Reason Magazine
- reason.com
- reason.tv
- reason.org
- Donate
- Site Search:
Reason on Facebook
Reason on Twitter
Reason on YouTube
Reason RSSGet Reason E-mail Updates!
Manage your Reason e-mail list subscriptionsadvertisements
Lawyer: Chrysler bondholder "was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal"
Speaking of the politicized auto bailout, here's ABC News correspondent Jake Tapper, reporting on a claim of White House arm-twisting of Chrysler creditors:
A leading bankruptcy attorney representing hedge funds and money managers told ABC News Saturday that Steve Rattner, the leader of the Obama administration's Auto Industry Task Force, threatened one of the firms, an investment bank, that if it continued to oppose the administration's Chrysler bankruptcy plan, the White House would use the White House press corps to destroy its reputation. [...]
Thomas Lauria, Global Practice Head of the Financial Restructuring and Insolvency Group at White & Case, told ABC News that Rattner suggested to an official of the boutique investment bank Perella Weinberg Partners that officials of the Obama White House would embarrass the firm for opposing the Obama administration plan, which President Obama announced Thursday, and which requires creditors to accept roughly 29 cents on the dollar for an estimated $6.8 billion owed by Chrysler. [...]
Perella Weinberg Partners, Lauria said, "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. That's how hard it is to stand on this side of the fence."
Lauria's story was denied by the White House. And, as of
Thursday, by Perella as well, who fired Lauria and suddenly decided
that maybe the White House deal wasn't so bad after all.
Whole thing
here. For some valuable critiques of the auto bailouts, I
recommend Mickey Kaus. I
debated lefty economist Dean Baker about the bailouts over at the
L.A. Times last month.
High Every Body|5.4.09 @ 11:34AM|#
if it continued to oppose the administration's Chrysler
bankruptcy plan, the White House would use the White House press
corps to destroy its reputation. [...]
Oh, this must be made up! The White House Press Corp is completly
unbiased and neutral. They keep saying that themselves.
|5.4.09 @ 11:34AM|#
why would this guy make up a lie that would get him fired? Why did the law firm fold so quickly? This whole thing is really sinister. I keep saying we have a state run media now. If this is true, that statement is no longer an exageration.
robc|5.4.09 @ 11:37AM|#
Note to self: record all conversations with the Obama*
governement.
*and all others too
High Every Body|5.4.09 @ 11:38AM|#
why would this guy make up a lie that would get him fired?
Why did the law firm fold so quickly? This whole thing is really
sinister.
Remember, it was all inherited from Bush.
Lester Hunt|5.4.09 @ 11:43AM|#
"Perella ... fired Lauria and suddenly decided that maybe the
White House deal wasn't so bad after all"
Wow, this really stinks. We're in for an increasingly evil four
years, at least.
Citizen Nothing|5.4.09 @ 11:48AM|#
"I keep saying we have a state run media now. If this is true,
that statement is no longer an exageration."
WTF?
It was ABC that exposed the Obama pressure tactics.
|5.4.09 @ 11:49AM|#
So you got racist publications in Ron Paul's name and you jump
through a million hoops to distance Paul from those publications.
But you have a rumor, based on hearsay, that is anti-Obama and you
believe it immediately?
Faith is a fickle mistress ain't it?
|5.4.09 @ 11:52AM|#
There is just no way that Perella didn't catch a phone call from
somebody in the administration when this story broke.
In some ways, the implausibility of a threat to sic the White House
press corp on somebody makes in all the more believable that a
threat was made.
You can bet that the GM bondholders are watching all this very
carefully.
I have to believe there would have been suits for breach of
fiduciary duty against the officers and directors who agreed to the
government offer in Chrysler. There should have been. I'm sure the
firms holding GM bonds are pondering that issue right now.
|5.4.09 @ 11:53AM|#
It was ABC that exposed the Obama pressure
tactics.
As far as I can tell, Tapper is the only member of the White House
press that has a single cojone to his name.
|5.4.09 @ 11:53AM|#
"I keep saying we have a state run media now. If this is true,
that statement is no longer an exageration."
WTF?
It was ABC that exposed the Obama pressure tactics."
It was one member of a whitehouse press corps of 100s who was
willing to report it. The others ignored it. The Whitehouse
threatening people with the media unless they play the game. That
is what tinpot dictators do with state run media organizations.
High Every Body|5.4.09 @ 11:59AM|#
That is what tinpot dictators do with state run media
organizations.
