What About Chrysler's Actual Creditors?

Nick Gillespie | May 2, 2009

Instapundit Glenn Reynolds directs our attention to a pending lawsuit against the Chrysler bankruptcy. It's spearheaded by "holdout creditors" who hold about $1 billion of the carmaker's secured debt and who refused an earlier gov't-backed deal to accept about 33 cents on the dollar for their investment. Obama has blamed these guys for the bankruptcy kicking in.

The holdout lenders will challenge the planned sale of Chrysler's prime assets to a new company controlled by the auto workers union and Fiat, according to Reuters. The lenders say the sale is an "end run" around established bankruptcy law that gives secured lenders priority over junior lenders (including the union) when it comes to getting repaid.

More here.

From a Reuters account:

The dissident group of about 20 lenders, holding about $1 billion in Chrysler debt, said in a statement earlier on Thursday that they had been "systematically precluded" from negotiations with the government. They say they have not taken TARP funds, while the four main Chrysler banks have received about $90 billion in funds from the government's bailout program.

Audio with the lawyer for the group here.

Update: Arguably the most interesting dimension to the story is the way the Obama White House is openly working the P.R. ropes against foot-draggers in this process. More on that here.

Comments

|5.2.09 @ 10:55AM|#

The lenders say the sale is an "end run" around established bankruptcy law that gives secured lenders priority over junior lenders (including the union) when it comes to getting repaid.

Politicians evading/ignoring the law? Shocked, I am.

|5.2.09 @ 10:59AM|#

TLTG, but The Chiosen One has already started demonizing these people for trying to avoid getting run over by the governments UAW rescue vehicle.

Somebody, maybe me if I get motivated, will supply the appropriate quote and link.

|5.2.09 @ 11:00AM|#

Maybe I'll even try that newfangled preview thingee then.

Nikola T|5.2.09 @ 11:06AM|#

C'mon guys relax. If your gonna "spread the wealth around", you have to spread the debt around as well.

It's crazy that these guys should be expecting their full money back from a company that can't pay it through no fault of their own. They should be grateful to get any of it.

If the republicans hadn't destroyed the economy, then all would be well forever. I bet these creditors are all just playing politics with their money and trying to make the President look bad for the next election cycle.

|5.2.09 @ 11:11AM|#

If those idiots would shitcan everything that doesn't say Dodge Ram on it, they could conceivably still be in business *next* May. Good luck getting that past Waxman.

Fiat apparently wants a pre-fab dealer network. If they had any sense (or weren't being bribed), they would be better off buying Saturn.

Dear Signor Montezemolo-

Tou're welcome. Send me a check.

thx

|5.2.09 @ 11:13AM|#

through no fault of their own.

I haz bin blamz teh viktum!

|5.2.09 @ 11:14AM|#

"T" is right next to "Y".

Stupid keyboard.

ace|5.2.09 @ 11:20AM|#

Please quit this bailout mess. Let the judge do his job. Respect the laws of the land, as these endrun disreguard is no good. Let Chysler fold then come back debt free. PLEASE ! ! ! othewise, it will not make it!

|5.2.09 @ 11:31AM|#

The lesson is, don't lend money to a company that has a history of begging for bailouts from the government.

-jcr

Nikola T|5.2.09 @ 11:37AM|#

If those idiots would shitcan everything that doesn't say Dodge Ram on it, they could conceivably still be in business *next* May.

Let's not forget Jeep. Still a money-maker and will always be. Nothing on four wheels says American Freedom more than a Jeep. Too bad it's owned by a shitty company.

On another note... Anybody remember what Bob Nardelli did to Home Depot? I can't believe Chrysler hired that idiot. Not that any of this is his fault, but it just goes to show the mindset there.

|5.2.09 @ 11:40AM|#

OK, I've done the aspirin, coffee and grapefruit juice thingee.

At a town hall meeting in Missouri on Wednesday, Mr. Obama said he still didn't know "whether the deal is going to get done." He told the audience that Chrysler's unionized workers "have made enormous sacrifices," but that a key question now was: "Are the bondholders-the lenders, the money people-are they willing to make sacrifices as well? We don't know yet."

So Obama is calling them out. "A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices and they would have to make none," Obama said.

...

"I don't stand with them," Obama said. "I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars."

OppenheimerFunds, in a statement, said: "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." [italics added]

|5.2.09 @ 11:40AM|#

Asked if he could recall any other union that fared as well, David L. Gregory, a labor law professor at St. John's University, replied: "Nobody's even close."

But the U.A.W. is also no ordinary union. Even though its membership at the Detroit automakers has shrunk to a quarter of its size in 1990, it still maintains tremendous influence in Washington, partly because of its heavy political contributions.

NYT

|5.2.09 @ 11:55AM|#

(tongue firmly in cheek)


We've got the WOD. The WOT. Now, coming to a business near you, the War On Wealth.

In this climate of "The Next Depression," it is acknowledged by the average dumbass American voter, that the economy failed due to the greed and corruption of the wealthy. If we have to screw them over to set things right, then so be it. We gotta help the workin man and try to save this american institution. We can't let some piddling little laws get in our way. Big Finance has made more than their share of plunder in the last few decades. Now it is high time they actually pay their own way.

And the way of everyone else whose back they have ridden to aquire their obscene riches.

perilisk|5.2.09 @ 12:25PM|#

Note to world: don't loan money to US companies. The government is changing the deal. Pray they do not change it further.

H.F. Wolff|5.2.09 @ 12:28PM|#

Hmmm,

First they trashed the US constitution: "It's only a s...y piece of paper".

Then they trashed personnel freedom by making it PC for the gummint to spy on any and all US residents and citizens. (home of the free, land of the brave???)

Now, private business contracts are subject to gummint tinkering / negating.

As my old pal James Bond so aptly put it:

Once is an accident;

Twice is coincidence;

Three times is enemy action.

Time for the shot guns and pitch forks.

H.F. Wolff

Nikola T|5.2.09 @ 12:29PM|#

Brotherben, you missed the biggest WO ever! The WOP (poverty) - now subsidized more than ever by the WOW.

|5.2.09 @ 12:30PM|#

They probably didn't even vote for our ObamaOurSavior, so screw them all. Nasty filthy rich people.

|5.2.09 @ 12:31PM|#

Shocking, isn't it, that people who loaned monies secured by assets would possibly want the sale of those assets to be used to repay them first. Crazy, thinking that a contract would actually mean something. Unreasonable, to think that you should be repaid proportionally to your investment. Absurd, to complain that the Union who loaned only half as much money but will receive two-to-five times as much equity as the bondholders.

|5.2.09 @ 12:34PM|#

I'm no economist, but doesn't this scream "don't invest a dime in anything the government might even glance at"?

Steven Smith|5.2.09 @ 12:35PM|#

There's nothing extralegal, or even extraordinary, about this sort of thing happening in a Chapter 11. 11 USC Section 1123(b)(5) allows Chapter 11 plans to modify the rights of secured creditors. It's failry typical for secured creditors to find their position altered rather dramatically in bankruptcy, and any part of the their loans to Chrysler which exceed the value of the assets secured are going to be deemed unsecured by the court. In that case, a priority unsecured creditor like the company's employees will get paid before the formerly secured bondholders as a matter of course. It's called a cramdown, and it's how the free market culls bad debt in bankruptcy.

Nikola T|5.2.09 @ 12:48PM|#

Epi,
I'm no economist, but doesn't this scream "don't invest a dime in anything the government might even glance at"?

What exactly does that leave?

Nikola T|5.2.09 @ 12:49PM|#

I'd say my mattress, but you know I've seen their interest in that too.

wingnutx|5.2.09 @ 12:57PM|#

I'm no economist, but doesn't this scream "don't invest a dime in anything the government might even glance at"?

Which will necessitate government investment, since those evil fatcats refuse to help out the workin' man.

Hugh Akston|5.2.09 @ 1:00PM|#

One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under the threat that the full force of the White House Press Corps would destroy its reputation if it continued to fight.

What a ludicrous threat. As though the WHPC would uncritically transmit anything and everything the Obama White House fed them.

|5.2.09 @ 1:06PM|#

In a way, this is kind of good. I hope Obama gets himself hopelessly tangled in this autobailout morass. That way he's tied down and can't accomplish much else. It'll be great if he spends his entire term futilely trying to rescue the unions, while the auto companies slowly sink.

In other news|5.2.09 @ 1:07PM|#

Speaking of fiat money
http://www.youtube.com/watch?v=NIfH0vY2ANA

Mr. Chartreuse|5.2.09 @ 1:13PM|#

Even better news for the Chrysler-Fiat deal:

What's more, parent company Fiat Group appears not to have enough money to pay debt that matures in the next 12 months, Standard & Poor's said Tuesday as it downgraded Fiat's ratings.

Luckily we won't have to bailout Fiat.

|5.2.09 @ 1:30PM|#

This government is undertaking, in my opinion, criminal action in the Chrysler bankruptcy. Moreover, Obama is fully aware that what he is doing is illegal, which is why he hasn't asked Congress to intervene, but doing it through his twisted executive schemes. His actions would cause a huge scandal if exposed to the political process.

First of all, this isn't the normal method of Chapter 11 bankruptcy; instead, the Administration is negotiating a sale to another, different entity, a "Chrysler 2″, under section 363. This is a conflict of interest because it is collusive bidding - the government is a stakeholder, as an equity holder and also as the recipient of political contributions, but is engineering the bid to the company that is ostensibly going to assume control of Chrysler, Fiat. Fiat will receive 15% of the equity, but it is strange that receives this control without putting up ANY MONEY AT ALL. Very typically, increasing the size of its stake will require politically-minded ideas like location of a Chrysler plant within the US. The UAW is owed unsecured claims of their health care fund, the VEBA, which under the government plan they will be "forced" to convert to 55% of the equity of the "New" Chrysler. For all this, they are offering $2 billion to the secured creditors.

Why is the Administration so eager for this bankruptcy to occur? Well, the general rule in Chapter 11 bankruptcy is that all creditors must agree to a re-organization plan or be proscribed one by the bankruptcy judge. However, the Administration wants a rapid-fire sale to Chrysler 2, because in order to effectively "block" the sale, the small number of dissenting creditors in question would have to put up more money in total ($2 billion) to bid on the assets than the Administration is offering. I will get to why there is no legal remedy in this situation later. Here is another conflict of interest, since the Administration is financing several of the larger creditors, the illegally-financed TARP banks, who will tend to accept less money than they would without yoke. This is a collective action problem: under normal bankruptcy, you can block by dissent; under the Administration plan, there needs to be a kind of coordination between the secured creditors.

First of all, understand that Fiat, the company, isn't important here. That begs another question - why are they participating, and what is their relationship to the Administration? They are not actually putting up any money, because the Treasury is going to finance the sale of the assets that will be received by "New" Chrysler. You could call it a "shill" bid, there is essentially no third-party bidder. Indeed, why would anyone want to get involved in this messy political situation, especially if the UAW will strike if you don't give them the same kind of exorbitant deal they would receive under the government? Note also that that same question also hampers the dissenting creditors' bid. Not only will the UAW get a 55% stake in "New" Chrysler, after Daimler pays $600 million into the pension plan, the Pension Benefit Guaranty Corporation will assume the liabilities of "Old" Chrysler, on the taxpayer's dime. They get to appoint a director to the board, and the supposedly "neutral" government will get to appoint 4 directors.

The sale under section 363 is designed to pre-empt another rule under section section 1129(a)(7) of the bankruptcy code. It reads,

"With respect to each impaired class of claims or interests - (A)
each holder of a claim or interest of such class . . . (ii) will receive
or retain under the plan on account of such claim or interest
property of a value, as of the effective date of the plan, that is not
less than the amount that such holder would so receive or retain if
the debtor were liquidated under chapter 7 of this title on such
date. "

So basically, it is a rule that says any reorganization plan should get maximum value for priority level of claims. If it prevailed, the dissenting secured bondholders would be made as whole as possible. But, if the company is sold under the more majoritarian section 363 sale, they never get to exercise those claim; if the trumping bid is the government's $2 billion, all secured creditors are paid pro-rata, and their claims cease. That's why the Obama Administration is speaking its Double Speak: "surgical" and "quick" really means "illegal" and "fraudulent". But the Federal Government is playing both sides, so that's A-OK.

The success of this plan critically hinges on whether it is judged "sub-rosa" by the presiding judge, which offers remedy for the "fear that a debtor-in-possession will enter into transactions that will, in effect, "short circuit the requirements of [C]hapter 11 for confirmation of a reorganization plan." So, instead of the alternative where we could have had an open, private process between many stake-holders, we are having a secretive and political process between compromised and possibly corrupt stake-holders.

|5.2.09 @ 1:31PM|#

Luckily we won't have to bailout Fiat.

Silly goose. This is not about Chrysler, the Terri Schiavo of the big 2.5. This is all about the UAW.

MNG|5.2.09 @ 1:47PM|#

"Now, coming to a business near you, the War On Wealth."

Since there's a 99.9% chance that you're not even close to being wealthy I'd say don't worry too much over it brother.

|5.2.09 @ 1:48PM|#

Now, coming to a business near you, the War On Wealth.

We've had that since at least 1913. Actually, I could argue that the War on Wealth began with Hamilton's first Bank of the United States.

-jcr

|5.2.09 @ 1:49PM|#

doesn't this scream "don't invest a dime in anything the government might even glance at"?

It sure does, but the problem is that due to their absurd interpretation of the commerce clause, there really isn't anything beyond the government's gaze.

That pretty much just leaves foreign investments.

-jcr

Paul|5.2.09 @ 1:51PM|#

Obama stands with Chrysler, the UAW, their families and their communities. Not with the creditors, their families and their communities.

MNG|5.2.09 @ 1:55PM|#

Can someone tell me what makes secured debt secured debt and unsecured debt unsecured debt, especially in this case? How did Chrysler's secured creditors get that compared to the unsecured creditors?

MNG|5.2.09 @ 1:56PM|#

"Obama stands with Chrysler, the UAW, their families and their communities. Not with the creditors, their families and their communities."

Well, he already stood by the financial industry to the tune of way more billions of dollars than the Big 3 are seeking.

|5.2.09 @ 1:59PM|#

"" Since there's a 99.9% chance that you're not even close to being wealthy I'd say don't worry too much over it brother.""

MNG, true dat. I'm not wealthy, by american standards. I am, however, well fed, don't have to walk anywhere, live in a climate controlled home with my wife and 2 good kids. So, I don't worry. If I was wealthy, I might.

I was simply making an observation.

MNG|5.2.09 @ 2:02PM|#

I don't worry too much about the wealthy, they usually do a good job of taking care of themselves.

Everyone on this site I imagine actually had their taxes lowered recently (unless they smoke, the SCHIP increase was funded by a cig tax, which I think was a bad idea).

|5.2.09 @ 2:03PM|#

How did Chrysler's secured creditors get that compared to the unsecured creditors?

Their contracts traded off a lower interest rate for preferred status in liquidation, the same way that a first mortgage will have a lower interest rate than a second note on the same property. Obama intends to break the deal.

-jcr

|5.2.09 @ 2:03PM|#

Roosevelt, Truman, Kennedy, Johnson, clinton abused their powers beyond Nixon but they were all democrats like obama so they get a pass from the 4th estate arm of the democrat party.

|5.2.09 @ 2:05PM|#

My can of roll your own tobacco was 10.69. It went up over 8 bucks a can. I now have e-ciggies and several ounces of liquid.

|5.2.09 @ 2:13PM|#

Can someone tell me what makes secured debt secured debt and unsecured debt unsecured debt, especially in this case? How did Chrysler's secured creditors get that compared to the unsecured creditors?

Your home mortgage is secured debt. You default and the bank owns your home.
Your credit cards are unsecured debt. You default and the issuer gets nothing.

|5.2.09 @ 2:15PM|#

My can of roll your own tobacco was 10.69. It went up over 8 bucks a can. I now have e-ciggies and several ounces of liquid.

Damn brotherben. You must make over 250K annually because The Chosen One promised that if you make less than that none of your federal taxes would go up.

MNG|5.2.09 @ 2:16PM|#

Thanks John. I'm curious as to why the union did not get their obligations (like the pensions) secured. Is it that they did not ask for it or could not get it?

Also, if someone does work on my house and I don't pay them they can get a lien on the property. Does that make them secured? If so, then why doesn't the work that Chrysler's employees have done make them in a similar position in regards to promised benefits for said work?

MNG|5.2.09 @ 2:19PM|#

I understand that J sub D, I guess I don't understand how these creditors got their secured debt but the employee benefits are not so. JCR's explanation helped with the first part.

It strikes me that the GOP is killing any chance of winning Michigan anytime soon, and if you think that was a state they were hoping to flip just last year. They are killing themselves.

|5.2.09 @ 2:20PM|#

So who's the Elliot Ness who wants to use RICO against the conspiracy of the White House press corps in aiding and furthering this Obama organized crime racket?

sfb|5.2.09 @ 2:20PM|#

Can someone tell me what makes secured debt secured debt and unsecured debt unsecured debt, . . .

You really have to ask?

1) You go to the bank to buy a car. The bank lends you the money and files a lien on the title. You stop making payments, and the bank takes your car and sells it to pay off the loan.

2) You go to a different bank and sign up for a credit card. The bank gives you the card, and you go out and buy a houseful of furniture. You don't pay the credit card bill on time, the bank can't go after your assets.

MNG|5.2.09 @ 2:21PM|#

I guess what I'm saying is that contractual obligations to employees should be treated as secured, maybe "automatically."

Bankruptcy laws + hangover gives me a freaking headache....

BTW-how do libertarians feel about bankruptcy laws? It seems to me they might have reason not to like it because it helps people welch on contracts voluntarily entered into...

|5.2.09 @ 2:21PM|#

J sub, yup, ya caught me. I am a self loathing billionaire.

|5.2.09 @ 2:22PM|#

MNG, when these lenders were asked by Terri Schiavo Chrysler for money, being conscientious and protecting the interests of their investors, they would would only lend money if the loan was secured by assets. Just like a pawn shop except Terri Schiavo Chrysler maintained physical control and the use of the collateral.

BTW, I do OK. Not wealthy by any means but see punishing the earning/creation of wealth counter-productive. It's why socialisn always fails.

mike farmer|5.2.09 @ 2:23PM|#

In order to make an Obama omelette, you have to break a few eggs.

MNG|5.2.09 @ 2:25PM|#

sfb
I understand that, but what makes that so, a bargained for agreement or the law? What I'm saying is this, is the first example you give secured because it's in the contract and the second example not secured because it is not in the contract? Or is there some law in the second example that prevents such a stipulation in the contract?

And if it's just a matter of contract, then why the hell didn't the union ask to have the pensions secured?

MNG|5.2.09 @ 2:27PM|#

J sub D
I actually think inequality is at least a necessary evil, incentives are good for everyone and you have to allow people to get rich for there to be incentives. I might disagree with you as to when we start to undermine incentives that make us all better off or what makes us cross the line of "punishing" wealthy people, but liberals should realize how important incentives are and what constitutes them.

|5.2.09 @ 2:30PM|#

Thanks John. I'm curious as to why the union did not get their obligations (like the pensions) secured.

Because they are stupid?
Because the whole idea of a company pension fund is stupid?

When you agree to a pension, you're making an assumption that the company is going to exist long enough to pay you. You're sacrificing present pay for future pay on a gamble that your company is going to be sucessful enough to keep dominating the market for another 40 years.

But when happens in reality is that the market crushes a company that has unproductive overhead (payouts on the pension plan) far sooner than the 40 year time scale you are waiting for to get that deferred benefit.
There's always some smaller, younger company that doesn't have current retirees to support out there to compete with you.

