I couldn't fill it out. This morning confirmed what I have been feeling for a while now, that I'm no longer a Democrat. Today, I'm an independent. Reading this, and amen to Michael Collins for putting this up, all I can say is that the failure to pass is really a shame. The argument has been that you can't change a business contract, that there is the rule of law. And for the most part, they are right. But I also know that deals can change if conditions do.
The Democrats knew this was a dead deal. If they really wanted to pass this, they could have. I'm sorry, but I fail to see how they could not. This was one of those "make us look good" bills for the Democrats. They know that certain conservative party members, without any arm twisting the other way, would vote against this. Honestly, did the Senate leadership really attempt to lobby with their dissident members? My suspicions think they did nothing. Durbin was probably told "yeah go ahead, it sounds great" but then behind his back they snickered. Frankly, a lot of these peope, both parties, are bought and paid for.
But we really need to have a serious discussion about homeownership and the things that entail such. We know there was fraud, hell I was almost part of such an operation back in '05! The banks don't want to own these homes. A lot of folks purchased homes that many KNEW they could NOT afford but felt entitled to own that big house. We had an industry pumping out messages that led to that entitlement, I mean how many of you have seen those mortage commercials or those late-night infomercials with Carlton Sheets? This was a perverse version of pump and dumb on a biblical scale! A lote of these people who are facing foreclosure who, despite how many cramdowns or financial assistances, must realize that if they can't afford it they will lose it. But for those that can, the best we can do is help them keep that home. For those that lose out, well we really need to help them up with rental assistance and dammit we need to do something...something about affordable housing!
First off, its too late to offset with a Credit Default Swap at this point if they haven't done so already. These "rebels" actually do have two valid points:
1) Legally, these creditors should be higher up on the claims list in recovering what they can. What the government offered and what they can, by law claim, the spread is enormous. The government offered about 33 cents on the dollar knowing that in a normal bankruptcy, these folks would probably end up with more than that (this assumes asset sales). Estimates I heard was between 45 cents to 90 cents on the dollar.
2) Many of the firms aren't hedge funds, but vechicles for pension funds. They may be mandated by the bylaws of their charters to pursue the maximum amount in recovery. The managers of these firms could face lawsuit because they could be seen as violating their fiduciary responsibility.
You as a bondholder, by law, have higher priority than many others. In the case of an automaker, your senior debt would be higher than the liabilities from a labor agreement. I can see the anger, but the President should not be bashing bond holders. They are simply going by what the law tells them what they're rights are.
Ok, now that I've gotten this out of the way. Let me tell you where they may have made a big mistake, a la the "gamble." For starters, most of the creditors have already agreed to the government's terms. It wasn't all the bondholders that said no, indeed it was over half (as of this morning, some have been reversing course). The banks will not object, they probably where the first to offset with a CDS. Hedge funds and pension fund managers worth their salt probably did the same. Lastly, many of these firms will simply write this off as a tax loss.
The judge has a lot of leeway here. But, like I said, these debt holders are senior in claims. But the judge can say "yes but over half of the creditors are willing to take a shave." The judge needs to preside over an orderly chapter 11 procedure, which is the payment of creditors while keeping the going business concern. If he sees that meeting the bondholders to their maximum recoverable levels would require liquidating assets beyond the critical point that keeps the company alive, he may take a different route.
Now these confederates could go and push to the hilt and essentially drive Chrysler to Chapter 7, complete liquidation, but then they would run into political risks. This is not normal times. We are in an era where government is taking a more active hand, to say the least. A year ago, we had two seperate banking industries (commercial and investment), today we have the government owning half of a unified financial industry. Who is to say, given political pressure, that the government doesn't take steps to do to these institutional investors what they did to the banks?
