Some Lenders Object, Why Not Others?

20 Chrysler lenders or about 30% of the debt Chrysler owes lending institutions are objecting to getting fleeced in the governments planned “surgical bankruptcy” plan. In a normal bankruptcy the senior secured creditors (the lenders) are first in line, while unsecured lenders (UAW) and equity holders are last. This is the basis for the lenders’ complaint:

Creditors object to the way the restructuring benefits the United Auto Workers union, which is an unsecured creditor, for the $10.6bn Chrysler owes to its retiree healthcare fund.

“What’s happening is the senior secured creditors are going to get 29 cents on the dollar and the unsecured creditors are going to get $10bn,” said Mr Lauria.

Now I think the obvious unasked question is, if the lenders are getting such a raw deal, why are only these institution objecting? what about the other lenders making up 70% of the loans? Your indirect answer is present toward the last half of the article.

Chrysler’s four main banks – JPMorgan Chase, Goldman Sachs, Morgan Stanley and Citigroup – had received about $90bn in government bail-out [TARP] cash.

Now we see why these banks are going along with losing all this money. They are scared of the government’s wraith. After Congress almost retroactively changed their contracts with AIG, and Attorney Generals outright threatened AIG executives physical well being, these TARP banks realize that the government is NOT bound by following the rules of law and can punish them for not acting in the government’s best political interest, namely, making sure the UAW is placated.

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2 Responses to “Some Lenders Object, Why Not Others?”

  1. on 04 May 2009 at 10:57 am DonS

    Wow. We are moving deeper into fascism.

  2. on 04 May 2009 at 1:40 pm Keith_Indy

    Fascism or plain ol’ Chicago style politics…

    ie, you scratch my back, and I’ll scratch your’s, otherwise, I’ll bend you over and you’ll like it.

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