The way around this is to put the money into the employee's control immediately. I.e. a 401(k) plan. If the company goes bust, it can't take down the 401(k) with it. (Except when employees have it invested in company stock... which they would be stupid to do anyway.)

sfb|5.2.09 @ 2:31PM|#

I understand that J sub D, I guess I don't understand how these creditors got their secured debt but the employee benefits are not so.

Duh

The bank says we won't give you money to build a factory unless you secure the loan with asset that you are about to build. Chrysler says ok. The bank gives Chrysler a loan.

The UAW says we won't work for you unless you pays us now and in the future when we retire. Chrysler says ok. The union goes to work.

Wages and benefits are never secured by real assets. Anywhere.

The issue now is that the original bank decided that Chrysler was unlikely to pay back and the loan the lender didn't want to wait years for the company to descend into bankruptcy and then wait more years for the judge divvy up the assets.

So the original lender sold the loan to a second lender at a deep discount. The price the loan sold for was based upon the probability that Chrysler would pay the loan plus some probability that THE SECURED LOAN WOULD BE WORTH SOMETHING IN BANKRUPTCY COURT.

Shockingly, the UAW continued to work for a company that everyone knows was going down the tubes and now wants the federal government to intervene to make their worthless FUTURE BENEFITS higher priority than the EXISTING SECURED LOAN.

Got it.

|5.2.09 @ 2:34PM|#

There is no limit to the tears we should shed for hedge fund managers who make a losing bet.

God has ordained that hedge funds be allowed to pick up "distressed" assets for pennies on the dollar and subsequently receive payment at par value, thereby making millions for doing nothing. It's in the Bible. You could look it up.

|5.2.09 @ 2:42PM|#

A little recent history -

When Mulally (sp?) took over Ford (those guys not presently sucking at the federal tit) he mortgaged every goddan thing they owned, up to and including the blue oval, in order to raise the cash necessary to restructure and survive this downturn.

If the Bush and Obama administrations had let ecomomic nature take its course, Ford would presently be garnering significant portions of Terry Schiavo's Chrysler's market share while they went through bankruptcy. Ditto with the ER residing GM. The government is screwing Ford, Toyota, Nissan, Honda, Volkswagon and anyone else who does or wishes to assemble cars in America to keep two failed businesses afloat.

If the UAW made a bad investment lending money to a sick corporation without getting security it just demonstrates that maybe unions don't know shit about protecting their members assets they were entrusted with.

John Tagliaferro|5.2.09 @ 2:45PM|#

Update: Arguably the most interesting dimension to the story is the way the Obama White House is openly working the P.R. ropes against foot-draggers in this process.

They are behaving in a blatantly thuggish manner that could give the foot-draggers all of the ammunition they need to have any decision they do not like overturned.

Now I have to re-edit my book since Chrysler is not going under Nazi rule like Government Motors. It seems a bit more like United Airlines with the workers in control of the means of production.

|5.2.09 @ 2:45PM|#

There is no limit to the tears we should shed for hedge fund managers who make a losing bet.

God has ordained that hedge funds be allowed to pick up "distressed" assets for pennies on the dollar and subsequently receive payment at par value, thereby making millions for doing nothing. It's in the Bible. You could look it up.

Lesson to investors: NEVER lend money to a unionized company.
You won't get your money back, and you won't be able to sell your debt, because nobody will buy it.
Don't even bother getting the loan secured by an asset, causet he President will unilaterally give the unions preference in bankruptcy couty.

Don't bother buying bonds from a unionized company either. Those are worthless too.

|5.2.09 @ 2:48PM|#

OK, I've done the aspirin, coffee and grapefruit juice thingee.

What, no whisky?

|5.2.09 @ 2:51PM|#

What, no whisky?

Hair of the dog is NOT a good idea. Ever.

John Tagliaferro|5.2.09 @ 2:53PM|#

Lesson to investors: NEVER lend money to a unionized company.
You won't get your money back, and you won't be able to sell your debt, because nobody will buy it.
Don't even bother getting the loan secured by an asset, causet he President will unilaterally give the unions preference in bankruptcy couty.

Don't bother buying bonds from a unionized company either. Those are worthless too.

Sounds like new investment words to live by.

|5.2.09 @ 2:56PM|#

Lesson to investors: NEVER lend money to a unionized company.

Fuck unionized; what, in fact, is a relatively safe investment now? The government has shown it can and will intervene in any thing it damn well pleases. I would think the only "safe" move is foreign investment, but even that is risky because as the US does, others follow.

This is like writing MORAL HAZARD on a drunk dude's face in magic marker, yet he doesn't see it because there's no mirror. At least one can feel a gorilla mask.

|5.2.09 @ 3:22PM|#

The only safe investments now are short-term (as in "up to the next election") positions that are politically favored. See also: The economics of "pull." If you can get inside information on what the administration is favoring, go for it and sell it if the polls start running against your guy/gal.

Naga Sadow|5.2.09 @ 3:23PM|#

Kinda interesting. The closest I've ever come to investing in a bank was when I took a suggestion from an acquantince and shorted some WAMU stock(sorry Pro Lib). I did own 3 Ford bonds but I sold them. Not because I forsaw this bullshit but because some chump agreed to buy them at PAR value. Not market value(which is what par usually means) but the value when they were issued! Fucking sweet! I actually considered buying some stock in a bank that got a failing grade from the friendly Community Reinvestment Act but decided not to buy. I'm not even putting anything into my 401k anymore either.

justinslot|5.2.09 @ 3:25PM|#

Epi: There aren't any safe investments right now, even gold can be manipulated by central banks. People who seem to know what they're doing are keeping their money out of the system right now. And I would think foreign investment would be much more unsafe, since the rest of the world has always intervened in their markets to a greater degree than we have done in the past, probably more than we're doing now.

And honestly, we've been knee deep in moral hazard for years now. At whatever point we let these companies (mostly finance and the automakers it seems like) believe we'd back them up no matter what kind of trouble they got themselves in, that was when it began. Maybe it goes back to the original Chrysler bailout? I think that's Barry Ritholtz's idea. That's why Dick "Dick" Fuld was so shocked when Lehman was allowed to die. Should've been placing more people in Treasury, Dick!

MNG|5.2.09 @ 3:49PM|#

"The bank says we won't give you money to build a factory unless you secure the loan with asset that you are about to build. Chrysler says ok. The bank gives Chrysler a loan.

The UAW says we won't work for you unless you pays us now and in the future when we retire. Chrysler says ok. The union goes to work."

Both are promises that should be kept and I don't see any reason why, in bankruptcy, any one should be preferred over the other.

MNG|5.2.09 @ 3:51PM|#

A promise to an employee and a promise to a lender, both should be kept.

And no one answered my more general question: what is the libertarian position on bankruptcy law?

|5.2.09 @ 4:00PM|#

MNG, that is a great question. I can't answer it myself. Me being the social liberal that I am.

|5.2.09 @ 4:02PM|#

I have heard it said that bankruptcy protection offers a safety net for the extreme risks of entrepeneurs(sp).

|5.2.09 @ 4:02PM|#

Nikola: Let's not forget Jeep. Still a money-maker and will always be. Nothing on four wheels says American Freedom more than a Jeep.

Bingo! FIAT already makes models that are very Jeep-like, um, Jeepish? All the Brazilian 2011 500 prototype needs is the Jeep badge and grill. Is the American Jeep about to acquire an Italian accent?

http://www.eurocarblog.com/post/1778/2011-fiat-uno-appears-in-minas-gerais

I keep asking myself why FIAT would re-enter the US market after their disastrous departure in 1984? Especially at a time when the market stinks and they're short on cash. Their cars aren't up to our DOT regs or CA emission standards (the largest sector of the market) so they would need to retool their designs and/or the factories.

Americans are not going to buy small, cheesy FIATs in sustainable numbers and Chrysler has nothing other than the Ram and Jeep brands that are marketable. Daimler discovered when they tried to rebadge the Chrysler minivan as the MB R Class crossover that we won't buy a phony car.

FIAT may be after the company's most valuable asset; the Jeep badge. The Jeep brand is hugely popular outside the US. It would sell like hot cakes in Brazil and India.

Plus Obama and crew would happy to rid the US of the earth destroying Jeep and the FIAT deal gives them cover for the union fiat.

|5.2.09 @ 4:04PM|#

and is therefore a good thing for the economy. Not sure how that applies to every overextended dumbass consumer in west podunk.

|5.2.09 @ 4:08PM|#

Both are promises that should be kept and I don't see any reason why, in bankruptcy, any one should be preferred over the other.

Way to fundamentally undermine the entire banking system.

Has it occured to you that if banks can't get collateral, and can't count on the courts to uphold their right to the collateral, that they will either (A) not lend, or (B) lend only at much higher interest rates?

What do you think the overal economic repercussions of that will be? Aren't we in the middle of a reacession caused by credit tightening?

Take away the right to hold collateral and you sure as hell will see banks getting a lot more paranoid about handing out money.

|5.2.09 @ 4:12PM|#

what is the libertarian position on bankruptcy law?

I don't know what the libertarian position is, but to me it is just a name for a legal process by which contracts are unravelled when the borrower is no longer able to live up to his obligations.

i.e. it's an extension of contract enforcement. It's just that it's a case where a judge decides if the contract can be enforced and what happens to the assets involved in order to life up, as much as possible, to the terms of the contract.

|5.2.09 @ 4:18PM|#

And no one answered my more general question: what is the libertarian position on bankruptcy law?

It's that or debtors prison. I'm not exactly gung ho on the prison option. Though I'm hardly an expert corporate finance atty, I'm certain that the system could be both improved and worsened. With the blues writing the legislation I would expect the latter vis a vis corporate bankruptcy. I felt the same way about the reds and personal bankruptcy.

YMMV.

John Tagliaferro|5.2.09 @ 4:31PM|#

J sub D,

If a lender does not ask for the proper collateral then they should be out if their customer is liquidated.

Nobody should be going to prison unless some sort of fraud was involved, even without the convoluted bankruptcy system we have now.

|5.2.09 @ 4:38PM|#

I didn't exactly give a ringing endorsement of the debtor's prison option.

|5.2.09 @ 4:47PM|#

Why not put some of the SMALL-TIME investors, who are on the verge of losing savings via government theft, in front of the camaras? This would seem a useful PR tool to counter the President's media-enabled thuggishness.

John Tagliaferro|5.2.09 @ 4:54PM|#

J sub D,

Sorry if it sounded like I thought you did. I agree with you on the debtors prison.

I really don't think it should be a loss-of-freedom offense to owe people money. If you owe them money because you lied to them to get a loan, that is another matter.

|5.2.09 @ 5:00PM|#

Lesson to investors: NEVER lend money to a unionized company.

We're getting dangerously close to the point where the prudent thing to do is never lend money to any American company. When the government is willing to ignore the law for political advantage, and the courts let them do so, it's time to put your money elsewhere.

-jcr

|5.2.09 @ 5:04PM|#

Oh yeah.
Everybody agrees that Bernie Madoff belongs in jail.

How about those who lied on self reported income on their mortgage applications? Yeah, the mortgage gratet was a complete effin' idiot who gets no sympathy from me, but lying on a contract is against the law. Does Joe Sixpack the fibber deserve to do time? Or more justly a felony conviction with probation?

|5.2.09 @ 5:05PM|#

gratet ---> granter

Preview, dammit! Preview.

|5.2.09 @ 5:09PM|#

JCR, the justice system has yet to weigh in on Terry Schiavo Chrysler LLC. The judiciary is allegedly independent and the ball is in their court. I'm hoping that the bondholders get a fair cut.

|5.2.09 @ 5:20PM|#

The difference between secured debt and unsecured debt is the level of risk involved and corresponding expectation of return. The law, especially bankruptcy law, reflects these differences and so does the market.

If the UAW had required an actual cash investment to secure their retirements they would never have gotten their contracts, there simply isn't enough money. The only way that the big 3 have been able to afford to operate in the past decade, or more, is by promising, without secure capital assets to back them up, to pay the generous retirement packages negotiated. To secure their retirement packages an actual investment would have had to been made, instead of only a promise to pay out of future profits.

Since you have a secured debt on your home, you get a mortgage around 6% or so. You can pay 20% or more for unsecured credit card debt, because they know they are less likely to collect it.

So if the debt is secured or not is agreed upon by both parties at the time of a contract. Bankruptcy law should reflect this. The key to bankruptcy being that the Law remains generally unchanged so that all parties can know what to expect in advance of participation in a contract. Arbitrary changes in bankruptcy law, to accommodate the UAW, for instance, are incredibly destructive to the entire financial system because no one can know what the law will be tomorrow and how to appropriately gauge risk.

Needless to say, if the government pushes this through it will be extremely economically counterproductive and dry up investment.

Kolohe|5.2.09 @ 5:22PM|#

Not market value(which is what par usually means)

To pick a nit, it almost never means that.

Kolohe|5.2.09 @ 5:31PM|#

A promise to an employee and a promise to a lender, both should be kept.

Well, yes, until you can't

And no one answered my more general question: what is the libertarian position on bankruptcy law?

No spokesman am I, but some sort of bankruptcy law is a good thing, maybe the most import thing in civil law because of the potential for not being able to keep promises.

..

No lawyer am I either, but from what I understand, employees have first dibs only so far as wages for time already worked. Any future promises are more or less unsecured.

Why the particular agreements between the workers, management and owners are the way they are is complex, and literally requires a J.D. and 20 years of practice to fully understand. J sub D above probably has the best layman's understanding and explanations of anyone on this board. My short answer is that all parties where perfectly happy to kick the can down the road indefinitely, as long as each could declare some sort of 'victory' and get what they wanted short term.

MNG|5.2.09 @ 5:40PM|#

"Way to fundamentally undermine the entire banking system. "

Well, given that workers seem to find ways to "lend" employers their labor for unsecured promises to pay them certain benefits I'm not sure it would be impossible for banks to find a way to lend money knowing their promise from the lendee is no better than other promises.


I promise you that I will pay you x. Then I promise Y that I will pay him x, but I add "and you can be sure of that, if I don't you get first crack at my assets!" I see no reason to privilge the latter promise over the former.

sfb|5.2.09 @ 5:50PM|#

"The bank says we won't give you money to build a factory unless you secure the loan with asset that you are about to build. Chrysler says ok. The bank gives Chrysler a loan.

The UAW says we won't work for you unless you pays us now and in the future when we retire. Chrysler says ok. The union goes to work."

Both are promises that should be kept and I don't see any reason why, in bankruptcy, any one should be preferred over the other.

Because the two promises were made UNDER DIFFERENT TERMS WHEN THE CONTRACTS WERE MADE -- it is really that fucking simple. So they get treated different when the company goes belly up.

This is fundamental business law. When the debtor don't got enough money to go around -- secured lenders get money first; if there is any left unsecured lenders get to pick through the remains.

You cannot have the government dictating changes to the original contracts after the fact. It is a total unraveling of legal precedent and fundamentally unjust, and perhaps illegal, to have the government dictate new terms to the secured lenders when 1) it is one of the unsecured creditors and it is demanding better treatment than it deserves under the law and 2) it is also demanding better terms for an other unsecured lender which is a political entity (the UAW) that has directly campaigned for the current government.

Kolohe|5.2.09 @ 5:57PM|#

I see no reason to privilge the latter promise over the former.

Really, you don't?

As people have said it's not that much different than having a credit card, then getting a car loan, then getting a mortgage. The order of incurring the debt is the least important (but not totally unimportant) factor in determining who gets paid what in the event of a bankruptcy.

In any event, in the specific case of the the UAW - Big 3, the contract between the union and the companies run something like a couple of thousand pages apiece. If the UAW didn't 'secure' their place in line in the contract, they either made a deliberate decision not to do so, or paid too much for their legal representation.

sfb|5.2.09 @ 5:58PM|#

Well, given that workers seem to find ways to "lend" employers their labor for unsecured promises to pay them certain benefits I'm not sure it would be impossible for banks to find a way to lend money knowing their promise from the lendee is no better than other promises.

So MNG, are you a troll posting crap just to get a rise out of a people? Or do you really believe the nonsense you post?

Because, you are, in effect, requesting we drop about a thousand years of English common law and the existing federal bankruptcy laws and guidelines just because it's so damn sad that the UAW is losing out.

MNG|5.2.09 @ 6:05PM|#

Really?

Again, I promise Kolohe to pay him $10,000 if he does X. Then I promise sfb to pay him $10,000 if he does x, but I say to him "and so help me, paying this debt will be preferred over all other debts I have."

And THAT is why we should give preferential treatment to the second? Because the debtor SAID SO?

WTF?

MNG|5.2.09 @ 6:10PM|#

"you are, in effect, requesting we drop about a thousand years of English common law and the existing federal bankruptcy laws and guidelines just because it's so damn sad that the UAW is losing out."

1. I'm no expert in bankruptcy law, but I'm betting there's been some fairly big changes in that area of law between a thousand years ago and now other than what I'm proposing...

2. I'm not arguing we should do this because "it's so damn sad the UAW is losing out", I'm arguing it for every promise to every employee (or other category of unsecured creditor).

"Because the two promises were made UNDER DIFFERENT TERMS WHEN THE CONTRACTS WERE MADE -- it is really that fucking simple."

Why should the terms of promise A between X and Y privilege it over promise B made between X and Z?

Suki|5.2.09 @ 6:13PM|#

sfb,

So MNG, are you a troll posting crap just to get a rise out of a people?

You spotted it that quickly? ;)

Hi John T! [waves]

Nikola T|5.2.09 @ 6:14PM|#

Plus Obama and crew would happy to rid the US of the earth destroying Jeep and the FIAT deal gives them cover for the union fiat.

That would be the end. You can steal my money, watch me 24/7, take my guns, but if you think you can take away our Jeeps, there'll be revolution!

Anonymous|5.2.09 @ 6:17PM|#

Why should the terms of promise A between X and Y privilege it over promise B made between X and Z?

Because the contract says so. (That's why people bother to secure loans.)

</|5.2.09 @ 6:42PM|#

McCain would have been worse.
The debt holders would get nothing and Chrysler would be manufacturing tanks for conscripts to drive in the World War on Brown People,Gay Marriage, and Medical Marijuana.

Kolohe|5.2.09 @ 6:42PM|#

And THAT is why we should give preferential treatment to the second? Because the debtor SAID SO?

Well, yes. If I didn't put in the agreement for specific collateral or preferred status that's on me. Presumably I compensated it for it by charging a higher interest rate. Keeping in mind that it's not quite a simple irl as 'because I said so' To secure your status as a debtor you must follow whatever rules are required to get that status. But presuming that sfb did so, damn straight he has preferential treatment.

As an aside, I presume you are also against universal default. Meaning for this hypothetical that I cannot in my contract say 'I'll give you 10K at x% interest rate, but if you incur another $10K in debt then my interest rate will be x+x'%.' A concern about unsecured creditors being able to maintain their place in line (or rather compensate for not being able to) would be in part resolved by allowing universal default.

Keep also in mind that in most 'at will' employment situations, the 'contract' is for around 2 weeks in the future. You only have a claim (which is head of the line) for wages for any time already worked. Any promises made for the future, are, if in writing, yes, contractual obligations, but which do not, ifaik, consist of secured claims. And the unions, or at least the union leadership and lawyers, should have known this.