Trust me, the last thing they want, is Uncle Sam finding a way to be part owner or dictate their pay. But if liquidation comes to Chrysler, it raises the odds that we could see the same for GM. How? If the courts agree with these bond holders, then those holding GM debt will have presidence. At this point, Washington is going to have to face a stark reality...that these pension funds and hedge funds could spark the anhilation of an industry. Ok, that's a bit drastic, because we would still have Ford (and whatever domestic start up automakers are left like Tesla). Now this site showed a map what would happen if we lost GM and Chysler. This would be a political nightmare and would move to stop this. Many would demand some kind of retaliation against those who helped liquidate these companies.
Wall Street knows this, which is why you didn't see a uniform vote on the this issue. They don't want to see a "retaliatory move" by the government. Which is why I them sabotaging these confederate investors.
Does a creditor care very much about credit quality if they have an insurance policy for default? Does it totally change the valuation of risk? For creditors w/CDS it becomes totally a matter of counterparty risk. Credit/default risk is gone.
How does this effect future corporate defaults/bankruptcies? Are we going to see more companies forced into bankruptcies because of CDS?
That would make a most interesting view point. Just how many of these banks were making huge money by not only doing predatory, inflated lending, but then placing bets on those very loans defaulting?
Nice rigged game and the only loser is the homeowner.
I'm still hesitant in spite of all of the oligarch lobbying simply because I know Dorgan's voting record so well. Why the hell did he vote against it and it's not due to lobbyists, I'm positive.
just a matter of principle or show and how many have CDS positions? Because if they have CDS positions they definitely would've been pushing for bankruptcy.
I heard complaints about how the government stepped in as political payback to the UAW for protecting their pensions and health care.
The whine was how most Americans do not have pensions, have jack shit on retirement, how worthless 401ks, etc.
I am thinking, yes that is true but does that justify screwing even more workers out of their retirement?
Uh, UAW you can't have retirement because the rest of America is screwed on retirement?
I think those hedge funds placed bets the company would be liquidated....just like the corporate raiders in the 1980s and so on...and they are pissed because much less return on their money.
I say screw 'em and that entire practice of swooping in and buying debt etc. in hopes the company goes bankrupt and thus these private equity/hedge funds can pressure for liquidation because they are secured creditors should be stoppped, period.
How many smaller companies, manufacturing, capital intensive companies has this practice destroyed?
We are talking exceptional circumstances. I am not a bankruptcy expert but if Chrysler was allowed to go into bankruptcy without some of these pre-arrangements then pension fund and VEBA obligations would be treated as unsecured creditors and basically get nothing. So tens of thousands of employees and retirees would be w/out health care and probably pensions.
Investor class is whining about favoritism. Sure, President Obama was not going turn his back on UAW. He can't afford to but this also a decision that eliminates or possibly postpones another severe shock to the economy - massive layoffs and hundreds of thousands of people w/out health care benefits.
Investor class can absorb the losses through our tax code and probably hedged their losses w/CDS. Workers don't have such options.
But how far can they do that? After all, if they end up printing enough money to cause massive inflation, then the banks are going to be beset with the mother of all bankruns also.
At some point, the whole system is going to break down.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
and the reason is Dorgan is well known to be a strong middle class advocate, legislator. Tester ain't bad either.
I just read through the amendment and I did see a clause which stated bankruptcy judges could reduce the principle to 31% of a person's income, as calculated at the time of bankruptcy.
Unless I am mistaken, this could give someone a house basically for free, while in bankruptcy.
I'm not saying this for sure yet, I need to see the objections of Dorgan, Tester for I know Dorgan especially is not one of our "bought and paid for" finance corporate representatives and Tester is not either. I also need to read the actual amendment more. I found it here.
Seriously we might have one of those devil in details going on.
Not saying this is bad, I have believed for some time, they need to let people out of those bad mortgages, refinance them and due to the housing bubble crash, also reduce principle in hardship, especially those second mortgages...
but I want to know more first.
But in terms of rage, hey, you go, I'm all for Populist outrage on EP! ;)
Is extremely middle class friendly which makes me believe there is more to this story than meets the eye. Same with Tester.
It could be it was some ruse to once again give some special interest group special favors or something. I couldn't find the actual amendment for further analysis. Link in thomas.gov went to a bad link.
