The White House denied the threats, but Business Insider subsequently reported that "sources familiar with the matter say that other firms felt they were threatened as well. None of the sources would agree to speak except on the condition of anonymity, citing fear of political repercussions."
"The sources, who represent creditors to Chrysler," continued the Insider story, "say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler. One person described the administration as the most shocking 'end justifies the means' group they have ever encountered. . . . Both were voters for Obama in the last election."
The idea of the White House--with the IRS and SEC at its disposal--threatening investment firms should have sent off alarm bells in America's newsrooms. Inexcusably, the media establishment largely ignored the hardball tactics. This is the same media that has doggedly reported on President Bush's U.S. attorney firings and the post-9/11 interrogations of terrorist suspects.
Nevertheless, the administration's bullying tactics reverberated through the investment world. Cliff Asness, a managing partner at AQR Capital Management, wrote in a memo that "Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power."
On May 8, Obama's tactics got their desired result. After two more institutions, OppenheimerFunds and Stairway Capital, withdrew under political duress, the remaining debtholders dropped their opposition.
"Chrysler's non-TARP lenders concluded they just don't have the critical mass to withstand the enormous pressure and machinery of the U.S. government,"
lawyer Lauria said.
The Obama administration's scorched-earth tactics have won the UAW its prize, but at what cost?
"When the rules are changed in the middle of the game, the degree of risk changes, burning lenders who relied on the old rules," says bankruptcy expert Michael E. Levine at the NYU School of Law. "If this were a one-time game, you could just decide who you want to burn. The problem emerges when you ask suppliers of capital to step up for the next round."
The administration's drop-dead message to investors will complicate Chrysler's challenge to survive under new Italian and UAW ownership.
Henry Payne is a writer and editorial cartoonist for The Detroit News, and Richard Burr is associate editor of the editorial page for The News.
|