Now feel free to try to change the law to make these secured claims in the future. Or encourage unions to put in the contract to collateralize (i.e. make more secure) these claims. My take is the unintended consequences of such actions would be nearly disastrous (short reasoning - unionized workplaces with such contracts will have difficultly obtaining financing at any price, and definitely not at a price that's feasible for continued operations/expansion), but if you want to push for such a change, go for it.

|5.2.09 @ 6:47PM|#

MNG @ 6:05

"Really?

Again, I promise Kolohe to pay him $10,000 if he does X. Then I promise sfb to pay him $10,000 if he does x, but I say to him "and so help me, paying this debt will be preferred over all other debts I have."

And THAT is why we should give preferential treatment to the second? Because the debtor SAID SO?

WTF?"

What you're missing is that, in your example, Kolohe and sfb are both equally free to bargain for secured creditor status. If Kolohe didn't -- too bad, so sad. It isn't like the secured/unsecured division is something new in the law.

Also, generally speaking, to acquire secured creditor status you have to obey certain notice requirements at well.

|5.2.09 @ 6:51PM|#

The thing that you seem to be ignoring, MNG, is that the promises made to the "secured" debtor is different than the one made to the "unsecured" debtor. It is explicit when you have a contract. They are both contracts but they say different things. Using the credit card/mortgage example when you get a credit card the worst that you agree to happening is being sued, possibly have your wages garnished. Bankruptcy law indicates that you can not have your home repossessed, because the money loaned was not "secured" with that asset. When you take out a mortgage you agree that your actual asset, the house, can be reclaimed.

This UAW giveaway amounts to making it legal for your credit card company to seize your house for unpaid credit card bills.

The UAW could have made it explicit that the big 3 secured the pensions with actual money, but they didn't. The biggest reason being that they COULDN'T, because it would have bankrupted the big 3 years, possibly decades, ago.

Kolohe|5.2.09 @ 7:01PM|#

And in the interest of full disclosure, I'll say that I'm likely one of the few people here that works for an org that still has an old school defined benefit pension. And mine is actually written into law.

Now they could go ahead and modify or eliminate it, (which would be disastrous, but not ruinous for me, because I have a small hedge against that scenario). They have in the past, modified it so that it was slightly lest generous for new hires (the scheme I cam in on - but wound of reverting to the old way for most of it anyway). But even if they went ahead and chopped it, I would be pissed, but I wouldn't say I had any sort of claim on it.

toddb|5.2.09 @ 7:14PM|#

MNG,
Scenario: I need to borrow $100K. I go to you and say...look, I need $100K, I own my house free and clear and it's worth $100K. If you loan me the money, I'll sign a contract that says if I don't pay you back in a year, you get my house. You loan me the money.

A month later, I find I need to borrow another $20K. I go to Kolohe. He asks for collateral, but I've already committed my only collateral to you, so I say...I can't give you collateral, but my boss loves me and I'm going to get a big raise next month so I'm good for it. He loans me the money.

Fast forward one year. I've lost my job and the real estate market has tanked. My house is now worth $70K. You are screwed, because you aren't getting the money and the asset you are getting is worth less than the loan amount. Kolohe is really screwed, because he only secured a vague promise that I could make it good later.

Enter Pres. Obama. He says "Kolohe is my kind of people...MNG is going to have to lump it and take what is left after Kolohe gets his $20K back." So my house is sold, Kolohe gets $20K and you get $50K.

You are cool with that? You don't feel that your contract saying you get the house shouldn't get priority over Kolohe's foolish gamble to give me the money without security?

|5.2.09 @ 7:19PM|#

MNG,

my shot at payroll as secured debt.

Security interest are offered for long dated obligations. If you are lending 20 year money, you need that for the transaction to make any sense - who knows whats going to happen over 20 years. Its that uncertainty that makes unsecured LT debt freaking expensive. Shorter dated claims can be secured, but usually aren't. Its easier to know the range of things that can happen, so usually a security interest doesn't make the borrowing any cheaper.

Why shouldn't a worker get a free secured claim? he hasn't lent any property, it's a short term claim, and this claim would displace claims more senior in contravention of that agreement which is already in place.

|5.2.09 @ 7:33PM|#

How long until talk of impeachment starts?

Harry Bennett|5.2.09 @ 7:35PM|#

The only secured claim a UAW worker should have is for a crack on the head.

|5.2.09 @ 7:41PM|#

Perella Weinberg is a hedge fund. I'd be interested to know what they paid for the debt they held. They tried to hold up the deal after being offered 33 cents on the dollar. Chrysler debt has not exactly been a hot buy in the debt markets lately. They might have paid 10 cents on the dollar for the bonds they held.

The deal they refused would have averted bankruptcy and they would have received some value for their paper. They played a game of chicken and got run over. A hedge fund taking the moral high ground is a fucking joke.

|5.2.09 @ 7:42PM|#

How long until talk of impeachment starts?

Hell, this is America. Impeachment talk always starts the day after inauguration.

|5.2.09 @ 7:43PM|#

Can someone tell me what makes secured debt secured debt and unsecured debt unsecured debt, . . .

Secured debt is secured by a security interest in specified collateral, which could be as specific as naming a particular asset or as broad as a blanket lien on all of the borrower's assets.

Other potential lenders are put on notice of the secured creditor's security interest by filing financing statements--a public record usually filed with the secretary of state of the state where the debtor is located. (Just like a mortgage is filed with the county recorder to notify potential creditors that your house has a prior lien.)

If you loan money without taking a security interest, you are an unsecured creditor. This doesn't mean that your debt in non-recourse--i.e., it doesn't mean that you can't go after the debtor's assets--but it does mean that your debt only gets satisfied with any assets left over after the secured creditors' claims are satisfied. If there aren't any assets left over, you could be out of luck. As others have noted, the additional risk of being an unsecured creditor is usually reflected in a higher interest rate--which is why your credit card (unsecured debt) has a much higher interest rate than your home mortgage (secured debt).

Additionally, there can be differing priorities between secured creditors--think of a first mortgage vs. a second mortgage. These priorities are generally a function of when the lien was imposed (earlier liens have priority), but the lenders can, and often do, contract between themselves to determine the priority of their claims.

Hope this helps.

|5.2.09 @ 7:49PM|#

The deal they refused would have averted bankruptcy and they would have received some value for their paper. They played a game of chicken and got run over. A hedge fund taking the moral high ground is a fucking joke.

Pug, does a hedge fund have a moral obligation to look out for the interests of their investors? In particular, should the managers of the fund demand that the law be followed so the investors in the fund maximize the return on their investments?

Oh that's right, you're not one of them so you don't care. Legal protection for me, but not for thee. Yet you describe the hedge fund owners and managers as lacking morals.

Short version - You are a hypocritical asshole.

Kolohe|5.2.09 @ 7:52PM|#

Hell, this is America. Impeachment talk always starts the day after inauguration

Double hell, it continues even after the next guy has taken over.

|5.2.09 @ 7:55PM|#

Lesson to investors: NEVER lend money to a unionized company.

No, instead loan it to a non-union company like WorldCom, Lehman Brothers or Enron.

|5.2.09 @ 8:02PM|#

Oh that's right, you're not one of them so you don't care. Legal protection for me, but not for thee. Yet you describe the hedge fund owners and managers as lacking morals.

Short version - You are a hypocritical asshole.

I take it you didn't like my comment on the morality of hedge funds. You can think they are paragons of morality if you like, I think they are quick buck artists of the lowest order. Their morals will conform to whatever the situation happens to be.

I'd be willing to bet they didn't pay more than 20 cents on the dollar for the Chrysler bonds they hold. I'm betting they were trying to jack up the government for millions so the deal would get done.

They played hardball and they got beaned. Tough.

BTW, I'm not a hypocritical asshole. You, however, are extremely rude and it makes you look bad. You should work on that.

|5.2.09 @ 8:13PM|#

You're lack of understanding of what is actually occurring with Chrysler bondholders and bankruptcy tells me I should have added ignorant between hypocritical and asshole. I doubt you even understand that hedge funds provide a valuable service in financial markets or they wouldn't even exist.

Should the rough language* offend you, I recommend you retire to some blog where moderators censor the discussion so as not to offend innocent virgin ears.

* You apparently haven't seen what I write when I'm angry. Hypocritical asshole wouild be considered going easy in most of my diatribes.

|5.2.09 @ 8:15PM|#

Perella Weinberg is a hedge fund. I'd be interested to know what they paid for the debt they held.

What does that matter?

They tried to hold up the deal after being offered 33 cents on the dollar. Chrysler debt has not exactly been a hot buy in the debt markets lately. They might have paid 10 cents on the dollar for the bonds they held.

They think they can get more in court, and they are probably right

The deal they refused would have averted bankruptcy and they would have received some value for their paper. They played a game of chicken and got run over. A hedge fund taking the moral high ground is a fucking joke.

But less, apparently, than they think they can get in court. how is asking for what you own immoral?

|5.2.09 @ 8:17PM|#

"I think they are quick buck artists of the lowest order. Their morals will conform to whatever the situation happens to be."

One has to wonder about your actual knowledge of how and why hedge funds work. Instead of a knowledgeable comment about the morality of hedge funds action's you simply declared them "bad". So rather than "they played hardball and got beaned" they stand to be fucked by the government because persons such as yourself don't understand what they do and think sophomoric and surface descriptions define them, basically judging a book by it's cover.

"A hedge fund taking the moral high ground is a fucking joke." and "You, however, are extremely rude and it makes you look bad. You should work on that."

For the record, these two posts, where you talk shit about a group of people and then call someone else "rude" does make you a "hypocritical asshole".

|5.2.09 @ 8:33PM|#

Pug apperently believes that when not busy foreclosing on the orphanage, hedge fund management is busy tying Nell to the railroad tracks.

|5.2.09 @ 8:37PM|#

I'd be willing to bet they didn't pay more than 20 cents on the dollar for the Chrysler bonds they hold. I'm betting they were trying to jack up the government for millions so the deal would get done.

"Jacking up" means stealing, right? by asking for more than a third of their property back? The original bondholders paid 100 cents, and then they sold out to hedge funds for 20 cents. the fact that they might be worth more than 20 cents in court doesn't make the funds who bought them criminals, it means they are providing a liquidity service. How is that anyones business?

Anonymous|5.2.09 @ 8:37PM|#

MNG isn't missing anything. In his world, a contract which was entered into voluntarily is simply evidence of oppression by the capital-holder. Who is oppressed is up to the government to figure out, preferably legislators (after all, judges are busy agitating for social change and modifying law).

</|5.2.09 @ 8:39PM|#

How is that anyones business?

If the transaction was unfair, it is the business of the Federal Government. cf, European Comission.

publius|5.2.09 @ 9:03PM|#

MNG @ 1:47pm said

"Now, coming to a business near you, the War On Wealth."

Since there's a 99.9% chance that you're not even close to being wealthy I'd say don't worry too much over it brother.

You enter the thread with a nasty ad hominem attack.

How childish....and typical.

NotSoSweet|5.2.09 @ 9:17PM|#

publius,

Some advice for MNG can be found here.

Looks like MNG wrote to Professor Foxy as "Sincerely" and possibly as "Lube".

The shower head advice is the best kept secret in personal pleasure. Maybe with a few climaxes MNG will be a little less hostile.

kinnath|5.2.09 @ 9:48PM|#

I'd be willing to bet they didn't pay more than 20 cents on the dollar for the Chrysler bonds they hold. I'm betting they were trying to jack up the government for millions so the deal would get done.

They played hardball and they got beaned. Tough.

Jealousy combined with ignorance -- the recipe for making a classic progressive.

You could try to read a newspaper or two, that would help with the ignorance.

Unless your problem is actually failing to process the information that's readily available -- jealousy plus stupidity results in mobs with pitchforks.

NotSoSweet|5.2.09 @ 9:53PM|#

Unless your problem is actually failing to process the information that's readily available -- jealousy plus stupidity results in mobs with pitchforks.

Are you talking the May Day celebrations in LA or the ones in Germany?

perilisk|5.2.09 @ 10:42PM|#

"Really?

Again, I promise Kolohe to pay him $10,000 if he does X. Then I promise sfb to pay him $10,000 if he does x, but I say to him "and so help me, paying this debt will be preferred over all other debts I have."

You're misrepresenting the situation. If you're GM, you didn't go behind Kolohe's back and give someone else preference, everyone knows up front whether a certain loan is secured by your assets or simple good faith. And because everyone knows and trusts in a third party to force you to honor that preference (whether they trust you personally or not), it is reasonable for sfb to cut you a break on interest, and for Kolohe to charge you more as he is taking more risk.

If that third party suddenly decides to instead compel you to treat Kolohe and sfb equally (oh, and it turns out that Kolohe is his favorite nephew, and sfb said some very snarky things to the third party last week while drunk) then it's reasonable for sfb to feel that he has been defrauded -- not so much by you, but by the person that the community has been counting on to make people honor their word, consistently and without prejudice.

The larger implication is that everyone realized that without that third party to compel honor, all loans are, at best, unsecured. At worst, loan order will be dictated by personal connections and may be as a mechanism to transfer money from favored lenders to unfavored lenders. Either way, the next time you (or anyone else, the fiasco wasn't really your doing) attempt to borrow money, you can expect to pay much more, if you can get a loan at all. And everyone is worse off as a result.

|5.2.09 @ 10:47PM|#

Lesson to investors: NEVER lend money to a unionized company.

"No, instead loan it to a non-union company like WorldCom, Lehman Brothers or Enron."

How much would you like to bet that lenders to WorldCom, Lehman, and Enron got a better deal in bankruptcy court than Chryslers lends were getting offered by Obama?

|5.2.09 @ 10:58PM|#

I take it you didn't like my comment on the morality of hedge funds. You can think they are paragons of morality if you like, I think they are quick buck artists of the lowest order. Their morals will conform to whatever the situation happens to be.

Their morals are irrelevant. Those bonds would sell for zero if there was prior knowledge that the collatoral would get expropriated by the government and given to UAW. If the banks knew that their bonds would be worthless in the event of a default, they wouldn't have purchased them in the first place. Chrysler wouldn't have been able to get a loan, and they would have been in bankruptcy years ago.

|5.2.09 @ 11:19PM|#

I heard that stockholders are getting only 5 cents on the dollar....I expect them to jump in with a suit as well.

GG|5.2.09 @ 11:31PM|#

Update: Arguably the most interesting dimension to the story is the way the Obama White House is openly working the P.R. ropes against foot-draggers in this process. More on that here.

Can't wait for the movie.

|5.3.09 @ 12:08AM|#

On an historical note, who can tell me who else was noted for railing against speculators? Class? Any hands?

(Hint: they were very big on uniforms and mass rallies)

-jcr

</|5.3.09 @ 1:10AM|#

I know! I know!

Teddy Roosevelt!

But I'm confused on the uniforms and mas rallies...

Paul|5.3.09 @ 1:36AM|#

Both are promises that should be kept and I don't see any reason why, in bankruptcy, any one should be preferred over the other.

Because it's the government's job to pick winners and losers.

Anonymous|5.3.09 @ 1:37AM|#

On an historical note, who can tell me who else was noted for railing against speculators? Class? Any hands?

Hugo Chavez!
Wait, I mean Ceasar Chavez.
No... I think it's Julias Ceasar.
Man, I loved Raul Julia.
In a crisis, it would be Rahm Emanuel.
Actually, I meant Bruce Soetero.

Naga Sadow|5.3.09 @ 2:07AM|#

Kolohe,

There may be a definitional argument springing up here. I've only been buying stocks and bonds for roughly six years. I've been buying bonds for roughly the last two years. Whenever I've mentioned their par value its always the market price the bond was selling for at the time I decided to buy it. The Ford bonds for instance were selling for roughly 73 cents on the dollar. A deep discount. I thought it was great considering the coupon was 7.5%. Am I confusing present value with future value?

|5.3.09 @ 2:12AM|#

On an historical note, who can tell me who else was noted for railing against speculators?

Hmmmmm.....

Three New Deals: Reflections on Roosevelt's America, Mussolini's Italy, and Hitler's Germany, 1933-1939

http://www.amazon.com/exec/obidos/ASIN/0312427433/reasonmagazineA/

Anonymous|5.3.09 @ 2:23AM|#

Naga, the amount you bought it at is (intuitively) its historical value or historical cost. This value is used in accounting for long-term securities and some shorter-term securities, depending on their economic substance.

Par: as Wikipedia puts it: "In the U.S. bond markets, the Par Value (as stated on the face of the bond) is the amount that the issuing firm is to pay to the bond holder at the maturity date." So par is the amount promised upon maturity, in terms of dollars of the year they mature.

Present value is the value of all cash flows resulting from ownership of the security, discounted at your current discount rate (usually either a prime rate or your personal/corporate opportunity cost: the rate at which the same money invested elsewhere would grow). The market value is obviously what it's really going for; the price information that's encoded in market bids here is really mostly each party's discount rate and their estimations of chances of the issuer's default.

So if you're looking at whether selling a bond is a good idea, you're going to want to compare its market value, which is what you'll get from selling it now, to the present value of all cash flows you'll receive from not selling it, which is what you'll get from it over its life; but that ignores any external benefits from holding onto it.

I haven't been following the conversation, but I hope this is useful.

Naga Sadow|5.3.09 @ 2:31AM|#

That doesn't sound right either. I must be mixing up my definitions again. I'm terrible at that. As a bartender, it's downright infuriating! I'm always forgetting shit I haven't had to think about in a while. I'll look it up tomorrow.

Suki|5.3.09 @ 6:28AM|#

Good morning Naga!

Fluffy|5.3.09 @ 7:59AM|#

And THAT is why we should give preferential treatment to the second? Because the debtor SAID SO?

I thought I would also chime in and point out that not only did the debtor say so - the creditors said so too. ALL the creditors.

The fact that some creditors demanded security for their extension of credit, and others did not, not only constitutes a definition of the relationship between debtor and creditor, but also the relationship between creditors. The people who bought unsecured bonds knew damn well that senior creditors were in front of them. And the wage negotiators at the UAW knew that, too.

So the creditors themselves have, by their deliberate and knowing acts, pre-agreed to their respective priorities at bankruptcy.

The deal they refused would have averted bankruptcy and they would have received some value for their paper. They played a game of chicken and got run over.

Actually, calling the deal Obama tried to structure an "aversion of bankruptcy" is a fucking joke and a lie, just like every other aspect of Obama's economic plan.

The deal would have destroyed the existing version of Chrysler, essentially wiped out the current owners, and forced all creditors to accept less than the full amount they were owed in a reorganization of the company. In other words, it WAS a bankruptcy, they just weren't calling it that.

And you know why they weren't going to call it that? So the sellers of credit default swaps on Chrysler could evade paying out on the bets they LOST. The entire deal was a cynical bargain designed primarily to bail out Wall Street AGAIN.

Hopefully the firms that wouldn't play ball with this corrupt game and forced an actual bankruptcy owned Chrysler CDS and can now demand 100% payment from their counterparties.

Lester Hunt|5.3.09 @ 9:14AM|#

Remember the Colorado bond holders in Atlas Shrugged?

BakedPenguin|5.3.09 @ 10:05AM|#

Naga, par for bonds is almost always $1,000 per bond. They are initially sold at $1,000, and then they either gain or lose value due to changes in the (macro economic) interest rate. If interest rates go up, the value of the bond goes down, because it is less attractive compared to the risk it presents. Changes in the financial stability of the company itself, obviously, can also affect the price. There are also convertible bonds, but that's a whole other ball of wax.

As the bond gets closer to maturity, the price of the bond will get closer to par value (assuming the company isn't on the verge of bankruptcy). The closer to maturity, the more probable it is that the company will pay off - redeem - the initial investment at maturity. As there are fewer and fewer interest payments in addition to the redemption payment, the difference between the interest rate of the bond and the prevailing interest rate matters less and less.