The system is de facto insolvent, including the FDIC which itself relies on funding via the treasury. The TARP funds have covered the insolvency. However, we've been told that the purpose of TARP was to recapitalize the system and add new liquidity to the ossified/frozen credit markets. The fact is, really, the system is insolvent.
The FDIC will never be insolvent as Congress will ALWAYS vote to re-fund it, even if all they can do is print money to do so.
They will understand that they have no other choice: Were a single FDIC claim to go unpaid, every single bank in the world would instantaneously be beset by the mother of all bankruns, and life as we know it would be over. And that would not bode well for their re-election hopes.
Here's a quote from Harlan Fisk Stone of the US Supreme Court, 1934. Sound familiar?
“I venture to assert that when the history of the financial era which has just drawn to a close comes to be written, most of the mistakes and its major faults will be ascribed to the failure to observe the fiduciary principle, the precept as old as holy writ, that ‘a man cannot serve two masters’ . . . the development of the corporate structure so as to vest in small groups control over the resources of great numbers of small and uninformed investors, make imperative a fresh and active devotion to that principle if the modern world of business is to perform its proper function. Yet, those who serve nominally as trustees, but relieved, by clever legal devices, from the obligation to protect those who interests they purport to represent . . . [and] consider only last the interests of those whose funds they command, suggest how far we have ignored the necessary implications of that principle.”
These corrupt bastards are bereft of morality and conscience. Every right in bankruptcy court afforded to those wealthy enough to own 2nd,3rd and tertiary properties has been denied to those who have only one residence.
Dick Durbin should be applauded for standing out in the crowd and calling the nays out:
As for these assholes, they should be ashamed of themselves.
I couldn't fill it out. This morning confirmed what I have been feeling for a while now, that I'm no longer a Democrat. Today, I'm an independent. Reading this, and amen to Michael Collins for putting this up, all I can say is that the failure to pass is really a shame. The argument has been that you can't change a business contract, that there is the rule of law. And for the most part, they are right. But I also know that deals can change if conditions do.
The Democrats knew this was a dead deal. If they really wanted to pass this, they could have. I'm sorry, but I fail to see how they could not. This was one of those "make us look good" bills for the Democrats. They know that certain conservative party members, without any arm twisting the other way, would vote against this. Honestly, did the Senate leadership really attempt to lobby with their dissident members? My suspicions think they did nothing. Durbin was probably told "yeah go ahead, it sounds great" but then behind his back they snickered. Frankly, a lot of these peope, both parties, are bought and paid for.
But we really need to have a serious discussion about homeownership and the things that entail such. We know there was fraud, hell I was almost part of such an operation back in '05! The banks don't want to own these homes. A lot of folks purchased homes that many KNEW they could NOT afford but felt entitled to own that big house. We had an industry pumping out messages that led to that entitlement, I mean how many of you have seen those mortage commercials or those late-night infomercials with Carlton Sheets? This was a perverse version of pump and dumb on a biblical scale! A lote of these people who are facing foreclosure who, despite how many cramdowns or financial assistances, must realize that if they can't afford it they will lose it. But for those that can, the best we can do is help them keep that home. For those that lose out, well we really need to help them up with rental assistance and dammit we need to do something...something about affordable housing!
First off, its too late to offset with a Credit Default Swap at this point if they haven't done so already. These "rebels" actually do have two valid points:
1) Legally, these creditors should be higher up on the claims list in recovering what they can. What the government offered and what they can, by law claim, the spread is enormous. The government offered about 33 cents on the dollar knowing that in a normal bankruptcy, these folks would probably end up with more than that (this assumes asset sales). Estimates I heard was between 45 cents to 90 cents on the dollar.
2) Many of the firms aren't hedge funds, but vechicles for pension funds. They may be mandated by the bylaws of their charters to pursue the maximum amount in recovery. The managers of these firms could face lawsuit because they could be seen as violating their fiduciary responsibility.
