Obama worse than Kissinger?

[chequita guevara]

The government has an overriding interest, due to its involvement.

No, the government has an overriding interest in ensuring the continuation of the system. During certain periods, it is in the interest of the entire capitalist class that some parts of the capitalist class get screwed or thrown under a bus, in order to save the rest.

This is one of those periods.

[KrazyHorse]

The government has an overriding interest, due to its involvement.

It can take it all for itself, or if it so chooses (politics!), it can decide to pay off a lower priority debtor instead of a higher priority debtor.

Once more, the government could just take complete control itself. And not pay off anyone.

JM

You're back into "the government can do whatever it wants" mode. Of course.

The point is WHETHER OR NOT THAT IS A GOOD IDEA.
And as I've demonstrated, it's NOT a good idea.

By the way, Chrysler has debt outstanding MULTIPLE TIMES bigger than the size of the government's loan to Chrysler.

Your justification is thus akin to one where as soon as the government lends a company 1$ it's allowed to repudiate 10$ of senior debt in favour of junior debt. Sure, it can do it. It is STUPID to do so, however.

[Ben Kenobi]

The issue is that old debt (union contracts, for example) are being favoured over new debt (secured!)

No, the issue is that the old debt (secured contracts), is being disfavoured over new debt (union contracts).

The old debt is the capital used to get the show up and running. This can be either newer or older then the union contracts. The only difference is that the old debt has been borrowed. It's as if I took money from Che and used it to run my business. Che has first dibs on the return of his money, because I wouldn't be able to hire people or get my business set up without that money.

Unions, on the other had are like a barnacle. They only appear, once the business is up and running, and they increase the costs of the operation of the business. They have exactly 0 dollars invested in the company, unless they run a pension plan whereby a certain percentage is invested in the stock of the company.

WRT to the union contracts, the business has made a promise to honour them and to reward workers with benefits that extend through their working life and retirement. This is money that has to come from somewhere else, either through borrowing, or through profit earned from customers.

Che, the unions have to take this loss and allow their contract to be broken. No ifs ands or buts, unless they want all their money pillaged by the investors as they buy out Chrysler, and are liable for all the debts of the investors.

[KrazyHorse]

Honestly, your justifications for doing this so far are childish so far, Jon.

Repeating over and over again that the government can do whatever it wants is retarded. Governments should do things which are good for the general welfare. This doesn't even pass the smell test.

[Jon Miller]

Often corporations need a SECOND chance. Thus the legal behavior here is well defined and new debt > old debt.

Very very rarely, corporations have a FOURTH chance. Those that blow this chance (and we all saw it coming with Chrysler) then have a unique position. The government has already stepped in, now it has to decide things. There isn't some set and legal way that things are set up, like new debt > old debt.

The government decides things based on politics, rather then based on some other concern (even the government being payed back). In this case, the politics means that one group (which just happens to have the precidence of old debt) is getting paid before 'new' debt (which came before government involvement).

Question, how much of the government bailout is being returned to the government with this Chrysler thing?

JM

[Jon Miller]

By the way, Chrysler has debt outstanding MULTIPLE TIMES bigger than the size of the government's loan to Chrysler.

If old debt was many times greater than new debt, should old debt get payed before new debt?

Giving standard operating procedure (no government bailout/etc).

JM

[Ben Kenobi]

The government has an overriding interest, due to its involvement.

The government has an interest, but their interest does not supercede that of the investors who helped build Chrysler in the first place. Did the government build Chrysler up from scratch and take the risk of total failure? No.

It can take it all for itself.

There are plenty of options.

1, which is by far the best, is to do nothing, allow Chrysler to enter bankruptcy, watch the termination of the union contracts. Chrysler opens up again in 6 months, the workers are back to work and the plants are in a profitable operation.

2. The government nationalises Chrysler outright. It can seize all the assets without compensation. The government is now responsible for the outstanding contracts, including the union contracts and debts, while the business operates at a loss.

This makes for a massive loss every year until Chrysler gets righted.

or:

3. The government buys out Chrysler, paying off the entire outstanding debts of the creditors, and keeps the union contracts. This is by far the most expensive.

The problem is that Obama cannot legally seize the assets, without controlling interest. They can break the law, but the longterm consequences would be disastrous.

The government cannot uphold the union contracts while failing to pay the investors their due. That is just not an option.

[Jon Miller]

This is also including a rewrite of the contracts with the unions/etc. In effect, some of this move up in priority for the union is due to the contract being rewritten to be worse for them.