If you bought at $750, and sold for par value - $1,000 - you had quite a deal.

|5.3.09 @ 10:15AM|#

Fluffy-

As usual, I think you have nailed it. However, do you have some back-up on the points made in your second to last paragraph?

Off topic: Jack Kemp died this morning.

|5.3.09 @ 10:16AM|#

Lester Hunt-

Speaking of bondolders, how about the delegates to the constitutional convention?

Suki|5.3.09 @ 10:19AM|#

BP,

If you bought at $750, and sold for par value - $1,000 - you had quite a deal.

And he is a bartender, so that is like 20 bar tab units vs. only 2 or 3 for the rest of us.

libertymike,

Heard about Jack Kemp this AM from my friend John :(
National Review people are posting their memories of knowing him.

MNG|5.3.09 @ 10:46AM|#

"Why should the terms of promise A between X and Y privilege it over promise B made between X and Z?

Because the contract says so. (That's why people bother to secure loans.)"

Most people's responses seem to be a variation on this. But I still cannot buy it: why would the terms of a contract between A and B make it "more preferred" or entitled to government preference in their using force to enforce the contracts (which is what bankruptcy proceedings are, right?) over a promise between A and C? Why would the termsenforcement of the first contract have anything to do with the terms/enforcement of the second? Certainly the mere agreement of A and B cannot be a reason why C should say "oh yeah, B's contract with A is more important than mine, I mean, hell, they said it was!"

|5.3.09 @ 10:49AM|#

Apparently, MaunderingNannyGoat is so incredibly fabulously wealthy he has no need to actually comprehend the basic fundamentals of finance. I suppose his butler handles all that.

------

They played a game of chicken and got run over.

I think you have this backwards; they refused to let themselves get steamrollered by a politician who wants to perpetrate a huge extralegal transfer of wealth based on his personal prejudices and political goals.

I'll go out on a limb and bet there were a bunch of people who were secretly rooting for the the odious evil hedge funds. People who were getting cudgeled into sumission with their TARP entanglements.

BakedPenguin|5.3.09 @ 10:52AM|#

that is like 20 bar tab units vs. only 2 or 3 for the rest of us.

Suki, there's a huge difference between my current tabs and the ones I had when I was 22.

Also, what's wrong with this picture?

MNG|5.3.09 @ 10:57AM|#

Kolohe
"Keep also in mind that in most 'at will' employment situations, the 'contract' is for around 2 weeks in the future."

I'm not sure people covered by a collective bargaining agreement are similar to "at will" employees. That would seem bizarre.

"Now feel free to try to change the law to make these secured claims in the future. Or encourage unions to put in the contract to collateralize (i.e. make more secure) these claims."

That's what I'm advocating. I'm uneasy about Obama just changing the rules for this situation, if that is what is occurring. But a general rule change seems warranted to me. And, I'm not sure it would need to lead to the disasterous effects you mention: as I said upthread if employees can find it rational to promise their labor for unsecured benefits I imagine lenders could find it rational to promise loans even if they know that employees of the enterprise loaned to have secured claims too...

Domo
"Why shouldn't a worker get a free secured claim? he hasn't lent any property, it's a short term claim, and this claim would displace claims more senior in contravention of that agreement which is already in place."

1. He's lent his labor, which is worth property (this his how a contractor can get a lien on your house when he works on it), 2. you are right about the short term if the employment condition says that, and 3. as I argue, I don't see why the employee as a party should respect the "agreement already in place" between the other party and a third party as defning HIS rights...

toddb
"You don't feel that your contract saying you get the house shouldn't get priority over Kolohe's foolish gamble to give me the money without security?"

You mean because I got you to make two vague promises, or an "extra special promise" and Kolohe just got you to make an ordinary run of the mill but still 100% valid promise? Uh, no I don't think either should be privilged there...

MNG|5.3.09 @ 11:02AM|#

"everyone knows up front whether a certain loan is secured by your assets or simple good faith"

Here's part of the heart of the matter: EVERY PROMISE YOU MAKE SHOULD BE SECURED BY YOUR ASSETS.

If I promise you 10,000 in return for X and I promise Y 10,000 in return for Z and then further add "and you can access my assets if need be to make good on it" then I see those promises as equal. A promise implies every effort to make good on it, no "cross my heart and hope to die" on top of it from either party should make it have any more moral or legal force than the simple promise: "I will give you 10,000 if you do X". And if you and I have a promise I don't care that you made a promise with another guy and told him you considered his promise with you extra special and preferred over mine.

Now if someone explicitly waves that for consideration I would feel different (I say "I will pay you 10,000 if you do x, and for another 1,000 you agree that you will wait in line behind this other creditor I have")

MJ|5.3.09 @ 11:07AM|#

"A promise to an employee and a promise to a lender, both should be kept."

Ideally, both should be kept, but we live in reality. Reality says that both cannot be kept so you are going to have to priortize which will be kept. Reneging on the promise to the lender will have short and long term consequences that will make keeping any promises to the employees impossible, as lenders will assume greater risk in floating loans to keep the business above water at any kind of favorable terms.

Accepting what can and cannot be done and revising plans accordingly is an adult attitude. Saying all promises must be kept equally regardless of circumstances is a suicide pact. Bankruptcy law is an ugly but necessary way of triaging priorities.

MNG|5.3.09 @ 11:08AM|#

So the creditors themselves have, by their deliberate and knowing acts, pre-agreed to their respective priorities at bankruptcy.

fluffy
That's a pretty big legal fiction it seems to me.

My brother does contracting work. When he makes a promise to make a fence for X in return for Y paying him $4,000, he assumes Y will pay him the money when he builds the fence, not "well, of course, if he made any extra-sepcial promises to other people and he can't honor them all then I expect him to honor those first."

Again, if it were made explicit, i.e. the guy said to him "hey, I agree to pay you the 4,000, but I'll throw in a promise for an extra 500 if you agree that my promise to Kolohe comes before yours" then I may think differently.

MNG|5.3.09 @ 11:12AM|#

"Reneging on the promise to the lender will have short and long term consequences that will make keeping any promises to the employees impossible, as lenders will assume greater risk in floating loans to keep the business above water at any kind of favorable terms."

Look, I see your point, but as everyone around here keeps telling me in the labor-management contract threads, labor is just as important as capital in making an enterprise succeed. Saying "look, you've got to prioritize the lender of capital's claims because otherwise people wouldn't lend, with disasterous consequences" doesn't wash with me because I will say "look, you've got to prioritize the provider of labor's claims because otherwise people would'nt provide labor, with disasterous consequences."

Unless you want to say that labor will tend to do such things because they have to due to their weakness in bargaining position relative to employers (and lenders). If you want to say that to get out of the problem then I could probably find it in myself to agree ;)

MJ|5.3.09 @ 11:12AM|#

"Here's part of the heart of the matter: EVERY PROMISE YOU MAKE SHOULD BE SECURED BY YOUR ASSETS."

Making sure of that is more the responsibility the entity asking for the promise then on the one making it.

And what if the promise being asked for is worth greater than present assets of the promiser?

MNG|5.3.09 @ 11:15AM|#

"Apparently, MaunderingNannyGoat is so incredibly fabulously wealthy he has no need to actually comprehend the basic fundamentals of finance. I suppose his butler handles all that."

P Brooks
I would never dump such things on your father, he's served me well for years. Besides, my shoes nearly always need shining and he's clearly the man for that job!

Mr. Brooks Sr, my coat and cap please. And tell Suki to bring the car around, we're going to the 12:00 showing of X-Men Origins.

MNG|5.3.09 @ 11:19AM|#

"Making sure of that is more the responsibility the entity asking for the promise then on the one making it."

Alright, one more because I go. That statement is INCREDIBLE. You mean the onus is on the OTHER PARTY to make sure the promisor keeps his promise????? I should think the onus to keeping the promise is, well, ON THE PROMISOR.

WTF?

Look, the cunt in this is not the bondholders imo. They are doing what they do and they have every right to try to get back what the cunt in this situation, which is Chrysler, promised. My point is so do all of Chysler's promisees, and that includes the employees they made definite promises to.

Now, off to Wolverine...Back later

MJ|5.3.09 @ 11:20AM|#

The promises made to the lenders are short term, the ones made to employees tend to be long term. If a company get capital to tide it over a short term problem, then it will be able to keep any long term promises. If you want to say that is a weaker position, fine, but it is the reality of the circumstances and cannot be changed.

MJ|5.3.09 @ 11:25AM|#

"That statement is INCREDIBLE."

Perhaps I phrased it poorly then.

I meant that the lender, employees, contractors ask for something, it is on them to ask the company it be secured or refuse the business. If the issue is so important to you that it cannot be unsecured it is your responsibility to ask for the security.

MJ|5.3.09 @ 11:31AM|#

Which still leaves unanswered: What if the promosed being asked for is greater than the assets of the company? The future debt of pensions is likely to be. If so, it cannot be secured against the assets of the company, and if it is it leaves no room for secured loans anywhere else.

I do not believe you are thinking through the consequeces of what you want done.

MJ|5.3.09 @ 11:53AM|#

"why would the terms of a contract between A and B make it "more preferred" or entitled to government preference in their using force to enforce the contracts (which is what bankruptcy proceedings are, right?) over a promise between A and C? Why would the termsenforcement of the first contract have anything to do with the terms/enforcement of the second?"

Because that's the legal difference between "secured" and "unsecured". You are arguing as if these terms have no meaning to you. "C" was well aware (or should have been) of where his contract fell on the list of priortities when he entered into it. If he was uncnfortable with that status he should not have entered into it.

Suki|5.3.09 @ 12:12PM|#

BP,

Also, what's wrong with this picture?

Guess 1: Ford (my total fave) is perceived by the market to be about twice as risky as Chrysler (beloved's fave) for non-callable bonds right now?

Guess 2: You like Ford too and the Fitch people are big meanies for rating Ford CCC vs. the A that Chrysler has?

All out of guesses. Please be kind when you score my quiz? (smile fit to pour on pancakes)

Suki|5.3.09 @ 12:23PM|#

BP,

Also, what's wrong with this picture?

WAIT! One more guess. I win and beloved loses so he cooks AND cleans tonight?

|5.3.09 @ 12:25PM|#

P Brooks
I would never dump such things on your father, he's served me well for years. Besides, my shoes nearly always need shining and he's clearly the man for that job!

Gadzooks!

Teh PWNAGE!!

BakedPenguin|5.3.09 @ 12:29PM|#

Suki, your 1) is certainly correct. I mainly wanted to add to the libertarian bitch-moment that Chrysler should be in that position vis-a-vis Ford. As an aside, while I currently drive a GMC truck, it will be the last GM or Mopar I ever buy.

Suki|5.3.09 @ 12:34PM|#

As an aside, while I currently drive a GMC truck, it will be the last GM or Mopar I ever buy.

I am not up to speed on the Chrysler deal. Is the government jumping in and running things like they are doing with GM? John T. mentioned he has to change a book detail because of that.

Suki|5.3.09 @ 12:35PM|#

BP,

See how well smiles work on quizzes? :)

Fluffy|5.3.09 @ 12:36PM|#

My brother does contracting work. When he makes a promise to make a fence for X in return for Y paying him $4,000, he assumes Y will pay him the money when he builds the fence, not "well, of course, if he made any extra-sepcial promises to other people and he can't honor them all then I expect him to honor those first."

Actually, I don't think you understand your brother's business very well, because I would bet you dollars to doughnuts that your brother puts a workman's lien on the property he contracts to work on. And if after your brother helps to build or improve property, if the customer tried to sell that property and use it to pay off his credit card debts, your brother would have a secured place in line to make sure he was paid out of the sales proceeds before the customer got any of them.

And if, when he went to place a workman's lien on the property, he discovered that there were multiple mortgages already recorded against that property and the customer was swimming in debt up to his eyeballs, the onus would be on him to say, "This guy already has so many liens that working for him is a bad risk. I better get my money up front, or just blow this job off."

Paul|5.3.09 @ 12:43PM|#

New headline as of this morning:

Obama plans to force deep cuts at GM

WASHINGTON - Fresh from pushing Chrysler into bankruptcy, President Obama and his economic team are hoping the hard line they took last week gives them leverage to force huge changes in General Motors, a far larger and more complex company.

Officials said that, difficult as Obama's decision was to take all the risks of a Chrysler bankruptcy, the politics of reshaping GM will be far harder.

No, Obama doesn't want to run the auto companies. Noooooooooo.

|5.3.09 @ 12:43PM|#

It will be interesting to see how the people crying "credit freeze!" last fall will react to this.

Will they be able to successfully dismiss the consequences of this?

The Angry Optimist|5.3.09 @ 12:45PM|#

I'm still mystified why we are even taking seriously the notion that labor is somehow an unsecured extension of credit. We are assuming Facts Not in Evidence, which is that individual UAW workers have individual contracts with Chrysler, which they do not.

Paul|5.3.09 @ 12:46PM|#

Fluffy:

Actually, I don't think you understand your brother's business very well, because I would bet you dollars to doughnuts that your brother puts a workman's lien on the property he contracts to work on. And if after your brother helps to build or improve property, if the customer tried to sell that property and use it to pay off his credit card debts, your brother would have a secured place in line to make sure he was paid out of the sales proceeds before the customer got any of them.

Thank you, Fluffy. I was about to bring the hell-fire down when you summed it up nicely.

People just don't get it. They think this whole business 'contract' thingy is a bunch of unenforcable pinky-promises where the outcomes are merely based on some egalitarian, range of the moment fairness decisions. "He's really cute, has big brown eyes and seems so nice, he should be first in line!"

The Angry Optimist|5.3.09 @ 12:49PM|#

In fairness, 99.9999% of contracts go through just fine. it's that .0001% that HAVE to be enforced and the even smaller number of cases where someone is in over his head that cause all the problems.

As in all things in life.

Anyway, can someone please tell me why we're talking about labor as an unsecured line of credit?

Naga Sadow|5.3.09 @ 12:51PM|#

Hey Suki.

P Brooks,

Yes. So far I have had my international economics professor and my business statistics professor say that we needed the bailout. I actually got into an argument with the latter. He pointed to the systemic risk and recommended a book, "Against the Gods" to learn about his talking points. I retorted that I already OWN the book and I drew a completely different picture. Everytime someone tries to control risk outside of the market it back fires. As for systemic risk, where's the end? At what point does business risk become systemic risk? He retorted that I misunderstood his argument and that he had a class to get to.

Naga Sadow|5.3.09 @ 12:53PM|#

TAO,

Because of MNG. MNG understands everyone's arguments and I suspect even agrees with those arguments but she's still trying for a clever loophole to shill for the UAW workers in this topic.

NotSoSweet|5.3.09 @ 12:57PM|#

P Brooks,

No, Obama doesn't want to run the auto companies. Noooooooooo.

Nah, he just wants them to do what he says. Just like Mrs. Nice Gyn.

The Angry Optimist,

I'm still mystified why we are even taking seriously the notion that labor is somehow an unsecured extension of credit. We are assuming Facts Not in Evidence, which is that individual UAW workers have individual contracts with Chrysler, which they do not.

Because so many nice people are trying to help out a collectivist crybaby as if it will help.

Naga Sadow,

So far I have had my international economics professor and my business statistics professor say that we needed the bailout.

Key words bolded. Mystery solved.

Naga Sadow|5.3.09 @ 12:59PM|#

NotSoSweet,

I don't follow your snark I'm afraid. Please explain.

NotSoSweet|5.3.09 @ 1:02PM|#

I don't follow your snark I'm afraid. Please explain.

They are professors, not normal people.

Naga Sadow|5.3.09 @ 1:05PM|#

NotSoSweet,

Well . . . yeah. Mostly arrogant, some woefully ignorant, but worthy of my respect due to the fact that I would NEVER do there job for less than six figures. I'm an asshole but I like to think I'm humble enough that I can ask my teachers questions. It's how I've learned that when people give long rambling answers they are full of shit.

NotSoSweet|5.3.09 @ 1:14PM|#

It's how I've learned that when people give long rambling answers they are full of shit.

You could've saved the money and just read the crap posted above us!

Naga Sadow|5.3.09 @ 1:17PM|#

NotSoSweet,

LOL. Indeed, my friend. It's why I rarely argue with MNG.

BakedPenguin|5.3.09 @ 1:29PM|#

Naga, if you knew all that, you could have said so earlier. Reminds me of the time I replied with a 'see-Spot-run' explanation to someone here asking about HTML. The guy responded (to someone else) asking what specific HTML tags worked in Blogger, and asking if Javascript would work instead.

I wanted to write 'Ass' on my forehead, except it would have come out backwards.

Naga Sadow|5.3.09 @ 1:38PM|#

BP,

This ain't a free show. I'm like the anti-Buddha. I'm convinced that if I give out my wisdom freely and prolificly there will be less for me to use.

|5.3.09 @ 1:39PM|#

If you run up a great big gambling debt (either at the track, or because your computer company has fallen victim to Moore's Law), and you borrow money from a loan shark to double down and win it all back, the loan shark doesn't care if the bank which holds your mortgage has first claim on your cash.

Guess who plays the role of the loan shark in this little morality play.

Naga Sadow|5.3.09 @ 1:42PM|#

P Brooks,

FTW. Obama, with the TARP slapdown, in the Oval Office.

Kolohe|5.3.09 @ 1:50PM|#

Here's part of the heart of the matter: EVERY PROMISE YOU MAKE SHOULD BE SECURED BY YOUR ASSETS.

And this is where the circle gets squared as you are implicitly coming out in favor of the abolition of fractional reserve banking.

Next up, restoring the gold standard? You'll make baby William Jennings Bryan cry.

BakedPenguin|5.3.09 @ 1:51PM|#

Naga, yeah wisdom wasn't exactly what I was asking about, but that's ok. If you want to be the anti-Buddha, you can deal with anti-karma. Next time I play Biloxi casinos, I'm gonna invite Suki and her boyfriend to free booze, then dash on the tab.

Kolohe|5.3.09 @ 1:55PM|#

My brother does contracting work. When he makes a promise to make a fence for X in return for Y paying him $4,000, he assumes Y will pay him the money when he builds the fence, not "well, of course, if he made any extra-sepcial promises to other people and he can't honor them all then I expect him to honor those first."

The demise of more than a few homebuilders and general contractors has resulted in exactly this situation several times in bankruptcy courts. Who got paid what depended on what the contracts were and the laws under which the various contracts were signed (and to be fair, the quality of legal representation)

Naga Sadow|5.3.09 @ 1:58PM|#

BP,

You don't wanna do that, friend. I WILL run you down in the casino. I have no problem embarrasing people to make them pay. Trust me. I've done it before. What's this "next time"? You've been by and haven't popped your head into my restaurant? You disappoint me.

Kolohe|5.3.09 @ 2:01PM|#

It will be interesting to see how the people crying "credit freeze!" last fall will react to this.

I thought (still think) there was a credit freeze last Sept, but that Chrysler (and GM if necessary) should go into Ch 11 bankruptcy and have that system sort it out.

|5.3.09 @ 2:08PM|#

Kolohe-

I'm not convinced the "credit freeze" was as severe as some people wanted us to think, but my real point was that introducing a new species of uncertainty into the credit market is unlikely to increase anybody's willingness to lend.

Naga Sadow|5.3.09 @ 2:11PM|#

Kolohe,

I usually agree with you but not on the "credit freeze". There are roughly 9,000 banking institutions. I refuse to believe someone out there wouldn't have bought up all the fire sale assets on the premise that they could get something better for the pennies on the dollar they paid for said assets.