You as a bondholder, by law, have higher priority than many others. In the case of an automaker, your senior debt would be higher than the liabilities from a labor agreement. I can see the anger, but the President should not be bashing bond holders. They are simply going by what the law tells them what they're rights are.
Ok, now that I've gotten this out of the way. Let me tell you where they may have made a big mistake, a la the "gamble." For starters, most of the creditors have already agreed to the government's terms. It wasn't all the bondholders that said no, indeed it was over half (as of this morning, some have been reversing course). The banks will not object, they probably where the first to offset with a CDS. Hedge funds and pension fund managers worth their salt probably did the same. Lastly, many of these firms will simply write this off as a tax loss.
The judge has a lot of leeway here. But, like I said, these debt holders are senior in claims. But the judge can say "yes but over half of the creditors are willing to take a shave." The judge needs to preside over an orderly chapter 11 procedure, which is the payment of creditors while keeping the going business concern. If he sees that meeting the bondholders to their maximum recoverable levels would require liquidating assets beyond the critical point that keeps the company alive, he may take a different route.
Now these confederates could go and push to the hilt and essentially drive Chrysler to Chapter 7, complete liquidation, but then they would run into political risks. This is not normal times. We are in an era where government is taking a more active hand, to say the least. A year ago, we had two seperate banking industries (commercial and investment), today we have the government owning half of a unified financial industry. Who is to say, given political pressure, that the government doesn't take steps to do to these institutional investors what they did to the banks?
Trust me, the last thing they want, is Uncle Sam finding a way to be part owner or dictate their pay. But if liquidation comes to Chrysler, it raises the odds that we could see the same for GM. How? If the courts agree with these bond holders, then those holding GM debt will have presidence. At this point, Washington is going to have to face a stark reality...that these pension funds and hedge funds could spark the anhilation of an industry. Ok, that's a bit drastic, because we would still have Ford (and whatever domestic start up automakers are left like Tesla). Now this site showed a map what would happen if we lost GM and Chysler. This would be a political nightmare and would move to stop this. Many would demand some kind of retaliation against those who helped liquidate these companies.
Wall Street knows this, which is why you didn't see a uniform vote on the this issue. They don't want to see a "retaliatory move" by the government. Which is why I them sabotaging these confederate investors.
Does a creditor care very much about credit quality if they have an insurance policy for default? Does it totally change the valuation of risk? For creditors w/CDS it becomes totally a matter of counterparty risk. Credit/default risk is gone.
How does this effect future corporate defaults/bankruptcies? Are we going to see more companies forced into bankruptcies because of CDS?
That would make a most interesting view point. Just how many of these banks were making huge money by not only doing predatory, inflated lending, but then placing bets on those very loans defaulting?
Nice rigged game and the only loser is the homeowner.
number. I don't thinks so - a lot of time and effort went into drafting and negotiating this amendment.
James Kwak agrees with you.
I'm still hesitant in spite of all of the oligarch lobbying simply because I know Dorgan's voting record so well. Why the hell did he vote against it and it's not due to lobbyists, I'm positive.
just a matter of principle or show and how many have CDS positions? Because if they have CDS positions they definitely would've been pushing for bankruptcy.
I heard complaints about how the government stepped in as political payback to the UAW for protecting their pensions and health care.
The whine was how most Americans do not have pensions, have jack shit on retirement, how worthless 401ks, etc.
I am thinking, yes that is true but does that justify screwing even more workers out of their retirement?
Uh, UAW you can't have retirement because the rest of America is screwed on retirement?
I think those hedge funds placed bets the company would be liquidated....just like the corporate raiders in the 1980s and so on...and they are pissed because much less return on their money.
I say screw 'em and that entire practice of swooping in and buying debt etc. in hopes the company goes bankrupt and thus these private equity/hedge funds can pressure for liquidation because they are secured creditors should be stoppped, period.
How many smaller companies, manufacturing, capital intensive companies has this practice destroyed?