JM

[Jon Miller]

It is standard legal procedure that when things enter arbitration that previous legal contracts/etc get voided.

I don't see why it is a serious problem in this case.

JM

[KrazyHorse]

Jon, you obviously are STILL HAVING TROUBLE UNDERSTANDING THIS.

Chrysler got a second (or third, or nth chance, whatever you want to call it) with the current secured debt.

Then the government stepped in and gave in an n+1 chance which it wouldn't have had otherwise (except possibly by going through bankruptcy).

The people who gave Chrysler their nth chance are WORSE OFF than if the government hadn't stepped in at all!

The NEXT GUY isn't going to give a company like Chrysler an nth chance. He's going to withhold funding at the rates that Chrysler paid BECAUSE HE'S AFRAID HE'LL END UP LIKE THIS SET OF SUCKERS.

This is a bad idea because it'll drive MORE COMPANIES INTO BANKRUPTCY, absent additional bailouts.



Honestly, this is the most retarded thing this new administration has done. Previously the loss was isolated to whatever money the government put into these ****holes of companies. NOW the loss can be transmitted across the entire ****ing economy as everybody else watches the **** going down and starts withholding money from any company which shows even a hint of a problem. That's PRECISELY what we don't want (what we're just getting over, actually).

[Ben Kenobi]

Often corporations need a SECOND chance.

Why? Businesses fail all the time and the government doesn't bail them out.

Thus the legal behavior here is well defined and new debt > old debt.

Umm, that would mean the union contracts would be dissolved in favour of the investors who invested over the last 20 years.

Very very rarely, corporations have a FOURTH chance. Those that blow this chance (and we all saw it coming with Chrysler) then have a unique position.

Chrystler should fail, that is the only option. Go into bankruptcy and come back out of it.

The government has already stepped in, now it has to decide things.

Not without controlling interest. The other shareholders have far more say as to the outcome. The shareholders are calling for bankruptcy.

There isn't some set and legal way that things are set up, like new debt > old debt.

Yes, there is. It's called bankruptcy, Jon. It's what insolvent companies go through all the time.

The government decides things based on politics, rather then based on some other concern (even the government being payed back).

The government doesn't get to make the decisions unless they have a majority of the board. This is not true for Chrysler.

In this case, the politics means that one group (which just happens to have the precidence of old debt) is getting paid before 'new' debt (which came before government involvement).

Again, they cannot do so.

Question, how much of the government bailout is being returned to the government with this Chrysler thing?

In bankruptcy they receive nothing. Now you see why people were opposed to pissing money down a hole?

[KrazyHorse]

It is standard legal procedure that when things enter arbitration that previous legal contracts/etc get voided.

I don't see why it is a serious problem in this case.

JM

Jon, it's standard legal procedure, of course. And it's standard legal procedure that SOME DEBTS ARE MORE HIGHLY FAVOURED THAN OTHERS.

What the **** are you smoking, dude? We've been discussing this for 2 ****ing hours.

The government is tearing up the rulebook by which all previous bankruptcy cases have been decided and handing over the keys to the union. The union contracts were legally STRICTLY JUNIOR to the secured debt. This means that the secured debtholders were supposed to collect 100% of their money before the union got a ****ing dime. Instead, the union just acquired a 55% stake in Chrysler and the bondholders are taking massive hits on the face value of their debt.

That's invalidating private contract BEYOND WHAT IT WAS SUPPOSED TO BE IN CASE OF BANKRUPTCY.

[Ben Kenobi]

It is standard legal procedure that when things enter arbitration that previous legal contracts/etc get voided.

That includes the union contracts Jon.

The secured loan contracts that are already made with Chrysler explicitly say that the creditors get first dibs in bankruptcy of whatever assets remain. This is why the creditors are pushing for bankruptcy to push for the recovery of the assets.

Once all the creditors have been paid, then comes the unsecured debt, such as the union contracts and the employees. You'd agree with me that it's more important that the workers get paid for their work, then Chrysler to pay those who have stopped working? Union contracts are the very last, after payroll.

[Drake Tungsten]

What the **** are you smoking, dude? We've been discussing this for 2 ****ing hours.

I'm glad I stopped. I was actually somewhat productive in the last few hours.

[KrazyHorse]

So have I been. I've been overseeing a review session, preparing my notes to talk (starting in like 5 minutes) and posting on Poly all at the same time