Suki|5.3.09 @ 2:13PM|#

Naga,

You don't wanna do that, friend. I WILL run you down in the casino. I have no problem embarrasing people to make them pay. Trust me. I've done it before.

Thank you!

If I am having party time with beloved in Biloxi I sure don't want him all grumpy from having to clean and dress a deadbeat penguin ;)

BakedPenguin|5.3.09 @ 2:18PM|#

By that time, I'll have gambled all my money away, which is about as sensible an investment as you can make today. It's why your tabs should always be secured by collateral.

Also, "next time" was poor usage. I've never been to Biloxi, although I briefly dated a girl from there once.

Fluffy Baggins|5.3.09 @ 2:20PM|#

OK, time to interrupt the discussion of the concept of liens to pose a libertarian ethics question:

My house is ~200 years old. This means I can't put a shovel in the ground in the yard without turning over something weird. And I was rototilling the garden the other day, and when I stopped for a moment to take off my work gloves my wedding ring pulled off my hand along with the left glove and ended up flying down into the freshly tilled earth. And in a truly bizarre coincidence, as I went over the ground on my hands and knees, I found not only my own wedding ring, but a second wedding ring I imagine some poor soul had lost while gardening on that exact spot years before. I cleaned the dirt off it, and the only marking on it is an engraving that says "Mexico 51". I interpret "51" to be a date, but I honestly don't know if it means 1851 or 1951.

Should I attempt to contact previous owners, to see if anyone got married in Mexico in 1951 and lost their wedding ring while working in the yard, or should I just say "finders keepers"?

Naga Sadow|5.3.09 @ 2:21PM|#

BP,

Uh . . . it is secured. By big, mean looking security guards. Refer to loan shark comment above.

|5.3.09 @ 2:23PM|#

MNG,
I often respect the arguments you make, but in this case, you are way the hell off kilter.

This isn't analagous to making vague promises to two different people. In one case, you make a vague promise, in the other, you sit down and sign a document putting up your assets as collateral. That docment is signed and witnessed before notary publics, and filed with the government to make sure everyone knows that your house as been put up as collateral. it's not an "extra special promise", it's a promise that is legally recognized by the government as having claim to assets at the time that it is made. That's why we have the concept of a 'lien'.

Signing your house off as collateral SHOULD give the bank posession of the house when you default. Period. That's the contract. Jumping in there to say some money he borrowed from a friend with an IOU should get equal legal standing is just nuts.

We're not going to totally rewrite hundreds of years of law regarding contracts, loans and titles just so the UAW can have it's pension plan protected.

The pension plan is and always was a stupid idea. I can't help it that unions are morons. they did the same thing with the steel industry back in the day. the steel mills went out of business, and the pension plans went with them.
Never bet your freaking retirement on a specific company continuing to exist for another 40 years. Let that be a less to workers everywhere.

|5.3.09 @ 2:28PM|#

Here's part of the heart of the matter: EVERY PROMISE YOU MAKE SHOULD BE SECURED BY YOUR ASSETS.

So, when you default on your credit card debt, the banks should be able to take your home?

You are basically asking for the abolition of the difference between secured and unsecured loans. You are saying that ALL loans should be treated as secured. Which means the abolition of limited liability corporations, amoung other things. As well as credit cards.

BakedPenguin|5.3.09 @ 2:37PM|#

I sure don't want him all grumpy from having to clean and dress a deadbeat penguin ;)

it is secured. By big, mean looking security guards.

Wow, you guys are no fun.

Also, since I might as well post something on topic, the cars companies actually had fully funded pensions in the late 90's, when the stock market was doing really well.

Naga Sadow|5.3.09 @ 2:44PM|#

BP,

Sorry. You touched a nerve. Not tipping is rude but forgivable. Not tipping and making me PAY for your meal? I will utterly destroy you if I find you!

Naga Sadow|5.3.09 @ 2:45PM|#

BP,

To be fair, if you didn't make a ton of money in the 90's from the stock market you should never touch money again. You may soil it with your ignorance. ;)

|5.3.09 @ 2:51PM|#

Speaking of the VEBA...

There's this to consider:

The union trustees could pressure management to play nice and give labor fat contracts. But if that results in a less competitive car company, then GM or Chrysler would lose money and their shares will lose value. Then, the trust will have a tougher time paying those health benefits. And remember one this: Trustees have a fiduciary duty to the trust. They may like the UAW. They may also support the cause of blue-collar affluence. Heck, they could be fire-breathing socialists who loathe management. But their legal duty is to manage that trust and make sure it can make a return on its investments and pay the benefits that the union negotiated years ago.

Kolohe|5.3.09 @ 2:51PM|#

Fluffy-
If your town is small enough, you may try to see if one of local jewelers (i.e. not chain store) would recognize the work and possibly determine the owner. (this assumes 'mexico' refers to the location of the wedding but not where the ring was forged)

Also going to a jeweler (of any sort) should be able to determine which century the ring is from. (my gut tells me the 'mexico' inscription means it's from this century)

Naga Sadow|5.3.09 @ 2:54PM|#

Fluffy,

Dude! You're fucked! Sauron's looking for that ring! He probably already has sent RingWraiths after you!

Kolohe|5.3.09 @ 2:55PM|#

Although if you could have an inscription like this

BakedPenguin|5.3.09 @ 2:55PM|#

Just making a joke about secured / unsecured loans. Your point about bigass bouncers is well taken, though. Bet Oppenheimer Funds wishes they had some dudes who could chat with the Obama admin.

As far as the 90's are concerned, I once bought a bunch of call options in a company that went through a short squeeze. Had I invested $10k instead of $500, I could have quit my damn job.

Naga Sadow|5.3.09 @ 2:57PM|#

BP,

Actually they do. Unfortunately those "dudes" work for Obama.

|5.3.09 @ 3:11PM|#

Dude! You're fucked! Sauron's looking for that ring! He probably already has sent RingWraiths after you!

What he left out is that the inscription 'Mexico 51' only shows up in flaming letters after you heat the ring in a fire.

Obviously, Sauron is the leader of a Mexican Lowerider Gang.

|5.3.09 @ 3:14PM|#

Lowrider (stupid keyboard)

Naga Sadow|5.3.09 @ 3:14PM|#

Dammnit Hazel! Now I got that damn lowrider song stuck in my head!

|5.3.09 @ 3:17PM|#

And in a truly bizarre coincidence, as I went over the ground on my hands and knees, I found not only my own wedding ring, but a second wedding ring I imagine some poor soul had lost while gardening on that exact spot years before.

Dude- if I were you, the first order of business would be to pour a ten inch concrete slab over that spot, before the zombies claw their way out.

BakedPenguin|5.3.09 @ 3:17PM|#

P Brooks - I've thought about that. It may result in a generational split among the UAW, with the younger workers arguing for higher salary, and the older workers fighting to ensure their benefits.

Hazel - does that make Lonewacker Gollum? Because that would totally make sense.

BakedPenguin|5.3.09 @ 3:21PM|#

Uh, I was referring to P Brooks' prior comment. I don't think zombies could potentially lead to a split among UAW workers.

Although that would make the better movie.

|5.3.09 @ 3:25PM|#

I dunno, did LoneWacko ever drive a pimped out 1951 Chrysler Imperial ?

Naga Sadow|5.3.09 @ 3:29PM|#

I could picture LoneWacko in a hatchback(thanks BP) but not a sweet automobile like that.

|5.3.09 @ 3:30PM|#

They may like the UAW. They may also support the cause of blue-collar affluence. Heck, they could be fire-breathing socialists who loathe management. But their legal duty is to manage that trust and make sure it can make a return on its investments and pay the benefits that the union negotiated years ago.

Irony. Sweet, sweey, Irony.

Fluffy|5.3.09 @ 3:42PM|#

Dude- if I were you, the first order of business would be to pour a ten inch concrete slab over that spot, before the zombies claw their way out.

Hmmmm...I hadn't considered the fact that there may be no need to look for the ring's owner, because he may be clawing his way up from a few feet below my garden as we speak.

Well, let him come. I will simply put Anti-Zombie Plan Vermont A, v 1.7, into effect. Long have I prepared for this day.

MNG|5.3.09 @ 3:55PM|#

"We are assuming Facts Not in Evidence, which is that individual UAW workers have individual contracts with Chrysler, which they do not."

Why does it matter whether the contracts were made with each employee individually or all at once through their legally recognized representative, the union? WTF? You don't see collective bargaining agreements as contracts? They probably have a labor law class at your law school you can take as an elective you know.

Jordan|5.3.09 @ 4:02PM|#

Everyone on this site I imagine actually had their taxes lowered recently (unless they smoke, the SCHIP increase was funded by a cig tax, which I think was a bad idea).

Uh, yeah right. Except for the future taxes/hyper inflation that will be required to be off all of this fucking debt.

The Angry Optimist|5.3.09 @ 4:02PM|#

huh? how are CBAs contracts? If you could take a CBA and apply it individually to each employee, then there would be no need for individual employees to pay union dues, as each employee to whom the CBA applied would be protected by (individual) contract.

A CBA is a labor contract between the union or unions and an employer or employers. Unless the UAW specifically pledged ten years of labor from Bob Smith and Bob Smith personally signed off on that, you cannot call labor an extension of credit.

So far as I understand your argument, it's that "CBA = labor contract = individual labor contract = extension of labor credit = validity of individual employees as creditors", which is plainly asinine.

Jordan|5.3.09 @ 4:02PM|#

Pay* off

Jordan|5.3.09 @ 4:04PM|#

No, Obama doesn't want to run the auto companies. Noooooooooo.

And all of the assholes who went apeshit any time Obama was called a socialist are mysteriously silent.

MNG|5.3.09 @ 4:07PM|#

"Actually, I don't think you understand your brother's business very well, because I would bet you dollars to doughnuts that your brother puts a workman's lien on the property he contracts to work on."

He doesn't get the lien before doing the work, but goes to court after the fact, if not paid.

"In one case, you make a vague promise, in the other, you sit down and sign a document putting up your assets as collateral."

WTF Hazel? You think the UAW-Chrysler agreement upon which the benefits I'm talking about are a vague promise and not written down?

OK, all people who think collective bargaining agreements are not legally enforceable contracts which create judicially enforceable rights and obligations please raise your hands so we can out you right now. Holy shit.

"You are basically asking for the abolition of the difference between secured and unsecured loans."

I think a promise should be secured by whatever assets the promisor has unless some explicit deal otherwise for consideration has been offered (before someone has a literal cow, yes I realize that is not what the frigging law says now, I am making an OUGHT statement, not an IS statement) and that an agreement between A and B that their contractual obligations come before all others in bankruptcy should not release in any way either party in their promise to C.

Kolohe|5.3.09 @ 4:10PM|#

I will simply put Anti-Zombie Plan Vermont A, v 1.7,

Of course, there's already a wiki

Naga Sadow|5.3.09 @ 4:11PM|#

MNG,

You understand that if you did that then you would hurt teh childrenz cuz the government couldn't deficit spend, right?

MNG|5.3.09 @ 4:11PM|#

TAO
You're ideology has blinded you to a bit of a fact: collective bargaining aggreements are contracts. Individual union members can actually sue the UNION to make them do what the contract says.

Holy shit, c'mon, you know this!

Shit, you can google it in about five seconds:

What Is a Labor Contract?
A labor contract is a private agreement entered into by an employer and a labor organization for the purpose of regulating certain work-related issues. The provisions of the labor contract are binding on both sides for a mutually acceptable period of time and are enforceable through procedures such as the grievance procedure, arbitration, the National Labor Relations Board, or finally, state or federal courts.
This agreement takes the form of a legal contract for several reasons. Employees need to know in advance about wages, fringe benefits, discipline proceedings, and other matters. Employers need to know the same things, plus want protection from strikes for a certain period of time.
In the vast majority of cases both parties to the agreement comply with its contents and the law never enters the picture. In some cases serious abuses do occur, and workers may turn to the National Labor Relations Board or the courts to seek protection.

The Angry Optimist|5.3.09 @ 4:11PM|#

So,yes, you are advocating for the abolition of unsecured loans. The consideration for lack of security, MNG, is higher interest rates than what come with secured loans. There's your consideration right there.

MNG|5.3.09 @ 4:16PM|#

Look, don't even think too hard about labor law. Think something we all know and love: sports law. CBA's abound in sports law. You don't think the CBA's in the NFL are not contracts? Why do you think there is no NFL player paid less than $285,000 TAO?

The Angry Optimist|5.3.09 @ 4:17PM|#

MNG - that doesn't make them employment contracts! Please do us both a favor and realize that you're not as smart as you think you are and I'm not as dumb as you condescendingly treat me.

You want to treat employment contracts as unsecured loans, yes? so, what person in this UAW-Chrysler contract, "lent" his labor to Chrysler, for what period of years and for what rate?

Again, CBAs are agreements that unions and employers hammer out, which basically set up employer and union obligations with respect to day-to-day operations. It's not a matter of being "blinded"; it's that CBAs are not individual employment contracts.

Again, you're way overstretching (I would argue that you're being disingenuos) in saying that individual employment contracts constitute de facto extensions of credit in the first place, and I would argue that you're really overdoing it by saying that CBAs are somehow credit extensions of "labor" to Chrysler from the UAW.

I mean, what are you on?

|5.3.09 @ 4:17PM|#

TAO: Secured loans generally have lower interest rates.

The problem is once the asset has already been secured, it is illegal to take out any more loans against it.

So MNG is basically agitating for less lending. Since it would be illegal to lend money to someone without getting security, and it would be illegal to put up the same asset as collateral for two loans.

Result - it should have been illegal for Chrysler to set up a pension fund, and or borrow money (whichever came later) because it's assets already had an lien on them.

Either way, Chrysler ends up bankrupt sooner, rather than later, and everyone suffers because of credit tightening.

The Angry Optimist|5.3.09 @ 4:20PM|#

Why do you think there is no NFL player paid less than $285,000 TAO?

It's in the CBA. That doesn't make it an individual employment contract. The agreement in the CBA that the NFL is going to pay anyone covered by the CBA a minimum payment is something bargained for by the group efforts of both sides. That does not mean, however, that Willie Anderson is extending a line of labor credit to the NFL!

|5.3.09 @ 4:20PM|#

You want to treat employment contracts as unsecured loans, yes?

No, you want to treat employment contracts as secured loans, without putting that in writing, then let the company put up the security as collateral to someone else, then let the someone else get fucked over, because the union had some kind of "implied lien" on the company's assets, withotu any legal recognition or notice being given to anyone else that that implied lien ever existed.

MNG|5.3.09 @ 4:20PM|#

I'm not sure I advocate eliminating all unsecured loans. First of all, I'm not sure everything we are talking about is a loan; the promise of Chrysler to pay out certain benefits to UAW workers for work done is not quite a loan, but an obligation, a contractual promise. And yes, I think absent some kind of explicit agreement with consideration people (including entitities) should be held to those promises.

As I said upthread if you want to make it so that I can loan you X amount but you can say "hey, if you are willing to agree that others will have preference to my obligation to you in the event I go bankrupt, I'm willing to pay a higher interest rate" then I would let that pass.

|5.3.09 @ 4:22PM|#

Er, last directed to MNG not TAO.
MNG wants employment contracts automatically treated as secured loans.

The Angry Optimist|5.3.09 @ 4:22PM|#

TAO: Secured loans generally have lower interest rates.

Yes. That's what I'm saying: the consideration furnished for an unsecured loan is the ability to charge a higher interest rate than one does on a secured loan.

So MNG is basically agitating for less lending. Since it would be illegal to lend money to someone without getting security, and it would be illegal to put up the same asset as collateral for two loans.

Well, like Kolohe said, it's the end of the credit card market. It's the end of credit (basically) and it's certainly the end of fractional-reserve banking.

Yikes.

MNG|5.3.09 @ 4:22PM|#

TAO
In the CBA Chrysler promised to pay certain things, like retirement payments, in return for labor that has already been given.

Kolohe|5.3.09 @ 4:23PM|#

OK, all people who think collective bargaining agreements are not legally enforceable contracts which create judicially enforceable rights and obligations please raise your hands so we can out you right now.

um, nobody's saying that. What everyone (ok I ) am saying is those 'judicially enforceable rights' are as far as I know rather low on the totem pole based on current bankruptcy law, and more importantly *the contract that the UAW agreed to*. The fact that some the contracts deferred compensation to a later date looks to be in retrospect not the best move. But these guys are hardly babes in the woods. And shame on both sides for creating an obligation that even at the time, should have had some warning flags based on industry and demographic trends which were in full swing by the late 80's.

think a promise should be secured by whatever assets the promisor has unless some explicit deal otherwise for consideration has been offered

This *is* how bankruptcy law currently works, no? I mean there are lots of charge offs cramdowns etc, and some things which are shielded (like in the case of personal bankruptcies people's homes), but if there are any assets leftover after all the explicit deals are settled, they get split among whomever's left. Right?

Naga Sadow|5.3.09 @ 4:24PM|#

As I have stated upthread, MNG agrees with everyone else. MNG is simply looking for a loophole to coverup his original knee jerk reaction position and claim victory for the UAW pension claims. Disingenous? Exactly.

MNG|5.3.09 @ 4:24PM|#

"The agreement in the CBA that the NFL is going to pay anyone covered by the CBA a minimum payment is something bargained for by the group efforts of both sides."

And if the CBA says that the NFL will pay X amount of retirement to NFL Players who retire after Y amount of years?

The Angry Optimist|5.3.09 @ 4:26PM|#

the promise of Chrysler to pay out certain benefits to UAW workers for work done is not quite a loan, but an obligation, a contractual promise.

OK, MNG, hypo time. Let's say I'm 70-year-old Joe Worker, and Chrysler has been paying my pension and medical care and blah blah blah for 10 years (since I retired). Now here comes Suzy Worker, who just retired last year.

Under your plan, what is Joe Worker entitled to and and what is Suzy Worker entitled to?

Oh, and additional to that, why is that Joe and Suzy Worker should be at the front of the line, but Creditor Dave should be at the back?

Fluffy|5.3.09 @ 4:26PM|#

WTF Hazel? You think the UAW-Chrysler agreement upon which the benefits I'm talking about are a vague promise and not written down?

OK, all people who think collective bargaining agreements are not legally enforceable contracts which create judicially enforceable rights and obligations please raise your hands so we can out you right now. Holy shit.

You realize this makes your argument weaker and not stronger, right?

The UAW has a contract, by your own admission, and not a vague and general promise. Had they chosen to do so, they could have demanded in their negotiations that Chrysler's obligations under that contract be secured by some asset or combination of assets, or by funds put up in escrow, or what have you.

They did not do this.

And you know why they didn't do it? Because they knew that would materially change the employment terms they were able to secure. And because they know that no employer maintains unencumbered assets equal to the total amount they could possibly owe under the terms of an employment contract, and that wages are paid out of cash flows and not capital.

I think a promise should be secured by whatever assets the promisor has unless some explicit deal otherwise for consideration has been offered

But that is what already takes place. The "credit" extended to Chrysler by the UAW [if we want to call it that] is secured by all of Chrysler's unencumbered assets.

You do realize that a debtor can't offer the same collateral twice, right? And that doing so is outright fraud? That if you have placed one mortgage on your house, and try to place another mortgage on it, that additional mortgage quite literally sits in the second lien position [hence the term "second mortgage"] and that the creditor holding the second mortgage gets nothing until the first mortgage is paid?

