Obama’s Transformational Business Practices
- 10 May 2009 by Author 0 Comments
Obama’s Transformational Business Practices
By Richard Larsen
Published – Idaho State Journal, 5/10/2009
Part of Obama’s transformation of America seems to be conversion of the Executive Branch of government from a law enforcer into a Machiavellian mafia. Notorious for extending “an offer you can’t refuse,” mafias infamously force people to do things they wouldn’t normally do to achieve their ends. This week the presidents’ team did just that to Chrysler creditors.
The President had arranged a salvific “marriage” between the struggling American car maker and Fiat by executive fiat, without so much as legislative authorization. Part of the deal was to give 55% ownership to the United Auto Workers. But to make it work, current Chrysler creditors had to agree to the deal.
Most of Chrysler’s creditors agreed to the President’s terms. They also were extended “an offer they can’t refuse,” as they were recipients of TARP (Troubled Asset Relief Program) funds from the government. But about 20 creditors, bond holders, were castigated by the President for holding out. In now customary Obama fashion, he demonized the investors, and those representing them, for trying to only lose 50% of their principal, rather than 75% of it.
Said Obama, “A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout.” For being such a smart guy and a lawyer, he doesn’t seem to understand investing, creditor obligations, and the world of business very well. But apparently that doesn’t matter as he continues to transform the world of American business where contracts don’t matter. The bond (debt) holders and equity owners of Chrysler get literally pennies on the dollar, while the UAW, who had no ownership stake in the company, come out like bandits.
A group of Chrysler lenders said in a statement earlier this week that they’d been treated worse than junior creditors during the negotiation process with the White House, in violation of “long-recognized legal and business principles.” Well, folks, welcome to the transformative business world of the Obama administration, where legal contracts are subjugated to the “rights” of loyal political supporters who are “entitled” to paybacks.
The other aspect of this tragedy that is so troubling is the threats made by the White House against those Chrysler lenders who were exercising their legal rights to recover more of their principle. According to Thomas Lauria, legal counsel for the non-TARP participant lenders, he and his clients were “directly threatened by the White House and compelled to withdraw its opposition to the deal under the threat that the full force of the White House press corps would destroy its reputation if it continued to fight.” Lauria made the statements in a live radio interview on a Detroit radio show, and I saw him recount the experience again on CNBC on Wednesday.
Lauria told ABC News that his clients “are mainly fiduciaries for pension plans, college endowments, retirement plans and credit unions who invested in low yield supposedly very secure first lien debt” with Chrysler. He’s also referred to as a “big time Democratic contributor,” who would ostensibly have no other reason to make such a claim.
This shatters the notion of the press being an objective, independent reporting entity with no agenda. That the White House could threaten investors by promising that “the White House press corps would destroy [their] reputation if [they] continued to fight,” is not only shocking, but reprehensible! Has the mainstream media become such a puppet that they will simply do his bidding in destroying the reputations of anyone he asks them to? And is the White House so convinced of their control of the media that they can really make such a promise? Apparently so. If you’ve never felt you had sufficient cause to be wary of media “objectivity,” your security blanket has just been yanked away. The naked truth is laid bare for all to see.
Jim Carney of Business Insider validated Lauria’s recapitulation of the threat with testimony from two other participants. They refused to let Carney identify them, however, for they feared political repercussions as well. Gee, I wonder why? By the way, both of the participants were reported by Carney as being Obama supporters.
These mafia-like strong-arm tactics of the White House bode ill for GM investors. The precedent has been set, and the President will get his way, regardless of who he has to demonize or destroy in the process, and more political favors will be doled out at tax-payer expense. And Ford, who has been able to survive without government meddling thus far, may well become a target of the President will who will likely use any means possible to give them to the UAW as well. Welcome to the transformational business world of Obama.
Richard Larsen is President of Larsen Financial, a brokerage and financial planning firm in Pocatello, and is a graduate of Idaho State University with a BA in Political Science and History and former member of the Idaho State Journal Editorial Board. He can be reached at firstname.lastname@example.org.