Monday, March 30, 2009

Hard elbows...

There’s something of a pattern emerging in our collective quest to deal with the seeming imminent collapse of Western Civilization, a.k.a. the 2008-9 Recession.

Something happens. Something’s done about it. And then lots of people freak out.

That's not what I would have done...or...what I would have done was better...or you're not going far enough. Yadda-yadda-yadda...

Of course, it’s happening, again.

My fellow Liberals are indeed freaking out over what the President said today in regards his plan to deal with the American Auto Industry. Double standard is the term I keep hearing over and over again.

But to folks like Robert Kuttner, David Sirota (and basically all the Liberals that even I, another Liberal can’t stand), I have to ask the question…do you even read this stuff??

I hate to resort to a Basketball metaphor, but the Commander in Chief is a fan, and this one story seems particularly apt in for the occasion.

Bill Russell as a young Celtics star was, of course, talented…but also prone to having the snot beaten out of him in games because he didn’t have it in him to throw an elbow.

So one day, Red Auerbach comes up to him, and asks him to throw an elbow…but just one elbow…during a nationally televised game. He guaranteed that once you throw that one elbow, you’ll never have to throw another one again.

Russell did…and eleven championships later, the rest is history.

What we all saw today was our President delivering a nationally-television hard elbow to GM’s Bondholders, the rich bastages holding GM’s debt. Turns out they’re about the only party in this mess who has refused to sacrifice anything at the table. GM owes them a lot of money, and they want protection. They want to be first at the trough. Damn the consequences.

Well, the President just fired the CEO of GM. (He'll be fine, from what I understand he's walking away with 20 Million dollars in Retirement.)

The President also let the Boldholders know, in no uncertain terms, that GM’s plan is not complete, and that they have sixty days to fix it. So until then, no money.

Therefore, [President Obama] said, he is offering GM and Chrysler "a limited period of time to work with creditors, unions and other stakeholders to fundamentally restructure in a way that would justify an investment of additional tax dollars."

He expressed confidence that "this restructuring, as painful as it will be in the short-term, will mark not an end, but a new beginning for a great American industry."

He said he was "absolutely confident that GM can rise again, providing that it undergoes a fundamental restructuring." He stressed that the U.S. government "has no intention of running GM."

If GM is unable to restructure and Chrysler cannot strike a deal with Fiat, they might need to use the bankruptcy code "as a mechanism to help them restructure quickly and emerge stronger," Obama said. He said that could enable the companies to "quickly clear away old debts that are weighing them down," even as their workers remain on the job.

"What I am not talking about is a process where a company is simply broken up, sold off and no longer exists," he said. "And what I am not talking about is having a company stuck in court for years, unable to get out."

I wish Kuttner and Sirota would spend as much time finding out what happened, rather than flapping their gums. Their slavish devotion to Ideology-First is every bit as bad as all the Conservative scumbags we routinely bash on this site, and many others. It’s all there. They just have to keep reading. But I think in both their cases, they are more interested in cornering the market in Liberal Obama opposition than finding out what the hell is going on.

So, in summary: Obama’s message wasn’t so much to GM, but these Bondholders. You have sixty days to give up something, or face a structured Bankruptcy where you lose everything.

Their response?

“Our strong preference is to complete this restructuring out of court,” GM said in a statement issued after Obama’s speech on the U.S. auto industry. “However, GM will take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process.”

Translation? GM is ready to go Bankrupt, if necessary.

We look forward to working with the company and the task force to configure an exchange that will maximize the chances of a successful out-of-court restructuring,advisers to the committee of GM bondholders negotiating with the company to restructure the automaker’s debt said in a statement. “All parties seem to agree that an out-of-court restructuring would be the preferred path to viability.”

Translation? Whooooaaa, slow down there, cowpoke. No need to get all hostile. Let's talk!

Also, it should be mentioned that Obama said Chrysler had 30 days to cut a deal with Fiat, or get nothing.

They cut a deal a few hours later. At least it was the framework for a pact.

Hard elbows in the paint. Seems they're the way of the world.

UPDATE 4:37pm Pacific: Slate's Daniel Gross (Senior Editor at Newseek, and frequent contributor) agrees...and best of all has...umm...what do you call them again? Those things, little squiggly lines that didn't appear in the first draft of the GOP Budget Proposal?!?!?

Numbers! That's right, they're called numbers.

[GM] has loads of debt. The most recent quarterly results indicate long-term debt of more than $29 billion. And since the firm's credit ratings have been pushed deep into junk territory, that means most of the holders of this debt are hedge funds, private-equity firms, and other investment vehicles. (Many mutual funds and institutional investors like pensions or insurance companies eschew junk debt.)

GM's debt is trading at what is euphemistically called "distressed levels." As indicated here, bonds due in less than two years are trading at 20 cents on the dollar.

Many of those who bought GM's bonds did so because they hoped to 1) convert the debt into ownership in the case of bankruptcy filing or 2) see the bonds rise in value should the government step in and formally guarantee GM's corporate debt.

Obama made clear today what they suspected: No such guarantee would be forthcoming. While GM had tried to restructure, Obama noted, it hasn't yet done enough. "I'm absolutely confident that GM can rise again, providing that it undergoes a fundamental restructuring. Have they cleaned up their balance sheets, or are they still saddled with so much debt that they can't make future investments?" (If you answered this double question with a no and a yes, you're right!) The upshot: Holders of GM's debt, like other entities to whom GM has made financial commitments—dealers, the auto unions—are going to have to cut a deal, sooner rather than later, and accept less than they think they're entitled to. None of that AIG-creditor treatment for you.

It's been a busy day. Originally posted at Fort McHenry.


Jeffinseatown said...

It is amazing that Obama is held to such a different standard than that of Bush. Bush handed out TARP money without much in the way of prerequisites. People didn't care until they started seeing the money misused, which of course came during the Obama administration. So, Obama has taken the heat for the TARP structure, for not putting a cohesive plan in place, even though he didn't give out the TARP money...then when he wants to provide structure to an Auto-bailout, he is criticized...where is the logic?

admiralmpj said...

Jeff, you bring up a good point. There is no logic. There is just anger. People are angry, and what's worse they are right to be angry. But they've got to know what it is they're angry about.

The AIG bonuses are a perfect example. Again, anger...and justifiable anger. But people have been harping on the amount, when in the long view of things, it's chump change...and chump change that will eventually be paid back to the taxpayer.

What I think people should be angry about is Wall Street's attitude, which of course is the bigger problem. This incident shows that after all these months these yahoos still don't get it. The same rotten "reward something for nothing" Management techniques are still in place. Yet, instead there's story after story about the money. How much they spent, what they spent it on, and how ridiculous is all is.

In this kind of environment, logic isn't going to hold.

(S)wine said...

Banks join the ranks of Wall Street swine, as well. They know they (the majors) will not be allowed to fail, as they did in the 1930s. I am contemplating switching all my shit to a State Employees' Credit Union from Bank of America. Bastards!

the beige one said...

Andrew Leonard had a great column up yesterday starting with the premise that, yes, O and his team are quite likely aware of the seeming double standard. So, why did he be so harsh on the Big Three? Partly to draw a line, and partly to put Wall Street and the banking/insurance world on notice.

the beige one said...

Yes, I wrote "why did he be so harsh," what of it?