Basically you are saying that debtors should be able to offer their entire portfolio as collateral for debt over and over and over again. In addition to institutionalizing a practice which is [rightfully] regarded as fraudulent if someone tries it today, you would in effect be making the extension of credit impossible. Since not all debts are accrued simultaneously, and since no one can control the ability of a debtor to go out and accumulate more debt, you would create a situation where all creditors must regard themselves as being in the worst possible security position at all times - and no matter what a potential debtor's balance sheet looked like, you'd have to give him your hard money rate, because for all you know the day after you extend credit he'll go down the street with the same collateral and take out 20x as much debt.

|5.3.09 @ 4:26PM|#

MNG,

You put up your house as collateral for a loan from bank X, then you employ Y to renovate your kitchen. Y asks you to pay him a pension ten years later in the contract. Ten years later, you go bankrupt. The bank wants to reposesss you house. You are saying that the bank owes Y money when the house is sold, because you had a contractual obligation you couldn't live up to.

This is nutso. The bank has no responsibility for the stupid agreement you made with Y. They had a lien on the house. The house is theirs. You and your obligation to Y have nothing to do with it.

The Angry Optimist|5.3.09 @ 4:28PM|#

And if the CBA says that the NFL will pay X amount of retirement to NFL Players who retire after Y amount of years?

Money doesn't come from the Magical Land of Faeries. If the NFL goes belly-up, some people are going to get hosed.

Let's think about the perverse incentives you want to set up as well: no one will ever want to invest with a company, even with a secured loan, because that now means nothing. OTOH, I have no reason not to offer pie-in-the-sky superbenefits to employees because hey, I've gotta pay that crap in the end anyway, right?

MNG|5.3.09 @ 4:35PM|#

One at a time gentlemen, who do you think I am, Joe P. Boyle (Blessed Be His Holy Name and Let Us Pray For His Return)?

TAO
"why is that Joe and Suzy Worker should be at the front of the line, but Creditor Dave should be at the back?"

As I said upthread, I'm not for screwing the bondholders, just not prefering them to Chrysler's other obligees. So I'm not sure how this hypo is meant to catch me...

fluffy
"Had they chosen to do so, they could have demanded in their negotiations that Chrysler's obligations under that contract be secured by some asset or combination of assets, or by funds put up in escrow, or what have you.

They did not do this.
And you know why they didn't do it? Because they knew that would materially change the employment terms they were able to secure."

I said upthread the union should have done this, but thanks for bringing up my usual point, that employees, even when represented by a union, usually don't have the bargaining position that lenders of capital or employers do (but remember, the labor is JUST as crucial to the enterprise as the capital, or so I've heard).

"And because they know that no employer maintains unencumbered assets equal to the total amount they could possibly owe under the terms of an employment contract."

All the more reason for the law to treat securing these as the default position.

"You and your obligation to Y have nothing to do with it."

But my obligation to the bank has everything to do with controlling mine to Y? Oooookkkayyy.

|5.3.09 @ 4:36PM|#

you would create a situation where all creditors must regard themselves as being in the worst possible security position at all times - and no matter what a potential debtor's balance sheet looked like, you'd have to give him your hard money rate, because for all you know the day after you extend credit he'll go down the street with the same collateral and take out 20x as much debt.

Or go out the next day and sign a contract giving generous pensions to his employees which idiot progressives like MNG would have preferred over the creditors lien on the company's assets.

And people like MNG wonder why we consider them economic morons who will destroy the economy if they are allowed to manipulate it.

MNG|5.3.09 @ 4:37PM|#

"If the NFL goes belly-up, some people are going to get hosed."

OK, we're getting somewhere now.

Why should those people be the players? Why should the obligations promised them by the NFL be less worthy than the obligations the NFL made to some "secured" obligation?

That's what we are presently discussing (and I'm happy we don't have to waste any more time on whether the NFL [or Chrsyler] contractually owes these things to the Players [UAW workers]).

MNG|5.3.09 @ 4:40PM|#

"Basically you are saying that debtors should be able to offer their entire portfolio as collateral for debt over and over and over again."

I'm saying when a debtor welshes on his obligations all of his assets should be equally available to all of his creditors, and any agreement he made between a few of them and him (the welsher!) should not control the obligations he has to others.

I should think you "contractarians" ;) would be all over making people live up to their contractual obligations equally.

|5.3.09 @ 4:40PM|#

"You and your obligation to Y have nothing to do with it."

But my obligation to the bank has everything to do with controlling mine to Y? Oooookkkayyy.

If we treat employment contracts as secured loans, then it would have been ILLEGAL for you to offer a pension to Y.

I'm okay with that. Company pension funds are a stupid idea anyway.

Treating pension obligations as secured loans means either (A) unionized companies CANNOT put up their assets as collateral for a loan, and hence CANNOT GET CREDIT or (B) it is ILLEGAL to sign a contract that includes pensions.

Take your freaking pick.

Either that or admit that pension funds have to be second in line to holders of secured debt.

|5.3.09 @ 4:41PM|#

Secured loans generally have lower interest rates.

Insurance premiums are based on the *probability* some event will occur.

Interest rates have (explicitly or implicitly- your choice) the probability of default (and expected ability to recover) built in. Consider it an "insurance premium".

The Angry Optimist|5.3.09 @ 4:41PM|#

no no, MNG, you missed the first part of the hypothetical, wherein Joe Worker is 70 and Suzy Worker is retired one year.

If the language of the CBA says that "After 30 years of service, every employee shall be entitled to X benefits until the day of his death", should Joe Worker get a cash amount equivalent to the yearly benefits based on his life expectancy? Should Suzy? And presuming that the money is going to run out before all of these calculations can be done, how do you parse out who gets what?

MNG|5.3.09 @ 4:41PM|#

BTW, as a PSA
I saw X-Men Origins today.

And I want my money back. Holy shit it was bad. It made Ang Lee's Hulk look Oscar Worthy (actually, I kinda liked Lee's attempt there, so I should have a better comic film stink-em-up)

|5.3.09 @ 4:42PM|#

I'm saying when a debtor welshes on his obligations all of his assets should be equally available to all of his creditors, and any agreement he made between a few of them and him (the welsher!) should not control the obligations he has to others.

Oh, so you are advocating the abolition of SECURED loans. Why didn't you say so? Nobody gets any security at all.

Liens are abolished. Collatoral no longer exists. Mortgages are now personal loans to individuals.

Welcome to the land of 20% interest on everything.

|5.3.09 @ 4:44PM|#

As I have stated upthread, MNG agrees with everyone else. MNG is simply looking for a loophole to coverup his original knee jerk reaction position and claim victory for the UAW pension claims. Disingenous? Exactly.

For the record: I think MaunderingNannyGoat is, in fact, just as ignorant and idiotic as he appears to be.

MNG|5.3.09 @ 4:44PM|#

TAO
I'm not trying to be tricky. They each can reach the assets equally.

For example, let's say the contractual formula entitles the older worker to 50,000 dollars a year for x years and the younger worker 39,000 a year for x years, then you can calculate the total they were promised and each would get the same percentage of that. So would all other creditors.

The Angry Optimist|5.3.09 @ 4:45PM|#

I should think you "contractarians" ;) would be all over making people live up to their contractual obligations equally.

We are. The agreement I made with the credit card company allows them to charge me 12%, and, implicit in that exchange, they don't have security on their loans.

"Contract-lovers" such as myself look to the contract to see what the obligee obligated himself to and what the obligor promised in return. If I don't see collateral, you're not entitled to collateral.

|5.3.09 @ 4:45PM|#

Welcome to the land of 20% interest on everything.

Hazel, you wide-eyed optimist!

|5.3.09 @ 4:47PM|#

My respect level for MNG has plummeted severely in this thread.

Either he is a complete moron, or a partisan shill. Or a dangerous combination of both.

Team Blue rules!

MNG|5.3.09 @ 4:49PM|#

"Oh, so you are advocating the abolition of SECURED loans."

Like I said upthread, yes sort of I guess ;). But come on, if you thought I was arguing to end the unsecured status then logically I was also arguing to end secured ones (in other words to get rid of the preference).

Of course if all promisees knew their promises were on equal terms they would act accordingly (asking for more consideration to grant their side of the promise).

You're saying "but Jesus God lenders will be less willing to lend without their preference!" But you don't seem to worry that workers will be less willing to work without their promises being privileged.

Why is that?

Does it have anything to do with the relatively weaker bargaining position of employees in general ;)?

Naga Sadow|5.3.09 @ 4:50PM|#

Hazel,

I used to respect MNG until recently too. MNG has gotten incredibly rude and lost her sense of humor.

Naga Sadow|5.3.09 @ 4:51PM|#

MNG!!!!!!!!!!!!!!!

Workers go where the money is not simply to work. I'm a worker, goddammit! If I don't make money I go somewhere else. Why would they hire me? So they can make money!!!

|5.3.09 @ 4:51PM|#

And I want my money back. Holy shit it was bad.

When the studio goes bankrupt, Obama will make sure you get your $9.50 before any of the actual creditors get paid.

MNG|5.3.09 @ 4:54PM|#

""Contract-lovers" such as myself look to the contract to see what the obligee obligated himself to and what the obligor promised in return."

I think if you promised to pay back your credit card company you should have to. If you look to the contract with them you will see a promise to pay back what you owe.

Bankruptcy should not be allowed to sheild you, and it should not be allowed to enforce agreements of preference between you and other parties to the detriment of third parties that you made promises too as well.

"Team Blue rules!"

I'm talking about eliminating a general difference in the bankruptcy laws. As I said @10:37 upthread this doesn't exonerate Obama doing making some special exception contrary to the rule of law.

Naga Sadow|5.3.09 @ 4:55PM|#

Hazel that last comment was full of win.

MNG|5.3.09 @ 4:56PM|#

"Workers go where the money is not simply to work."

But if part of this "money" is not paid immediately, but promised to you in the future in exchange for work you've done as part of the deal, then you don't mind it being treated worse because of a side deal your boss did with another party?

Naga, I like you, but to quote a great movie, you're outta your element!

MNG|5.3.09 @ 4:59PM|#

I'm talking about changing the existing law.

If Obama is just changing already in place in this one instance then I hope he loses in court. The law must be predictable so that all parties know what's up and can plan their lives accordingly.

MNG|5.3.09 @ 4:59PM|#

5:00 dudes, my turn to watch my daughter...

|5.3.09 @ 5:00PM|#

But you don't seem to worry that workers will be less willing to work without their promises being privileged.

Bargaining positions are relative. If you demand the moon, you're relatively in a weaker position than someone that merely demands to have their money paid back with a reasonable interest rate.

If unions knew that demanding retirement pensions 40 years down the line wasn't something that the company could reasonably secure with the company's assets, it's their own damn fault for making unreasonable demands, and settling for a promise that they ought to have known wouldn't be paid off.

So the unions lied to their members and deceived them into thinking that the pensions were guarenteed in some way. Too bad for the morons who think union jobs provide security.

The Angry Optimist|5.3.09 @ 5:04PM|#

Now MNG doesn't like bankruptcy laws. Amazing.

Naga Sadow|5.3.09 @ 5:05PM|#

They already do that. It's called benefits. For instance, MGM would have to pay me a hell of a lot more than it does due to the fact that benefits were substituted as a wage.

The Angry Optimist|5.3.09 @ 5:06PM|#

If you look to the contract with them you will see a promise to pay back what you owe.

Backed up by just that...a promise. Not collateral. Frankly speaking, you could enact a law tomorrow that said "when making an unsecured loan, one must specify what the consideration for that loan is", and the CCCs will just put "Your interest rate is 12% BECAUSE this loan is unsecured". It's such a silly, stupid change because it's so elementary. Everyone already KNOWS that unsecured loans = higher interest rates, to cover the risk of default.

Naga Sadow|5.3.09 @ 5:51PM|#

Without MNG to kick around this thread is dead.

SIV|5.3.09 @ 6:08PM|#

My respect level for MNG has plummeted severely in this thread.

Either he is a complete moron, or a partisan shill. Or a dangerous combination of both.

To quote Bobby the Brain Heenan:
(Bash at the Beach 1996)

"What've I been telling you all these years!"

|5.3.09 @ 6:38PM|#

joe managed to run off with his tail between his legs before understanding this simple truth, so I'll offer it again in hopes it will help his "intellectual" heirs.

Not admitting when you are wrong, no matter how stubbornly you do it, doesn't mean that you are right.

|5.3.09 @ 6:39PM|#

Either he is a complete moron, or a partisan shill. Or a dangerous combination of both.

To quote Bobby the Brain Heenan:
(Bash at the Beach 1996)

"What've I been telling you all these years!"

To quote myself:
"And people like MNG wonder why we consider them economic morons who will destroy the economy if they are allowed to manipulate it."

Seriously. He's advocating abolishing the concept of posting collatoral for a loan. So that workers will have first claim on assets over creditors. This is what happens when you allow progressives to set economic policy.

You'd have better results appointing a committee of escaped monkeys and feeding them crack.

Kolohe|5.3.09 @ 6:41PM|#

Re: 'credit freeze'

Calculated risk had an update today on his graphs of 'credit crisis indicators.'

I am taking just on authority that those are the correct metrics, but using that postulate, those graphs around Sept showed unprecedented numbers - and it wasn't just the magnitude, but also the first derivative.

To me those graphs look like the one's the fisiks types make when they try to divide by zero.

|5.3.09 @ 6:56PM|#

God has ordained that hedge funds be allowed to pick up "distressed" assets for pennies on the dollar and subsequently receive payment at par value, thereby making millions for doing nothing. It's in the Bible.

No, it's in the law. Creditors are always allowed to attempt to recover the full value of their contract, no matter what they actually paid for it. You would destroy the secondary market if you demanded they only be able to recover their basis and not the contract value.

|5.3.09 @ 7:04PM|#

I really don't know diddlums about economics but I have to wonder something. Is the president planning on propping up ALL retirement plans that have takin a thrashing in the markets? Won't that be a bad thing for the big picture?


Yes yes, I know. But I am starting to have a few concerns over Mr. Obama's decision making processes.

Elemenope|5.3.09 @ 7:24PM|#

Update: Arguably the most interesting dimension to the story is the way the Obama White House is openly working the P.R. ropes against foot-draggers in this process. More on that here.

He...he used...sarcasm! Nooooo!

And people call liberals whiners.

MNG|5.3.09 @ 7:32PM|#

Hazel
You don't seem so worked up about the prospect that since their promises are unsecured workers will not work and our society will end in utter ruin, so I'm not sure why you think ending preferred status for some obligations over others (unless all parties explicitly agree btw, I'd allow that) will mean lending will go the way of the dodo and we will all be eaten by spiders in a post-apocalyptic nightmare.

Again, is it because you know that workers, in general, are more compelled to do what you say lenders would never do in their right minds, that is, put up something very valuable unsecured? That the bargaining positions are inherently unequal for workers?

Hmmm.

"Not admitting when you are wrong, no matter how stubbornly you do it, doesn't mean that you are right."

SugarFree, I know this may cause you to have an actual heartattack, but the fact that a person doesn't agree with a group of libertarians over something, even after extensive discussion, is not proof of some kind of mental breakdown or meglomania. Has it ever occurred to you that I simply think making employer's employee obligations secured, or getting rid of preferential treatment of obligations in general, is a more just, fair and useful policy?

I mean really. If you look at this thread and you are not on either side I can't see how one would not see that we've been making the same arguments and points back and forth over and over; we just did not agree at the first at a fundamental level and all the "arguments" (in quotes because they have been variations of the same argument on either side) have not "proven" anything.

You see, Reason is a well known libertarian magazine and H&R is a well known libertarian website. So the vast majority of commenters are rather diehard libertarians. So the fact that many of the posters disagree with a poster who has the temerity to question the latest libertarian line is hardly proof that the dissenter is wrong, crazy or evil. In fact, given as how my preferred party runs this nation right now and yours struggles to break 1% of the national vote I would think, if you truly cared about moving this nation in a more libertarian direction, that you would desperately want to know how so many of your fellow citizens who, like you, read books, went to college, etc., disagree with you on so many issues.

Picking up on that would make a lot of you guys not just better debaters, but also more of a political force.

I actually subscribe, and have subscribed for a few years btw, to Reason, because I once thought I had a lot in common with the Libertarian party (I believe liberals discount the power of incentives and the quite remarkable power of capitalism too much, I disagree with them on gun control and affirmative action, and I agree so strongly with the libertarian position on the WOD). After meeting you delightful purists I know I'm no libertarian, just one of the liberals who outnumber you guys about 30 to 1 in this nation. Good job fellas!

|5.3.09 @ 7:32PM|#

Not admitting when you are wrong, no matter how stubbornly you do it, doesn't mean that you are right.

Conversly, admitting when you make a mistake actually increases your credibility down the line.

That is too nuanced for some to comprehend.

MNG|5.3.09 @ 7:35PM|#

LMNOP
I don't think Obama has the right to circumvent existing bankruptcy law though it work to the detriment of the unions here. But surely he has the right to seek a voluntary agreement among all creditors to treat the employee obligations as preferred, and surely the creditors have a right to agree (yes, they'd be fools to do it and breaking their fiduciary duty imo) and surely the Prez is free to use the bully pulpit to, well, verbally bully them to agree.

What's going on here is the bi-weekly union hate.

MNG|5.3.09 @ 7:37PM|#

J sub D
We've had discussions on this site for years now. We disagree a lot.

Do you really think I'm somebody who would not admit when I'm wrong? This is the guy who started this thread by admitting flat out I did not know how the bondholders in question had acquired the status of secured creditors and the union had not, though I am fully aware at how admitting you don't fully understand something is nearly always used as a cudgel to beat folks about the head and face on blogs.

MNG|5.3.09 @ 7:41PM|#

What uneases me about all of this is this. It's not too hard to detect an undertone to many (certainly not all btw) folks position here that goes like this: the workers did not take steps to secure the obligations in question, only a fool or loser would do that, and now in whining about it they are whining losers and we really, really like seeing whining losers get it, and we will be really, really mad if the government prevents those whining losers from getting what they deserve!

And people wonder why some folks can think of libertarians as authoritarians. The defining thing about authoritarianism as an academic concept since WWII is the passionate hate of "the weak" and a desire to see them "get what they deserve" at the hands of the strong.

MNG|5.3.09 @ 7:53PM|#

It reminds me of the thread many moons back about the woman who worked for Wal-mart who suffered a crippling accident (I think she became retarded actually) and Wal-Mart insurance paid off to her, and then later after a settlement invoked a clause to recoup the settlement.

It's one thing to say, Jesus, this is lamentable, but I can see why insurance companies have these clauses and why they should be enforced (insurance companies, like all companies, have shareholders and owners whom they owe a fidcuciary duty towards to maximize return), but many on this thread were like "WTF? The stupid bitch should have bargained for a better clause, she signed the contract knowingly now she gets what's coming to her and complains? Arrgh!"

And you can follow this line of thought here. Many here talk about the "unproductive" using the government in the fashion of "parasites" to suck off of "the productive." And you just know (actually some will come out and SAY IT) the assumption is that THEY are "the productive" (which is laughable, this is why I feel the need to point out to people here that the odds are that about 1% of the folks on this site are close to what we would call "the productive" or "wealthy" in this nation).

Many people have regaled us with stories of how they had to join a union and the union protected their stupid and lazy co-workers while holding their super-productive asses back. Not only is this bullshit, it's close to myopic madness. Look, none of you are all that productive compared to your co-workers, you're not that special. Every goofball thinks THEY are the hard working, smart, productive guy in the office. Look, you're not. I make 60,000 a year in a cushy job, my wife makes that and we belong to the town country club for pete's sake (great place to eat btw) and, while our combined income puts us ahead of the large majority of the nation that still puts me very, very far from the upper crust.

