will to put a dime on the line and take over Chrysler's assets.

...wat?

They already put money on the line, now they're trying to collect it. Speculators or not, they're legally entitled to to those assets.

Yeah, and they are getting the processed from the sale of the those assets.

What is the alternative that you think should happen instead of selling the assets to Fiat? Do you expect the assets fairy to plop down a factory under the speculators pillow?

What is the point you're trying to make?

Lets make it simple for you.

If you object to the sale of the assets to Fiat what should happen to them? And explain why .05% of the control of the assets should veto the wish of the remaining 99.95%

 

[halik]

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: smack Down

Right I forgot there is a vast left wing conspiracy to make banks loose money.

Who says the collateral is worth X, a bunch of self serving speculators not a one of which is will to put a dime on the line and take over Chrysler's assets.

...wat?

They already put money on the line, now they're trying to collect it. Speculators or not, they're legally entitled to to those assets.

Yeah, and they are getting the processed from the sale of the those assets.

What is the alternative that you think should happen instead of selling the assets to Fiat? Do you expect the assets fairy to plop down a factory under the speculators pillow?

What is the point you're trying to make?

Lets make it simple for you.

If you object to the sale of the assets to Fiat what should happen to them?

I object handing assets over to junior creditors/other entities at the cost of secured creditors. In all reality at that point they're not yours to give (assuming chrysler stopped servicing debt/busted covenants etc.)

These people have the first crack at the assets, so you *can't* jump over them as if nothing happened. Either pay them enough to they will accept the offer or those assets aren't yours anymore.

When you start messing around with the rules that determine RISK in capital markets, it will fuck up many, many things. For example Fords secured debt has taken a hit, because all the people holding it right now are thinking "well shit, is this debt actually secured or not". Yields go through the roof and next time Ford wants to do an issue they'll have to pay through their ass.

 

[smack Down]

Originally posted by: halik

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: smack Down

Right I forgot there is a vast left wing conspiracy to make banks loose money.

Who says the collateral is worth X, a bunch of self serving speculators not a one of which is will to put a dime on the line and take over Chrysler's assets.

...wat?

They already put money on the line, now they're trying to collect it. Speculators or not, they're legally entitled to to those assets.

Yeah, and they are getting the processed from the sale of the those assets.

What is the alternative that you think should happen instead of selling the assets to Fiat? Do you expect the assets fairy to plop down a factory under the speculators pillow?

What is the point you're trying to make?

Lets make it simple for you.

If you object to the sale of the assets to Fiat what should happen to them?

I object handing assets over to junior creditors/other entities at the cost of secured creditors. In all reality at that point they're not yours to give (assuming chrysler stopped servicing debt/busted covenants etc.)

These people have the first crack at the assets, so you *can't* jump over them as if nothing happened. Once you have that taken care of, then you can start handing out equity and assets to other parties.

They did have first crack at them. They could have submitted a bid to take control of Chrysler but they passed. New Chrysler is free to enter into any contract it wants, the bond holders have zero claim to New Chrysler.

If you object to the sale of the assets to Fiat what should happen to them? And explain why .05% of the control of the assets should veto the wish of the remaining 99.95%

 

[halik]

Originally posted by: smack Down

They did have first crack at them. They could have submitted a bid to take control of Chrysler but they passed. New Chrysler is free to enter into any contract it wants, the bond holders have zero claim to New Chrysler.

If you object to the sale of the assets to Fiat what should happen to them? And explain why .05% of the control of the assets should veto the wish of the remaining 99.95%

First crack in BANKRUPTCY.... are you sure you know what you're talking about? If there is a new Chrysler, it is after the secured bondholders are paid. That's how it works.

Second, the fact that 99.95% of creditors agreed to something still doesn't give you the right to sell something that is not yours. That is why it's going in front of the supreme court.


But here's what should've happened (and I suspect will happen): instead of using populist bullshit ("everyone is making a sacrifice blah blah") just buy out the remaining debt holders. Those entities have legal claims to those assets, so just offer a fair equity swap or just buy them out.

 

[smack Down]

.

 

[smack Down]

Originally posted by: halik

Originally posted by: smack Down

They did have first crack at them. They could have submitted a bid to take control of Chrysler but they passed. New Chrysler is free to enter into any contract it wants, the bond holders have zero claim to New Chrysler.

If you object to the sale of the assets to Fiat what should happen to them? And explain why .05% of the control of the assets should veto the wish of the remaining 99.95%

First crack in BANKRUPTCY.... are you sure you know what you're talking about? If there is a new Chrysler, it is after the secured bondholders are paid. That's how it works.

Second, the fact that 99.95% of creditors agreed to something still doesn't give you the right to sell something that is not yours. That is why it's going in front of the supreme court.


But here's what should've happened (and I suspect will happen): instead of using populist bullshit ("everyone is making a sacrifice blah blah") just buy out the remaining debt holders. Those entities have legal claims to those assets, so just offer a fair equity swap or just buy them out.

So you finally say what you want to happen.

Bailout the speculators. No way in hell should they get even more tax dollars because they made a bad investment. The bonds are only secured by the assets which where placed up for auction and only one bid was entered. If you or any bond holder doesn't like the result then they should have entered a higher bid.

 

[halik]

Originally posted by: smack Down

Originally posted by: halik

Originally posted by: smack Down

They did have first crack at them. They could have submitted a bid to take control of Chrysler but they passed. New Chrysler is free to enter into any contract it wants, the bond holders have zero claim to New Chrysler.

If you object to the sale of the assets to Fiat what should happen to them? And explain why .05% of the control of the assets should veto the wish of the remaining 99.95%

First crack in BANKRUPTCY.... are you sure you know what you're talking about? If there is a new Chrysler, it is after the secured bondholders are paid. That's how it works.

Second, the fact that 99.95% of creditors agreed to something still doesn't give you the right to sell something that is not yours. That is why it's going in front of the supreme court.


But here's what should've happened (and I suspect will happen): instead of using populist bullshit ("everyone is making a sacrifice blah blah") just buy out the remaining debt holders. Those entities have legal claims to those assets, so just offer a fair equity swap or just buy them out.

So you finally say what you want to happen.

Bailout the speculators. o way in hell should they get even more tax dollars because they made a Nbad investment. The bonds are only secured by the assets which where placed up for auction and only one bid was entered. If you or any bond holder doesn't like the result then they should have entered a higher bid.

/FACEPALM

Of all the bailouts here, these "speculators" here are the only ones with LEGAL right to those assets. You're bailing out chrysler and uaw and to some extent fed. gov't itself (the retirement liability would end up there), but the people you call speculators are the only ones that BY LAW have a claim on that money.

Obama screwing them over is why you consider that "bad investment". Otherwise they get paid out during ch7.

There was no auction, there were no bids and you have no idea what secured debt it.