Responding to Raghu below -- I don't want to exaggerate, but the auto bankruptcies will be key evidence whether the US legal system remains independent and free of government control, which is a major reason for the economic success of the US, or whether we have become a banana republic in which the court system is nothing more than instrumentality of the state, which would be a real turning point and, in my opinion, disastrous.
As expected, the Obama administration has structured plans that favor the UAW at the expense of other constituencies. In the normal bankruptcy world, the bankruptcy code provides protection for the other constituencies. At its simplest, a company cannot force a credior, any creditor, no matter what the circumstance, to take less under plan that what the creditor would receive if the company was liquidated as opposed to the plan proposed. In addition, a plan cannot be confirmed if it would "discriminate unfairly" between creditors. The proposed plans almost certainly violate these provisions. The US system normally follows the biblical injunction that "Ye shall do no unrighteousness in judgment: thou shalt not respect the person of the poor, nor honor the person of the mighty: but in righteousness shalt thou judge thy neighbor." (Lev. 19:15), and "Neither shalt thou countenance a poor man in his cause." (Exodus 23:3). Therefore, while the retired union worker may be more likable than a vulture fund that buys distressed debt, that is not a factor a judge should take into consideration. If the political system believes that retired auto workers should be bailed out, the government can bail them out. It can tax you and me and give it the retired workers. But that is not what Obama is proposing to do. He is proposing to have a select few (i.e. the other creditors) of the companies bail outthe workers. The existing law does not permit it. If the plan is rammed through notwithstanding the law, it will truly be a sad day.. David Shemano --- Original Message--- To: Progressive Economics <[email protected]> From: raghu <[email protected]> Sent: 4/30/2009 3:09PM Subject: [Pen-l] Crybaby vultures >> http://www.salon.com/tech/htww/2009/04/30/chrysler_and_the_vultures >> -----------------------------------------snip >> "I am in turmoil," says Chrysler investor Geoffrey Gwin in a Wall >> Street Journal feature story published today. According to reporter >> Serena Ng, Gwin, the "principal" of the Group G Capital hedge fund, >> "is wrestling with the knowledge that the retirement plans of some >> 80,000 Americans may rest in his hands." >> >> "At the heart of his angst," reports the Journal, "Mr. Gwin says, lies >> his own family's experience. His father, a 30-year veteran of Delta >> Air Lines, lost most of his pension and health-care benefits after the >> airline filed for bankruptcy protection in 2005." >> >> While he may swallow hard and vote to help salvage parts of the >> company, Mr. Gwin says his father's treatment makes him loath to pave >> an easy road for Chrysler. >> >> "It's very hard for me to deal with this," says the younger Mr. Gwin, >> a 41-year-old father of three. "As horrible as the situation looks for >> Chrysler's employees, I keep thinking about how horrible my own family >> felt when Delta was going to file for bankruptcy and my father's >> pension was going to take a hit. No task force or the federal >> government came to his aid then." >> >> So... in other words: No bailout for Dad, so the hell with Chrysler's >> workers. >> >> The Journal also published an overwrought "letter" from Gwin >> explaining all the anguish that the head of this "small investment >> fund" feels at his unexpected responsibility for Chrysler's future. >> >> I call bullshit. If you're looking for an example of the "speculators" >> that President Obama attacked in his speech on Chrysler today, Group G >> Capital is a prime suspect. >> >> Not once in Serena Ng's article do you hear Group G Capital described >> by its true name: It is a distressed debt hedge fund that specializes >> in swooping in on companies who are in big trouble, buying their debt >> at a discount to face value, then hoping to eke out a profit either in >> an out-of-court restructuring deal or in bankruptcy court, where >> they'll play hardball. >> >> [....] >> >> An argument can be made that, as with your run-of-the-mill carrion >> feeders, distressed debt funds fill an important ecological niche in >> the capitalist ecosystem. You can think of them as facilitators of the >> kind of "creative destruction" that keeps natural selection hopping on >> Wall Street. >> >> But now might not be the best time to make that case. Especially when >> you consider this: We don't know for sure whether one of the reasons >> why the hedge funds refused to make a deal with the government was >> that they had bought credit default swaps insuring that they would get >> a nice payoff in the event of bankruptcy. But it doesn't take a great >> leap of the imagination to think that distressed debt funds are >> exactly the breed of hedge fund sharks most likely to engage in such >> behavior. It's a perfect fit for their ultra-cutthroat business model. >> >> So spare us the sob story, Geoffrey Gwin. You're in this game to make >> money by speculating on the bonds of companies that are in big >> financial trouble. Now you've found yourself smack in the middle of a >> major political showdown between a pissed-off public and a Wall Street >> that hasn't had this little credibility since 1929. Too bad for you. >> Good luck sweet-talking the judge. >> >> >> >> >> -raghu. >> _______________________________________________ >> pen-l mailing list >> [email protected] >> https://lists.csuchico.edu/mailman/listinfo/pen-l >> _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