Not more than maybe, maybe, one single person on this site will be a multi-miilionaire by the time they die. I'm so sure of that I'd bet my car on it. Deal fellas. If the market rewards talent, ambition and other indicators of wherewithal, then you will be shown NOT TO HAVE THOSE THINGS IN ANY UNUSUAL AMOUNT.

|5.3.09 @ 8:20PM|#

You don't seem so worked up about the prospect that since their promises are unsecured workers will not work and our society will end in utter ruin, so I'm not sure why you think ending preferred status for some obligations over others (unless all parties explicitly agree btw, I'd allow that) will mean lending will go the way of the dodo

...

Workers have no right to demand stuff that they aren't entitled to. They can go on strike demanding that the company return negative profits and give them each a million dollar McMansion, and if that destroys society, it will be the unions fault for asking for more than they are worth.

The unions didn't get their pension plans secured because they knew the company wasn't making enough money to do so. In other words, they knew they were asking for more pay than they were worth, and they settled for a share of FUTURE profits in the hopes that the company would be more sucessful in the future.

In other words, the union pension plans were a ponzi scheme from the beginning, with future benefits being derived from profits to be generated generated by FUTURE WORKERS.

Just like Social Security, mind you.


Again, is it because you know that workers, in general, are more compelled to do what you say lenders would never do in their right minds, that is, put up something very valuable unsecured? That the bargaining positions are inherently unequal for workers?

The lenders are only asking for the very reasonable request of a return on a loan, or posession of a physical asset instead.
The unions are asking for money that the company isn't making today, but may someday make and "extract from the labor of future workers" (to use Marxist terminology so you weill understand it). They couldn't get the pension fund secured because they damn well knew that they were asking for more money than they were worth.

|5.3.09 @ 8:29PM|#

Do you really think I'm somebody who would not admit when I'm wrong? This is the guy who started this thread by admitting flat out I did not know how the bondholders in question had acquired the status of secured creditors and the union had not,

And yet you will go to any lengths, up to and including destroying the entire banking system, rather than admit that the UAW pension fund isn't entitled to assets posted as collateral for other people's loans.

|5.3.09 @ 8:51PM|#

Do you really think I'm somebody who would not admit when I'm wrong?

Well, yes, you as much admitted it. You wrote: I'm not sure why you think ending preferred status for some obligations over others (unless all parties explicitly agree btw, I'd allow that)

All parties did explicitly agree.

Existing bankruptcy law IS an "explicit" agreement. Are you claiming that the UAW was unaware of their position if there was a bankruptcy?!! The UAW contract, since it did not explicitly require a capital investment, explicitly placed their claims after the secured ones. If the UAW did not explain this to their members then it would be their fault, wouldn't it?

So instead of admitting you were wrong, you have posted a few dozen times about your ideas of "fairness" as if your ignorance of bankruptcy law equated to UAW ignorance of it also.The UAW KNEW their claims were second, the fact that you didn't doesn't make them "unfair".

Fluffy|5.3.09 @ 9:10PM|#

What uneases me about all of this is this. It's not too hard to detect an undertone to many (certainly not all btw) folks position here that goes like this: the workers did not take steps to secure the obligations in question, only a fool or loser would do that, and now in whining about it they are whining losers and we really, really like seeing whining losers get it, and we will be really, really mad if the government prevents those whining losers from getting what they deserve!

That's not the undertone at all.

Here's the undertone:

"That fucker Obama thinks he can pull a fast one and steal the remaining assets of Chrysler and hand them to the UAW. Boy I hope that fucker gets screwed and everyone who hoped to benefit from his fucking scam ends up fucked in the ass as a result!"

And people wonder why some folks can think of libertarians as authoritarians. The defining thing about authoritarianism as an academic concept since WWII is the passionate hate of "the weak" and a desire to see them "get what they deserve" at the hands of the strong.

That's ridiculous.

The Peronist authoritarian regime, and just about every single last authoritarian regime in post-colonial Africa and Asia, were explicitly billed as being organized on behalf of the exploited weak and against the evil elites [the urban left in Peron's case, and the evil Colonialists or their pied-noir and "running dog" associates in Africa and Asia].

And then there's Mao to consider.

If we back up before WWII, the Bolsheviks specifically claimed to be seeking revenge by the weak upon the stong, in class terms. Mussolini sought to bind Italy's disparate classes into "fasces" so they could resist the evil international cosmopolitan elites.

In fact, it would be hard for me to think of an authoritarian regime other than Hitler's that did not spring from one oppression narrative or another. And even Hitler interspered his claims of "master race" status for Aryans with a victim narrative about how the superpowered "Jewish conspiracy" sat astride the world like a colossus.

The Angry Optimist|5.3.09 @ 9:15PM|#

you know the other defining concept of authoritarianism, MNG? Using force against one group to the benefit of another...something we all oppose.

Jordan|5.3.09 @ 9:17PM|#

Not more than maybe, maybe, one single person on this site will be a multi-miilionaire by the time they die. I'm so sure of that I'd bet my car on it. Deal fellas. If the market rewards talent, ambition and other indicators of wherewithal, then you will be shown NOT TO HAVE THOSE THINGS IN ANY UNUSUAL AMOUNT.

So? We're not the ones advocating confiscatory tax rates, nationalizing half the economy, etc in the name of fairness either.

Jordan|5.3.09 @ 9:20PM|#

What's going on here is the bi-weekly union hate.

Bi-weekly government-enforced (and now govt-funded) union hate. A crucial difference.

MNG|5.3.09 @ 9:23PM|#

"Workers have no right to demand stuff that they aren't entitled to."

Things they were promised in a contract? WTF? Did Chrysler not promise to pay these pensions to folks who gave their labor to them under those terms?

"The unions are asking for money that the company isn't making today"

WHAT? The employees said "We will do X work for you for Y and Z benefits and pay" and they have done the work! It's time for Chrysler to make good on Y and Z.

"were explicitly billed as being organized on behalf of the exploited weak and against the evil elites"

fluffy
So Hitler cast the true Aryans as the "weak" being preyed upon by the "strong" Jews? Uh, no, he basically said "look my fellow Aryan brothers, we have made the real wealth and power and these weak Jews with their tricks are sucking our life blood out, let's smash them, the Jews, the Communists, the homosexuals, are trying to make a strength of their weakness by appealing to guilt, but we won't have any of it" (see neitzsche on how the weak turn morality claims into power). Every authoritarian movement I can think of has moved with "we (the Glenn Beckian "we") are the good and strong, "they" (again GB) are the slimy and clever, let's get them!

Neitzche's thing that the Nazi's liked so much was that the "strong" were being duped by the "clever weak" and so should rise up and smash them. You know, the "liberal elite" is pushing so and so...

Naga Sadow|5.3.09 @ 9:24PM|#

Fluffy,

Actually Nazi is short for National Socialist Workers Party(I don't know the German but it runs about like that). The communists, interestingly enough, backed the Hitler as Chancellor cuz while they were idealogically opposed they were after the same thing and he seemed like the best bet. Problem was the Nazi's weren't gonna be stooges and let the Communists sweep them aside once in power.

MNG|5.3.09 @ 9:25PM|#

But OF COURSE TAO, it's so much cleaner than using force to just make a "neutral" rule that puts the past victims of force and fraud at a disadvantage and say "on your marks, get ready, GO!". And then you can still reliably count on dominating the dominated. And you can hate them when they complain! Silly whining losers!

Herr Naga Sadow|5.3.09 @ 9:26PM|#

the Hitler

Whoa! Freudian slip?

The Angry Optimist|5.3.09 @ 9:28PM|#

oh lulz...you're trying to cast the UAW as history's losers? That's fucking rich.

MNG|5.3.09 @ 9:28PM|#

"The communists, interestingly enough, backed the Hitler as Chancellor"

Ok Naga, please stop playing and drop back in on the next pop culture thread, because the Nazi's and the Communists were dread enemies. Have you read Mein Kampf? You know, with all its anti-Bolshevikism? I didn't think so!

Thanks for playing though! Come back soon when we are discussing Serenity!

MNG|5.3.09 @ 9:29PM|#

Yeah TAO, the UAW members are nothing like the downtrodden Ford family :)

Naga Sadow|5.3.09 @ 9:29PM|#

I am becoming more and more convinced that MNG is simply acting out.

</|5.3.09 @ 9:30PM|#

Have you read Mein Kampf? You know, with all its anti-Bolshevikism?

That proves National Socialism was not socialist.

MNG|5.3.09 @ 9:31PM|#

"Bi-weekly government-enforced (and now govt-funded) union hate."

Yeah Jordan, the NLRA doesn't tie labor's hands at all, it's just a labor enhancement act!

Again, please join us again when we are talking about breast sizes on Alias, OK?

You've never read the NLRA have you? Or read about its history. OK, isn't there a NBA game on for you?

Naga Sadow|5.3.09 @ 9:33PM|#

Oh MNG. Don't you know politicians? Deals are made all the time with "dread" enemies. Why? Because they think they'll get the better part of the deal in the end. Also, you should read something besides Reader's Digest articles. I read voraciously. Especially about history. I'm rereading "The Discourses" by Machiavelli right now. Betcha didn't know the guy is a Republican(not the modern party but a proponent of divided government).

MNG|5.3.09 @ 9:33PM|#

"That proves National Socialism was not socialist."

OK "bub", I've read it. Tell me all the socialist parts. C'mon, go!

|5.3.09 @ 9:34PM|#

I don't think Obama has the right to circumvent existing bankruptcy law though it work to the detriment of the unions here. But surely he has the right to seek a voluntary agreement among all creditors to treat the employee obligations as preferred, and surely the creditors have a right to agree (yes, they'd be fools to do it and breaking their fiduciary duty imo) and surely the Prez is free to use the bully pulpit to, well, verbally bully them to agree.

I find nothing you're saying there objectionable. Assuming that The Chosen One makes no attempt to influence the bankruptcy judge, this will all be looked at as a a fart in a whirlwind.

Obama's pro union and that dickhead from Alabama isn't. Duh.

MNG|5.3.09 @ 9:35PM|#

Naga
Before we go even one more wasted word forward:
Have you read Mein Kampf?

Note, I just might make you look silly if you say "yes" and you haven't.

The Angry Optimist|5.3.09 @ 9:37PM|#

OK, MNG, regale us with your wisdom...how is it that NLRA "ties the hands of labor".

this should be good.

John Tagliaferro|5.3.09 @ 9:38PM|#

Naga Sadow,

Without MNG to kick around this thread is dead.

Then let it die and stop feeding the damn troll already!

Actually Nazi is short for National Socialist Workers Party(I don't know the German but it runs about like that).

Nationalsozialistische Deutsche Arbeiterpartei or NSDAP, figure it out. They were German Fascists, i.e., National Socialists just like Obama and MNG.

The communists, interestingly enough, backed the Hitler as Chancellor cuz while they were idealogically [sic] opposed aligned other than that international bit they were after the same thing and he seemed like the best bet. Problem was the Nazi's weren't gonna be stooges and let the Communists sweep them aside once in power.

There you go friend of my friend.

|5.3.09 @ 9:38PM|#

Do you really think I'm somebody who would not admit when I'm wrong? This is the guy who started this thread by admitting flat out I did not know how the bondholders in question had acquired the status of secured creditors and the union had not, though I am fully aware at how admitting you don't fully understand something is nearly always used as a cudgel to beat folks about the head and face on blogs.


Nope. I don't think that poorly of you. I don't think poorly of you at all. You're a bleeding heart dumbass, but I don't consider you a "dishonest fuck" as I've called out others about. Sorry if it sounded like I did.

Naga Sadow|5.3.09 @ 9:39PM|#

Interesting. So you're saying facts as you know them are prevalent upon a propaganda piece? Very interesting. Ever heard of a little thing called "The Communisty Manifesto"? Written by a dude called Marx?

Note, I just might make you look silly if you say "yes" and you haven't.

MNG|5.3.09 @ 9:39PM|#

If Obama was as "pro-union" as many here say he was he would have just kicked the car companies 1/5 of what President's lately have gladly kicked to Wall Street companies.

I respect you guys because you opposed the Wall Street bailout. But I don't respect those who favored the former and not the latter.

MNG|5.3.09 @ 9:40PM|#

I wrote a graduate paper on the Manifesto.

Care to elucidate?

John Tagliaferro|5.3.09 @ 9:40PM|#

That proves National Socialism was not socialist.

It 'proves' that it was National Socialist, not International Socialist. Just ask Trotsky.

Naga Sadow|5.3.09 @ 9:41PM|#

John T.,

I'm not so sure MNG is troll . . . yet. He can still turn back to the occasionally funny, usually polite, understanding liberal he once was. I have hope.

MNG|5.3.09 @ 9:43PM|#

Trotsky was a douche.
So was Hitler.
Yet, they hated each other for a reason.

John Tagliaferro|5.3.09 @ 9:43PM|#

I wrote a graduate paper on the Manifesto.

Care to elucidate?

AWESOME! And some Marxist/Leninist gave you a fantastic grade too, right Comrade?

Jordan|5.3.09 @ 9:44PM|#

Yeah Jordan, the NLRA doesn't tie labor's hands at all, it's just a labor enhancement act!

Oh please. Unions like the UAW wouldn't even exist if it weren't for government enforcement.

John Tagliaferro|5.3.09 @ 9:45PM|#

Trotsky was a douche.

Nice to have the graduate student here to give us the high brow take.

MNG|5.3.09 @ 9:45PM|#

Naga
I honestly believe the positions I take. It's literally insane for a person to post on a site where he doesn't hold what he holds on the site. WTF is the point?

John Tagliaferro|5.3.09 @ 9:46PM|#

I'm not so sure MNG is troll . . . yet. He can still turn back to the occasionally funny, usually polite, understanding liberal he once was. I have hope.

I suspect spoofing.

|5.3.09 @ 9:46PM|#

MNG is a true blue democrat with enough integrity to disagree with the party line on occasion. He is not standing in line to give Obama a BJ like so many other lefties.

Give the guy credit for those things at least.

Naga Sadow|5.3.09 @ 9:48PM|#

John T,

I'll finish up and stop butting heads with MNG.

MNG,

My point was that a lot of people have attempted to "help" the poor and downtrodden by invoking Marx. They seem to go back on all that once in power. There's a reason for that. It was all bullshit! Also known as propaganda.

MNG|5.3.09 @ 9:48PM|#

Jordan
Part of me wants to take you seriously, though (come on, admit it) you have never read the NLRA or much about its history. That part says, do you know about the government banning of certain picketing by unions and secondary boycotts? They were amazingly effective weapons...

But the other part of me is more realistic and it says to you: You can get DVD's of Alias on Amazon.com for cheap through the second hand market. Please go there now and stop bothering the grown ups.

Naga Sadow|5.3.09 @ 9:50PM|#

J sub D,

You forgot to end with "harumph".

John Tagliaferro|5.3.09 @ 9:51PM|#

Naga,

Whilst chatting to the National Socialist Marxists (they come in many stripes), like MNG, you might wish to call that document Manifest der Kommunistischen Partei so he/she can understand what you mean.

Naga Sadow|5.3.09 @ 9:54PM|#

To long of a word. I'd have to cut and paste it. I don't think I've even thought about it since I read it.

hmm|5.3.09 @ 9:55PM|#

Equity market scared shitless. check
Major credit centers almost controlled. check
Bond market getting crushed under boot heel. check
Superhero out fit with a bit "O" on the cape made. check
Swooping in to save the world. in progress

I try really hard to not subscribe to the "clowns are going to eat me" crowed and to quash that voice in my head that says it is all planned. As of late the clowns are getting scarier and the voice is starting to make some damn good arguments.

Completely off subject. Did I miss an article about the Big O SIFTA comment in Mexico? Or was there not one. I figured someone at Reason would have picked up on the 2nd Amendment abuse.

MNG|5.3.09 @ 9:55PM|#

I'm going now myself to re-watch Soderbergh's Solaris (hey, it's not that bad!).

Before I go:

Thanks J sub D (honestly, I hate most Democrats, I spent two years working for John Warner (R-Va) and do not regret it).

Naga
Of COURSE Marx was full of shit. He had some amazingly insightful sections to the Manifesto (hey, don't crap on me, even Sowell said this), but many parts could only be appreciated as absurd comedy. Marx was a bad, bad man imo, who promoted and excused tyranny. I'm part of that liberal tradition that really dislikes Marx (see Popper, the Open Society and its Enemies).

John T
I know you've got some caricature in your head, but many liberals while many liberals were simply "useful idiots" for Communism (and many today still are), many were at the front lines standing against that evil (see Sidney Hook).

</|5.3.09 @ 9:57PM|#

WTF is the point?

To get their goat, or to get them to answer a question sideways that they wouldn't, but could, frontways (a subclass of the goat).

Venerable Rev Dan T taught us to share.
joe taught us that city planning is SRS BZNS.
You taught us that leftism thinks of itself as the entirety of politics.

We have so much love, and so little time, my red blossom. If you had children pets to murder, maybe you would have found being illiberal on libertarian forums juvenile.

Bingo|5.3.09 @ 9:57PM|#

I think that MNG just sees a bunch of hard-working blue collar types getting the short end of the stick here because they were honest and humble enough to take an evil corporations word and simple-minded enough to not understand the effects of a possible bankruptcy. To him they were taken advantage of and need to government to fix their simple mistake.

What he doesn't see is that a lot of these creditors that invested in GM were using other people's investments. Since they made sure these were secured investments, the creditors were able to weigh the risk and hopefully make a good return for the people who had invested in them. Unfortunately, the government is changing the rules in the middle of the game, so that previous evaluation of risk is worthless and all bets are off.

So what about those poor people that had invested their retirement money into funds that in turn invested in GM? Should Joe Blow's retirement fund get fucked because a politically-connected labor monopoly in a failing corporation wants to break the existing rules and get their due first?

Naga Sadow|5.3.09 @ 10:00PM|#

Not so much that Marx promoted tyranny but that his work was used to promote tyranny. Can't blame an author for cherry picking points that help his thesis. Trouble was he was damn good about finding every possible "evil" of capitalism to include in that 3 and a half week long siege I was under to finish it.

Naga Sadow|5.3.09 @ 10:03PM|#

Joe was a city planner? I thought he worked for some telecom company?

</|5.3.09 @ 10:06PM|#

I think he did both. I won't grace his memory with a Googling.

And if you don't call promoting endless revolution as a result of class oppression "evil", then I have a well-behaved three-headed dog to sell you.

Sean W. Malone|5.3.09 @ 10:07PM|#

Is it just me or did MNG entirely miss the point that Chrysler (and all the hypothetical debtors flung about on here) don't have enough money to pay everyone?!


Seriously... I second Hazel:

"And people like MNG wonder why we consider them economic morons who will destroy the economy if they are allowed to manipulate it."

This just isn't that complicated. Really MNG, it's really really not.

Secured Loan: You are offering collateral in order to get some lender to lend you something he would find too risky to lend to you otherwise. When you fail to live up to your obligations, the lender takes your collateral to mitigate his risk - as was the original contract. = House

Unsecured Loan: You convince a lender to give you some money with no *explicit* guarantee of repayment in exchange for a higher interest rate, a lower nominal loan value or typically both. = Credit Card

Wage Payments/Employment Contract: 1. Not a loan at all. 2. Something which is entirely contingent upon a company's existence. If the company goes under and no longer exists, obligations to pay pensions and wages are necessarily last on the list - Bank gets to collect collateral first, so real capital immediately goes to the secured debt, then the unsecured creditors and wages generally fight it out for what's left.

