The Empire Strikes Back…And This Time Darth Vader Wins

Dear Friends: The Goddess of Capitalism invites Professor Athena back for another visit to the Shrine!

Professor Athena, a sensible businesswoman and a savvy senior executive at a major financial institution, says:

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President Barack Obama’s auto task force assumed a vicious aggressive stance against creditors and bond holders of Chrysler early this spring. The rebel bankers J.P. Morgan and Chase had struck an early blow wanting to “receive what they were owed in order of priority”. Imagine such boldness, that of expecting U.S. bankruptcy law to prevail. This on March 29th, and according to an account in this morning’s Wall Street Journal article by Neil King, Jr. and Jeffrey McCracken. The authors say, “The next day the President stepped before a podium to announce that Chrysler could face a disorderly bankruptcy or even liquidation.”* This from the man dressed in black delivered in portentous tones to the rebels, not so numb as to be unable to read between the lines. In so many words, the administration was saying, “Submit to us, and we will spare your family”. Not much coercion there.

Friday the last rag-tag rebels abandoned their fight in a U.S. bankruptcy court, where a speedy Chapter 11 agreement divides the remaining money in 55% ownership between a trust for union retirees and Fiat SpA, which wasn’t even a Chrysler creditor, and no percentage of ownership at all by the senior secured lenders. As the WSJ article so aptly points out, senior secured lenders usually are paid in full before lower-ranking creditors are paid. In a heavy-handed and threatening pose using the leveraging of their light-saber sword TARP, the White House along with members of Congress who were involved beat down the rebel uprising and assured that financial firms along with banks will no longer support the corporate debt system in America. The most damaging of the quotes in the article is one attributed to “an administration official”, who said, ‘You don’t need banks and bondholders to make cars’.

Short of wondering if anyone in this administration realizes what their limos run on, there is more than meets the eye in this paradigm shift against the financial community which finances every aspect of the auto industry, from direct dealer and consumer lines to corporate equity and debentures. Who indeed will take a position in U.S. corporate long-term debt in the face of knowing that usual bankruptcy rules no longer apply? Once the government lends money, the rules change completely for equity and bond holders, who will be beaten down by the Empire. Banks who have received TARP money “must lend”, but must not have any illusion about something so basic as repayment of principle. From a larger perspective, the climate of U.S. dollar-denominated holdings by global investors takes on a newly sinister perspective. When rules which have dominated our economy since its inception and which had in the past firmly established rights of property and ownership through our court systems are abandoned in favor of an administration’s plan of “change”, what assurance indeed do foreign investors have even in the debt of the U.S. Treasury itself?

If bondholders were “nervous” before, they are more than aware the battle is on going forward. There is nothing short of an all-out armament and a “force field” protecting the embattled corporate investment environment now. Who knows when there will be job creation, given the extreme attacks by way of already-announced increases in corporate taxes and new anti-trust challenges, coupled with blockaded lending lines and long-term capital? Only if this fight ends ultimately in the defeat of Darth Vader and his Empire of liberals can we return to economic growth and prosperity in the private sector and reverse the present course of government ownership and massive growth. May the force be with you.

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MUT’s Money Quotes:

* Michelle Malkin notes that Big Labor’s investment in Obama has paid off.

* The Anchoress has a thoughtful review of the Miss California announcement made yesterday, including an indication that some of the media elites were not happy with the Donald’s decision.

* Capt. Ed of Hot Air indicates that GM is thinking of leaving Detroit, but Obama will probably not let them. Whaddaya mean there are strings on bailout and stimulus money!!!

* Speaking of bailouts, Founding Bloggers indicates that some liberal representatives have actually discovered tax breaks are helpful to businesses. However, the only corporation worthy of this treatment is….wait for it….the elite media!