Resistance Begins at Ohm!

Friday, May 1, 2009

We have been robbed!

Quick, call Joe the plumber!
OK, this is a little convoluted, but if it were straightforward, I'm sure there would be a lot of screaming right now.
1) The US Gov't gives Chrysler $4 billion in Feb or there abouts
2) The Gov't tells Chrysler to give its brand name assets to Fiat because Chrysler does not make cars that people want. Like Fiat does. Like minivans and Dodge trucks aren't every-freakin-where.
3) Hold-up, Chrysler Financial is a major liability at this moment, so something has to be done with that first.
4) The Gov't declared GMAC a bank a while ago, making it eligible for TARP funds (money to GM that is not part of the $17 billion bail-out gift-loan). The Gov't promptly gave GMAC enough to keep it viable at least on the books and pawned it off on Cerberus, which coincidentally (?) owns Chrysler. The idea is to merge GMAC and Chrysler Financial, thereby giving Chrysler auto a better chance. And I suppose we are to believe that two losers will make a winner somewhere along the way. Cerberus, by the way, isn't a TARP beneficiary. I guess that makes them an investment vulture. Must not be friends of Barry.
5) OK, now we are back on track, so the next problem are the investors who hold $6.9 billion in collateralized debt. Collateralized, meaning that they hold title to the company. 70% of the debt holders are banks and other not-until-now banks like Golman-Sachs (meaning non-vulture investment companies) that received massive TARP and non-TARP Federal Reserve bailout money (the Federal Reserve has been printing money and giving it to banks outside of TARP). But 30% of the debt holders aren't on the TARP carousel where everyone gets a few gold rings. And 30 cents on the dollar for secured loans when other unsecured lenders get more isn't fair now is it? That's what they say. Barry says they are just greedy hedge funds. That cash for debt payment would be $2.25 billion courtesy of the federal government just to get rid of the $6.9 billion problem. That the money does not have to be returned to taxpayers.
6) Chrysler threw in the towel today and basically said, feds, union, it's all yours. Cerberus is the group that really gets screwed in this because they are stuck with Chrysler financial as well as GMAC. Maybe they get paid off with non-TARP funds. I doubt they will see any 30% return and they actually own the company.
7) So for $6.25 billion of your tax dollars, the government gives United Auto Workers retirement health care fund 55% of Chrysler, the government taxpayer gets 25% and Fiat gets 20% in exchange for their technical know-how. If you were born before 1975, I'm sure you have a less that favorable opinion of Fiat's technical knowhow. Wait, did you notice that? UAW gets a 55% share of Chrysler? If you were born before 1975, I'm sure you have a less-than favorable opinion of UAW's ability to manage anything involving money and future obligations.

Conclusion: for more than $6.25 billion, the government gives Chrysler (at the expense of investment firms that did not take your tax dollars) to UAW. And a European company known for making really crap cars gets a minority share, all brand rights and a dealer network.
The investor losses on Chrysler debt, 70% of $6.9 - 2.25 billion or $3.25 billion is probably paid for by a combination of TARP and Federal Reserve "lending" to the same Wall St. banks and investment companies that have had their hands seriously in your pockets since last September. Shweeet! For them. If you aren't a TARP welfare case? Well, you can just suck wind, you greedy, capitalist investment vulture.
Chrysler essentially becomes a non-commercial cooperative. Like that's going to get you your $6.25 + $3.25 or $9.5 billion back.
The government will guarantee your car warranty, at a future risk of unknown dollars, but given UAW history, Chrysler isn't going to cover it.
I have no idea what Fiat did to get this deal.
In other words for something like $10 billion or your tax dollars to be paid in future years, the Obama administration has essentially transferred a privately held corporation to UAW by paying off Chrysler lenders and giving them 55% of the company.
The alternative being that the company could have gone into bankruptcy back in January without your $10 billion, pretty much to the same effect except the UAW would have stood in line with the rest of the unsecured creditors. And Fiat probably would have had to pay something for what they got out of the deal. If I have this figured out correctly (my calculators don't have enough digits for billions), that is $33,333 for you and me and every other card-carrying citizen of this country.
This has to be one of the most sophisticated (because of the number of hands involved) and devious (because Congress never voted for this) transfers of wealth since Venezuela confiscated US oil company assets.

Is anyone paying any attention to this?

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