Again... keeping in mind that there simply isn't enough money to pay everyone.


I'm mystified as to what seems either wrong, or hard to understand about that. The contract you make with a bank for a secured loan pre-empts other unsecured contracts... If your unsecured creditors thought you'd be that much of a risk then they'd have made you offer collateral or rejected the loan outright.

Otherwise, as TAO said, the unsecured creditor simply charges a higher interest rate to cover the percentage of defaulters.



I'm sorry guys, but this isn't hard to understand is it?

Sean W. Malone|5.3.09 @ 10:10PM|#

PS. The other, very serious consequence of Marx' thinking:

"Different" logic based purely on what group you belong to. This meant that depending on whether or not you were rich, poor, black, white, Ukrainian, Mongolian, Siberian, "Aryan", etc., reality is fundamentally different for you and therefore rationality and reason are inapplicable.

It's not simply enough that Marx' ideas were "used" for bad stuff - Marx' ideas were simply bad seeds to start. The minute I figured out what Marx was really talking about was the minute I looked back over the history of the 20th Century and went... "Ohhhhhh.... Yep, that's where that leads."

Jordan|5.3.09 @ 10:10PM|#

Part of me wants to take you seriously, though (come on, admit it) you have never read the NLRA or much about its history. That part says, do you know about the government banning of certain picketing by unions and secondary boycotts? They were amazingly effective weapons...

Yawn. Yes, I've read it. I'm still waiting for you to explain how a government created monopoly not having free reign is any way comparable to the fact that it was created by government in the first place. Feel free to substitute Alias jokes for a substantive reply.

John Tagliaferro|5.3.09 @ 10:26PM|#

MNG,

Naga
I honestly believe the positions I take.

Like the stance he took in fishnets and a corset singing "Time Warp".

I know you've got some caricature in your head,

False. I am reading and responding to your ignorant babbling. No amount of definition giving permeates your thick Nazi helmet.

but many liberals while many liberals were simply "useful idiots" for Communism (and many today still are), many were at the front lines standing against that evil (see Sidney Hook).

And you, my fish-netted transsexual troll, are no Liberal. You are a Marxist/Leninist/Hitlerist authoritarian leftists of the lowest magnitude who does not deserve to breathe the air of free people.

You are of the same stock as Alexander Mitchell Palmer, Luigi Galleani, James P. Cannon (yes, I know your CPUSA buddies opposed him), Earl Browder, Jimmy Carter, Bill Ayres, Donald DeFreeze, Bill Clinton and President Obama.

Oh, sorry to group you in with some Leftists who did something more than talk a big game. They took to arms for their "cause". We all know you would never do that and you will recognize the names of the gum flappers without Wiki.

Useful idiots? You are a USELESS idiot.

Naga Sadow|5.3.09 @ 10:27PM|#

Malone,

Yes . . . and no. I try to assume that there was a good idea at some point that just went haywire. Marx saw the initial start of the industrial revolution as terrible. He thought there was something better out there. There isn't. Communism sounds good til you realize we aren't social insects like ants. Once you realize that, it's fairly easy to poke holes in his arguments. Utopian systems always fail. Period.

John Tagliaferro|5.3.09 @ 10:30PM|#

MNG,

Sorry for not calling you Ma'am at the beginning of my 10:26 post.

MJ|5.3.09 @ 11:16PM|#

"Trotsky was a douche.
So was Hitler.
Yet, they hated each other for a reason."

Yes they did. Unfortunately for your argument, it was not because the former was a socialist and the latter was not. It was because Trotsky was an internationalist and Hitler was a nationalist. The important disgreement between the two was on different axis then the one you want to believe.

SIV|5.3.09 @ 11:17PM|#

Communism sounds good til you realize we aren't social insects like ants.

I'm convinced that "evolution" into social hive animals is what collectivists desire rather than any particular utopia.

|5.3.09 @ 11:22PM|#

"Workers have no right to demand stuff that they aren't entitled to."

Things they were promised in a contract? WTF? Did Chrysler not promise to pay these pensions to folks who gave their labor to them under those terms?

How many times do we have to point out that Chryslers assets were liened to someone else?

I know you suddenly (and conveniently!) decided that there should be no such thing as collaterol for any loan. Thus destroying pretty much the entire structure of the banking system. But face it, ownership of Chrysler's assets wasn't in the contract.

Moreover, what they aren't entitled to (really), from a philosophical and moral standpoint, is more money than Crysler is actually taking in.

I'll explain this again in Marxist terminology.
You know that bullshit about "surplus value"?
You know the bullshit about how workers are entitled to the full share of a value of their labor? (Yes, THAT bullshit.) If Chrysler would have LOST MONEY by securing the pension obligations with actual assets (which they would, and the unions knew they would, which is why they didn't ask for it), does that not imply that the workers were asking for pay greater than the actual value of their labor. I.e. There would be no profits, Chrysler would lose money by paying the employees more than it was taking in.

Ergo, the employees were not entitled to the pension money (from a moral standpoint) in the first place. They explicitly knew that the pensions would have to be paid back by extracting "surplus value" from future workers.

And, not surprisingly, that is EXACTLY what it has come down to, as referenced above. The pension fund, now in charge of Chrysler's management, now has a direct conflict of interest between the rights of present workers and the rights of the retirees. Retirees who demanded (and got) more value than their labor was actually worth, by creating deferred obligations onto the backs of future (now present) workers.

John Tagliaferro|5.3.09 @ 11:23PM|#

SWM,

I'm mystified as to what seems either wrong, or hard to understand about that.

The babbling talking point you are trying to educate believes that the act of employing a person guarantees a paycheck for life.

You know, since the "Capitalists" 'used' those workers, they deserve to be taken care of, but the "Capitalists" are too 'cheap' to do that without being forced to by government.

More clear now?

John Tagliaferro|5.3.09 @ 11:27PM|#

Hazel,

Hello! Suki mentioned you.

Great minds and all of that. You beat me to a punch.

MJ|5.3.09 @ 11:34PM|#

What good would securing Chrysler's liabilities to it's pension fund do anyway?

I suspect the future liabilities of the pension fund dwarf Chrysler's real assets by an order of magnitude at least. Even turning over all the assets over to the fund will do nothing to secure the fund's longterm viability. No matter what happens, the pension is boned.

|5.3.09 @ 11:38PM|#

I heard that stockholders are getting only 5 cents on the dollar....I expect them to jump in with a suit as well.

Why? Common stockholders have the lowest priority claim on company assets. Five cents on the dollar is probably generous in this case. I received less than 1% when SGI's creditors took over and wiped out the existing shareholders.

|5.3.09 @ 11:54PM|#

Here's part of the heart of the matter: EVERY PROMISE YOU MAKE SHOULD BE SECURED BY YOUR ASSETS.

Every promise you make is eventually secured by your assets, even unsecured promises. Let me explain. Unsecured debtors, while not having a direct claim on the company's assets, do indeed share in the proceeds from liquidating said assets after the secured creditors are satisfied. The secured/unsecured distinction is one of priority, not (generally) entitlement to the assets and proceeds from their liquidation. You can have differing priorities of debt, so that one creditor's claim has preference over another's, even though both are the same type (secured/unsecured).

Outside bankruptcy, you can lose assets to unsecured creditors. They sue you on the note, get a judgment, and attach the judgment to all your assets. Once attached, foreclosure or repossession proceedings can begin. In most states you can indeed lose your house, your car, your cash in the bank, and most anything else you own if you don't pay your credit card bill.

Punctuation Communist|5.3.09 @ 11:56PM|#

What good would securing Chrysler's liabilities to it's its pension fund do anyway?

You do not own apostrophes, capitalist dog. You can own apostrophes, for the voice of the collective determines their worth, and apportions them out as necessary. You have been found wanting, comrade.

Sean W. Malone|5.3.09 @ 11:59PM|#

Naga:

I don't know... The more I understand Marx, the more I really just think he wasn't a very good thinker. He missed some glaringly obvious aspects of human nature, his logic is subpar at best and his economics... Umm... Yeah. He may have had the best of intentions, and I think given the scarier time of early industrial revolution he lived through I'll give him a bit of a pass on some of his beliefs of "exploitation". But He still missed the point entirely on a lot of issues...

John:
I know. I know... I spend far too much time trying to explain reality to people who are so tangled up in their internal (eternal?) world of bitterness and exploitation to grasp it.

|5.4.09 @ 12:10AM|#

Punctuation Communist,

I love you. Marry me.

Naga Sadow|5.4.09 @ 12:14AM|#

Malone,

Ah, the exploitation. He did a lot of research on that. Trouble was he glossed over anything that refuted his research. He didn't have any real idea on how to correct it. I believe you are correct that he was never a big thinker. Workers controlling the means of production is only mentioned once in the entire ensemble of Das Capital. He was a sorta muckraker when you get right down to it. He put his research out there so he seemed to assume the RIGHT PEOPLE would arrive to deliver the people from their oppressive enviroment. Sad really. He was kicked out of the movement he created because he seemed to really believe it could be accomplished. Just my take on it though.

Naga Sadow|5.4.09 @ 12:16AM|#

Fuck! Kapital!

Punctuation Communist|5.4.09 @ 12:47AM|#

Well, Heinlein references do turn me on.

Paul|5.4.09 @ 12:57AM|#

And, not surprisingly, that is EXACTLY what it has come down to, as referenced above. The pension fund, now in charge of Chrysler's management, now has a direct conflict of interest between the rights of present workers and the rights of the retirees. Retirees who demanded (and got) more value than their labor was actually worth, by creating deferred obligations onto the backs of future (now present) workers.

This can be summed up as a Ponzi Scheme.

Elemenope|5.4.09 @ 1:31AM|#

Whilst chatting to the National Socialist Marxists (they come in many stripes), like MNG, you might wish to call that document Manifest der Kommunistischen Partei so he/she can understand what you mean.

Barely coherent poo-flinging of adjectives approved for their doubleplussungoodness? I don't come around so much no more, mainly because of this sort of shit.

"Don't listen to him, he's just a commofacsicoolectivdemopublican."

It's like the Christmahanakwanzaa of libertarian evil.

</|5.4.09 @ 1:36AM|#

LMNOP, this has nothing on the "cosmo" category. This guy wants contracts to be declared null because he doesn't understand how people can agree to things before they happen!

Grammar Nazi|5.4.09 @ 1:54AM|#

You do not own apostrophes, capitalist dog. You can own apostrophes, for the voice of the collective determines their worth, and apportions them out as necessary

You schiß this one up, Herr Dummkopf. Again, how did we lose to these guys?

The Angry Optimist|5.4.09 @ 1:57AM|#

El, this place around 2001 and 2002 was a total nightmare. The Wild West, really.

Elemenope|5.4.09 @ 4:22AM|#

El, this place around 2001 and 2002 was a total nightmare. The Wild West, really.

Huh. So what happened such that it settled down into a place of reasonable discourse, like it was last year and the year before? Did I just get lucky and stumble into the few years of metastable chillness betwixt storms of ideological stupidity?

John Tagliaferro|5.4.09 @ 5:30AM|#

Punctuation Communist,

Well, Heinlein references do turn me on.

In Soviet Russia, Heinlein references turned on you.

Punctuation Communist|5.4.09 @ 6:30AM|#

They sure did. But I was high in the KGB by that point, and my minions rallied up what we used to call "tsarists," and... well, the rest is history.

MNG|5.4.09 @ 7:59AM|#

TAO
"how is it that NLRA "ties the hands of labor"."
Didn't I answer that (and only in part, there are many more restrictions on unions in the NLRA) at 9:48? Really, take the labor law class as one of your electives, it'll help you sound less silly on this topic.

"Sorry for not calling you Ma'am at the beginning of my 10:26 post."

It's OK John T., you're mom always calls me "sir" (Sir DonkeyPenis to be specific).

Hazel
Chrysler promised the workers, in exchange for their labor, certain things. They should have to make good on that promise. The fact that they told other people with whom they made promises that those obligations were preferred to the former promises should matter not. A and B should not be able to bind C by their agreement.

But we've gone through this!

High Every Body|5.4.09 @ 8:35AM|#

Of course! How could I have been so blind? Reading 300+ posts of mostly garbage can do that, but I am now enlightened!

The answer to the Chrysler default thing is: If the workers are not set for life then we must jail every executive and replace them with a federal appointee.

If the company does not start making money under the new system, even better benefits must be granted to the hourly workers and paid for by the federal government and auctions of the homes and offspring of the executives.

The executives and their families woll be housed in "comfort facilities" to pleasure the workers on their breaks in whatever manner the workers wish.

Between breaks, they shall serve the public with all proceeds going to the UAW pension fund.

High Every Body|5.4.09 @ 8:36AM|#

It's OK John T., you're mom always calls me "sir" (Sir DonkeyPenis to be specific).

Who keeps saying that joe left?

..|5.4.09 @ 8:38AM|#

In the end, nothing was resolved.

The Angry Optimist|5.4.09 @ 8:52AM|#

Didn't I answer that (and only in part, there are many more restrictions on unions in the NLRA) at 9:48? Really, take the labor law class as one of your electives, it'll help you sound less silly on this topic.

I work for a labor attorney. You're absolutely on crack. State, plainly and clearly, how NLRA is *not* a labor-enhancing statute. you cannot just say "uh, it ties their hands". No...how?

Gilbert Martin|5.4.09 @ 9:02AM|#

The federal government never had any legitimate Constitutional authority to create any labor laws at all to begin with.

That is not part of "regulating interstate commerce".

And the laws it did create most certainly do stack the deck in favor of labor unions.

Any deviation from a pure freedom of contract doctrine that applies equaly to all parties inherently stacks the deck in favor of some over others.

If companies were truly free to exercise ALL their legitimate freedom of contract rights such as the right to refuse to negotiate with labor unions or the right to hire replacement workers, then the UAW would not exist.

High Every Body|5.4.09 @ 9:15AM|#

GM,

In order to appease the Leftist Goddess of Fairness and Correctness we must launch Operation Worker Comfort NOW!

|5.4.09 @ 10:26AM|#

What's going on here is the bi-weekly union hate.

Given:

(a) The long history of criminal activity by unions,

(b) The fact that unions in their current form are largely a government creation, and

(c) The fact that the two most heavily unionized industries (autos and education) are colossal failures,

why shouldn't we hate on the unions?

Sean W. Malone|5.4.09 @ 11:00AM|#

"Chrysler promised the workers, in exchange for their labor, certain things. They should have to make good on that promise. The fact that they told other people with whom they made promises that those obligations were preferred to the former promises should matter not. A and B should not be able to bind C by their agreement."

What's hilarious is after all this "discussion", MNG is still incapable of realizing that when people/companies go bankrupt they simply don't have enough money to pay *everyone* and that their debt obligations have to be apportioned by some means.

But this just goes back to the sort of magical universe progressives seem to live in where it's all greed and power that explains economic relationships and not awkward concepts like mathematics.

MNG: Chrysler is NOT going to pay everyone what they owe, that's the premise here... They're going bankrupt so... they can't. Beyond that, you're just arguing against them honoring their contractual obligations for their hard assets to go to their collateralized debt.

Why oh why is that a tough concept?

High Every Body|5.4.09 @ 11:03AM|#

SWM,

If we just create brothels and have the executives, along with all of their relatives, working them then the revenue will more than make up for it and the workers could all retire.

Solves that revenge problem for the Left too.

Gilbert Martin|5.4.09 @ 11:06AM|#

"why shouldn't we hate on the unions?"

Indeed, why not?

The unions are getting explicit and overt bailouts courtesy of the taxpayers now thanks to the Obama administration and the Democrats but they ave been getting covert bailouts courtesy of the consumer for decades.

The political clout wielded by the UAW was the cause of import quotas, import tarrifs and other restrictions that had the effect of making the entire consuming public support their labor monopoly.

The same Congressional blowhards who are now lambasting the big three for not building enough small fuel efficient cars are the same blowhards who voted for legislation that prevented those car companies from importing exactly those type cars from foreign subsidiaries where they were made with cheaper labor.

High Every Body|5.4.09 @ 11:23AM|#

GM,

You are forgetting that Chrysler inherited this problem from the Bush administration ;)

|5.4.09 @ 11:42AM|#

The political clout wielded by the UAW was the cause of import quotas, import tarrifs and other restrictions that had the effect of making the entire consuming public support their labor monopoly.

The political clout wielded by the UAW was yet another of the "gifts" of the New Deal.
-jcr

Gilbert Martin|5.4.09 @ 11:58AM|#

"GM,

You are forgetting that Chrysler inherited this problem from the Bush administration ;)"

Yes I expect that every conceivable problem in the universe will be "Bush's fault" for the next four years.

High Every Body|5.4.09 @ 12:09PM|#

Yes I expect that every conceivable problem in the universe will be "Bush's fault" for the next four years.

Or more.

High Every Body|5.4.09 @ 12:25PM|#

How did I miss this? LMNOP comes out of Left Field with:

Elemenope | May 4, 2009, 1:31am | #

Whilst chatting to the National Socialist Marxists (they come in many stripes), like MNG, you might wish to call that document Manifest der Kommunistischen Partei so he/she can understand what you mean.

Barely coherent poo-flinging of adjectives approved for their doubleplussungoodness? I don't come around so much no more, mainly because of this sort of shit.

"Don't listen to him, he's just a commofacsicoolectivdemopublican."

It's like the Christmahanakwanzaa of libertarian evil.

The one comment encouraging communicaition with MNG is cast as "don't listen to him"?

Or maybe I am misreading snark.

|5.4.09 @ 2:24PM|#

Chrysler promised the workers, in exchange for their labor, certain things. They should have to make good on that promise. The fact that they told other people with whom they made promises that those obligations were preferred to the former promises should matter not. A and B should not be able to bind C by their agreement.


You are a moron.
They didn't merely "tell other people... those obligations were preferred", they made them under an existing legal structure by which the government, and everyone else, recognizes them as being preferred. It's called "posting collateral" you dumb shit. You post collateral for specific loans, and when you fail to make those loans, the collateral goes to A or B. Period. C cannot come in and seize collateral that was posted to cover loans made by A and B just because it happens to be a "union".

Gilbert Martin|5.4.09 @ 2:37PM|#

"They didn't merely "tell other people... those obligations were preferred", they made them under an existing legal structure by which the government, and everyone else, recognizes them as being preferred. It's called "posting collateral" you dumb shit."

Yep.

It has been amazing to me to hear the idiotic rationalizations made be various labor union shills and/or democrat politicians about this on CNBC, Fox Business Channel, etc.

One twit I heard tried to change the subject and claim it was evidence of a need for socialized medicine. Another one I heard claimed the hedge funds who bought the loans knew it was a speculative deal (as if that had something to do with altering their legal standing in the capital structure) and some Michigan democrat politican said the holdouts were being "unpatriotic" and should be put on a boat and shipped to Somalia.

In short, they were all sucking wind.

High Every Body|5.4.09 @ 2:42PM|#

One twit I heard tried to change the subject and claim it was evidence of a need for socialized medicine.

Several people on the reason intertubez predicted that one. Go Team Orange (not OLS)!

|5.4.09 @ 9:10PM|#

It seems to me that "American companies are at a disadvantage in the global marketplace because we don't have a National health Plan" has been a refrain among "progressives for quite a while now.

I'm actually surprised we're not hearing more of it.

|5.5.09 @ 12:03AM|#

Another one I heard claimed the hedge funds who bought the loans knew it was a speculative deal

There are quite a few progressives who argue that a creditor should only be able to recover their basis in the debt, rather than the contractually obligated amount. If that were to pass, it would be a huge windfall for debtors and yet another blow to the rule of law.