We are talking exceptional circumstances. I am not a bankruptcy expert but if Chrysler was allowed to go into bankruptcy without some of these pre-arrangements then pension fund and VEBA obligations would be treated as unsecured creditors and basically get nothing. So tens of thousands of employees and retirees would be w/out health care and probably pensions.
Investor class is whining about favoritism. Sure, President Obama was not going turn his back on UAW. He can't afford to but this also a decision that eliminates or possibly postpones another severe shock to the economy - massive layoffs and hundreds of thousands of people w/out health care benefits.
Investor class can absorb the losses through our tax code and probably hedged their losses w/CDS. Workers don't have such options.
It's the Theology that leads to these votes. Protestant Sola Scriptura Individualism- as applied to homeowner foreclosures.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
But how far can they do that? After all, if they end up printing enough money to cause massive inflation, then the banks are going to be beset with the mother of all bankruns also.
At some point, the whole system is going to break down.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
and the reason is Dorgan is well known to be a strong middle class advocate, legislator. Tester ain't bad either.
I just read through the amendment and I did see a clause which stated bankruptcy judges could reduce the principle to 31% of a person's income, as calculated at the time of bankruptcy.
Unless I am mistaken, this could give someone a house basically for free, while in bankruptcy.
I'm not saying this for sure yet, I need to see the objections of Dorgan, Tester for I know Dorgan especially is not one of our "bought and paid for" finance corporate representatives and Tester is not either. I also need to read the actual amendment more. I found it here.
Seriously we might have one of those devil in details going on.
Not saying this is bad, I have believed for some time, they need to let people out of those bad mortgages, refinance them and due to the housing bubble crash, also reduce principle in hardship, especially those second mortgages...
but I want to know more first.
But in terms of rage, hey, you go, I'm all for Populist outrage on EP! ;)
Is extremely middle class friendly which makes me believe there is more to this story than meets the eye. Same with Tester.
It could be it was some ruse to once again give some special interest group special favors or something. I couldn't find the actual amendment for further analysis. Link in thomas.gov went to a bad link.
All the rhetoric about not graduating enough scientists and engineers is...well, pure rubbish.;-)
Interesting: Baucus, Dorgan, Tester, Specter, and Snowe voted against it. For the most part, Republicans Nay...except for these Dems.
The system is de facto insolvent, including the FDIC which itself relies on funding via the treasury. The TARP funds have covered the insolvency. However, we've been told that the purpose of TARP was to recapitalize the system and add new liquidity to the ossified/frozen credit markets. The fact is, really, the system is insolvent.
The FDIC will never be insolvent as Congress will ALWAYS vote to re-fund it, even if all they can do is print money to do so.
They will understand that they have no other choice: Were a single FDIC claim to go unpaid, every single bank in the world would instantaneously be beset by the mother of all bankruns, and life as we know it would be over. And that would not bode well for their re-election hopes.
the banks own the Senate.
Just more protection for the financial oligarchy.
Here's a quote from Harlan Fisk Stone of the US Supreme Court, 1934. Sound familiar?
“I venture to assert that when the history of the financial era which has just drawn to a close comes to be written, most of the mistakes and its major faults will be ascribed to the failure to observe the fiduciary principle, the precept as old as holy writ, that ‘a man cannot serve two masters’ . . . the development of the corporate structure so as to vest in small groups control over the resources of great numbers of small and uninformed investors, make imperative a fresh and active devotion to that principle if the modern world of business is to perform its proper function. Yet, those who serve nominally as trustees, but relieved, by clever legal devices, from the obligation to protect those who interests they purport to represent . . . [and] consider only last the interests of those whose funds they command, suggest how far we have ignored the necessary implications of that principle.”
These corrupt bastards are bereft of morality and conscience. Every right in bankruptcy court afforded to those wealthy enough to own 2nd,3rd and tertiary properties has been denied to those who have only one residence.
Dick Durbin should be applauded for standing out in the crowd and calling the nays out:
As for these assholes, they should be ashamed of themselves.
(h/t dday)
Pages