Chrysler bondholders

One of my friends sent me an email on this subject.

President Obama is angry with the bond holders of Chrysler:

http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-on-the-Auto-Industry/

This paragraph explains the reason for his anger:

While many stakeholders made sacrifices and worked constructively, I have to tell you some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none. Some demanded twice the return that other lenders were getting. I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don't stand with those who held out when everybody else is making sacrifices. And that's why I'm supporting Chrysler's plans to use our bankruptcy laws to clear away its remaining obligations so the company can get back on its feet and onto a path of success.

On 5/1/09 Frank Beckmann of Detroit radio station WJR interviewed Tom Lauria, bankruptcy attorney at White & Case, who represents a group of lenders that object to the Chrysler sale:

http://www.760wjr.com/Article.asp?id=1301727&spid=6525

Excerpts from this interview follow:

Lauria: ... they bought a contract that says that they get paid before anyone else does by Chrysler. And they have been told by the government who is in complete control of Chrysler, oddly enough, that despite their contractual right, they do not get paid before everyone else...So they are standing on their rights, standing on the law, trying to defend in effect what is the Constitution of the United States, to make sure that they get what they’re entitled to for their investors...

Lauria: ....I can tell you for sure that I represent one less investor today than I represented yesterday. One of my clients was directly threatened by the White House, and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight. That’s how hard it is to stand on this side of the fence. ....

If the White House is willing to trample the constitution during a bond restructuring negotiation what will be next?

An important lesson to be learned from this situation is that if you disagree with this White House your reputation will be destroyed.