Pulled this from Boortz:
THOSE DISGUSTING ANTI-AMERICAN SECURED CREDITORS
Neal Boortz @ May 4, 2009 8:29 AM
You've read, no doubt, about the Chrysler bankruptcy. Have you read, though, of how Obama used his power as president to demonize and browbeat some of the people to whom Chrysler owed money? I've been saying for years that despotic politicians depend on the ignorance of the American people to work their schemes and protect their positions of privilege and power. The behind the scenes goings-on are a brilliant case in point.
Now I'm not trying to insult anyone here, but permit me to couch this bit in terms that the victims (though they aren't aware of their victimhood) of our government education system can grasp. Getting down to basics is necessary for as many people as possible to understand how our anti-capitalist president has possibly turned business lending on its ear. If you think I'm stating the case wrongly here you're welcome to chime in with a comment. (You do see the "comments" link, don't you?) (note from Joyce: go to www.boortz.com to comment, I took it out here)
There are two kinds of people in the world: People who divide the people in this world into two types, and those who don't. There are also two types of loans. You have secured loans, and unsecured loans. The terms under which you borrow or lend the money will depend on large part whether the loan is secured or unsecured. The difference: With a secured loan the borrower has put up something of value that he owns as security to ensure his payment. If he doesn't pay, the lender can perfect his security interest on that item of value. The most common examples would be real estate loans and car loans. You put up either the car or your house as security for the loan, and if you don't pay the lender sends out some huge tattooed menace to repossess your car or a pot bellied Sheriff with aviator sunglasses to foreclose on your home.
If you put up nothing but your good reputation and credit history as security for the loan, well that would make your loan unsecured. Good reputations and credit histories tend to be worthless when economic times get rough.
When you're lending other people's money and you owe those people a duty to do everything you can to make sure the loan is paid back, with interest. In many cases the lender is actually a corporation and the corporate officers loaning the corporate money have a responsibility to corporate shareholders to keep their investments safe.
Loans, like talk show hosts, have a pecking order. (I'm one of the smaller peckers out there). When a borrower goes Tango Uniform the lenders line up to get their money out of the carcass ... usually through a bankruptcy procedure. The secured lenders go first. The unsecured creditors go last. This is as it should be. What good is getting security for your loan if you know that when you get to a liquidation of your borrower through bankruptcy you're going to have to wait until some unsecured lenders get made whole. Let's expand this a bit. Let's say a corporation or business comes to you for a loan. It doesn't matter for what: Maybe they want to expand, add jobs, develop a new product. Doesn't matter. They want money; you have money ... and you're trying to make a deal. You, the lender, have a responsibility to your shareholders, so you're going to insist on security for the loan. No security - no loan. You're also going to want to know that in the event of a meltdown you loan is going to be given priority over all of the unsecured loans your borrow may have. Without that assurance you're not likely to make the loan.
OK .. why all of these basics? That would be because they all come into play in this Chrysler bankruptcy. The two warring parties here were bondholders and unions. Chrysler owes money to bondholders. Those loans are secured. Chrysler also owns money to union pension funds. Those obligations are not secured. Enter, politics. Unions are a lot more important to a Democrat president than are bondholders. After all, bondholders are mere investors ... and they are more likely to be wealthy than the retired union members. That, of course, makes them evil.
So ... this appears to be how the Chrysler bankruptcy is going to shake out. The union pension funds are going to get priority over the bondholders. In other words, unsecured creditors will get preference over secured lenders. Cats and dogs sleeping together. Not only will the unsecured union pension plans get priority, Obama and his minions did no small amount of demonizing the secured lenders in the process.
Some of the secured lenders - those not under the thumb of the Obama administration because they took TARP funds - balked at Obama's plan. They were secured Chrysler lenders, and secured lenders they wished to remain. Obama demagogued these secured lenders by saying "I stand with Chrysler's employees and their families and communities" and not "those who held out when everybody else is making sacrifices." So there you go. If you want to enforce your security interest - if you want your money back -- you're against Chrysler's employees and families. Everyone else is making sacrifices and you don't want to. Hey ... wait a minute here. Are we forgetting that these people have obligations to their shareholders?
OppenheimerFunds is one of those secured creditors. They issued a statement saying "Our holdings in secured Chrysler debt are entitled to priority in long-established U.S. Bankruptcy law, and we are obligated to our fund shareholders to support agreements that respect these laws." How do you go to your shareholders and tell them that you've just flushed a bunch of their money down the crapper because you wanted to stand by Chrysler's families and communities? Other liberals also have a name for the secured creditors. They call them "vultures." You'll also hear the word "greedy" Obama called them "speculators," a word that doesn't carry a positive image with the dumb masses. That's Obama for you. Investors are evil. They're "speculators!" They're greedy because they want their loans repaid. Only in the anti-capitalist mind of a liberal moonbat would you hear such asinine language.
Yesterday afternoon we got news that the Obama White House threatened to destroy the reputation of a particular investment bank if they didn't cave in and go along with Obama's bankruptcy plan for Chrysler. How? By calling them traitors and vultures? That's been done already.
OK ... so what's going to happen now? Two things:
First: Some of Chrysler's secured creditors are going to object to the Obama-negotiated bankruptcy plan. They will fulfill their obligation to their shareholders, as they should, and try to get the favored treatment from the bankruptcy court usually reserved for secured creditors; and for standing by the rule-of-law they will be called every but Children of God. The anti-capitalist crowd will use these creditor hold-outs to demonize the financial sector in general and to promote the cause of even more government control.
Second: Lenders are going to be very careful in their lending decisions. What lender, for instance, will want to buy any bonds in any company that might end up a protectorate of the federal government? Who would want to loan that company any money? You want security for your loan, and you don't want political hacks demagoguing you if you actually try to foreclose on your security interest. Under this standard businesses - especially businesses in a wee bit of trouble - are going to have a rougher time getting needed financing.
Here's a scenario from you. A manufacturing concern is in trouble. If they don't get some financial help to make it through a rough spot they're going to tank, and about 2000 workers are going to lose their jobs. The manufacturing company goes to an investment bank and seeks a loan. As security for the loan the manufacturing company offers a lien on its buildings, corporate aircraft and manufacturing equipment. The lender, though, says no. The company is in trouble and there is a possibility that the loan might not be repaid. Under the new Obama scenario the government might step in and prevent the lender from foreclosing on its security interest in land, buildings and equipment. The government might decide that all of the company's assets should be sold in bankruptcy and the funds dedicated to the unsecured pension obligations to the 2000 workers. Result? Since the normal rules about secured and unsecured credit don't really apply any more, the lender declines the loan. We'll be in a situation where the best way for a company to get a loan is to prove to the lender that they don't need the money. This will all work out well for Obama, of course, because if the ailing company can't get the private sector financing ... where is there to go? Why, to the government, of course!
OK ... a bit wordy. But you need to know just how having a dedicated anti-capitalist in office works. Good for those who love government. For those who don't ... not so good.
Back to Joyce: So this is our President, yet again breaking the law. He does not have the power to change bankruptcy law.
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