But Chavez is no tinpot dictator, he is Progressive!
Oh, this is about Obama?
Jeff P|5.4.09 @ 12:02PM|#
Dis is a nice Restructuring and Insolvency Group ya got here, bub. Be a shame if anything happened to it...
High Every Body|5.4.09 @ 12:06PM|#
NS,
Yes! See! Just like Obama!
No tinpot dictators to see around here. Move along.
Some Guy|5.4.09 @ 12:10PM|#
The White House was going to go around telling everyone that
these guys won't bow to government pressure to throw away their
clients' investments in order to help the UAW?
"Oh no, not that! Anything but that!"
JP|5.4.09 @ 12:15PM|#
Just to be clear, it appears that Lauria (the lawyer and whistle-blower) was "fired" by his client (Perella). Lauria didn't lose his job with his law firm, White & Case.
High Every Body|5.4.09 @ 12:17PM|#
JP,
Would that be like a guy being strongarmed by the mob firing the
lawyer who went to the press and the cops about it?
JP|5.4.09 @ 12:20PM|#
HEB -- Oh, I'm not suggesting this was an innocent event or anything. I just wanted to clarify that Lauria still has a job and that it wasn't his law firm that caved to pressure.
|5.4.09 @ 12:24PM|#
"Just to be clear, it appears that Lauria (the lawyer and
whistle-blower) was "fired" by his client (Perella). Lauria didn't
lose his job with his law firm, White & Case."
Why fire your lawyer for defending you in public? You only fire him
if you are worried about Obama and his crew.
|5.4.09 @ 12:25PM|#
the threat that the full force of the White House press
corps would destroy its reputation
As worded, this is laughable.
The White House Press Corps is coming to GIT
YOU.
Boogaboogaah!
This does not mean I don't think they were directly threatened by
the Ascended One's minions; I suspect this wording was lawyerly
(personal) ass-covering.
|5.4.09 @ 12:25PM|#
"Oh no, not that! Anything but that!"
I've been wondering about that. Hedge fund managers sell the fact
that they will squeeze every red cent for their clients. Having it
publicly known that you went head-to-head against some block-headed
political thugs can only be used as a selling point.
Now, block-headed political thugs might think that is bad press,
but they aren't known for their depth of knowledge of ... well
anything.
|5.4.09 @ 12:34PM|#
Threatening anyone with pitchfork wielding mobs is bad for business. We're talking about people who can rile up people to the point that death threats get issued if they so desire.
|5.4.09 @ 12:40PM|#
An important point about this is that Perella Weinberg does a
lot of work with the FDIC on the current slate of banks going into
insolvency.
Their position in Chrysler bonds was (I believe) a result of their
purchase of Xerion capital. This is of lesser economic importance
to them then their relationship with the FDIC.
So from a strictly selfish point of view, it is important to them
to keep a strong relationship with the government.
Also, as someone who is married to a corporate lawyer. Let me say
this. Lawyers will twist every fact to their advantage, make hugely
pedantic arguments and the like.
When a high-end lawyer (and White and Case is a good firm) makes a
clear statement like this you can be sure that it is almost surely
true.
|5.4.09 @ 12:41PM|#
Like this:
http://www.politico.com/news/stories/0409/20871.html
But President Barack Obama wasn't in a mood to hear them out. He
stopped the conversation and offered a blunt reminder of the
public's reaction to such explanations. "Be careful how you make
those statements, gentlemen. The public isn't buying that."
"My administration," the president added, "is the only thing
between you and the pitchforks."
JP|5.4.09 @ 12:42PM|#
Also, as someone who is married to a corporate lawyer. Let
me say this. Lawyers will twist every fact to their advantage, make
hugely pedantic arguments and the like.
Define "fact."
;-)
Dello|5.4.09 @ 12:45PM|#
Blue,
"I've been wondering about that. Hedge fund managers sell the fact
that they will squeeze every red cent for their clients. Having it
publicly known that you went head-to-head against some block-headed
political thugs can only be used as a selling point."
Not if your fund is hit with an IRS audit for things it doesn't
even do, which it then has to spend time and resources to prove it
doesn't, for the rest of your life.
Folks might shy away.
High Every Body|5.4.09 @ 12:47PM|#
Also, as someone who is married to a corporate lawyer. Let
me say this. Lawyers will twist every fact to their advantage, make
hugely pedantic arguments and the like.
All wives are like that.* They don't have to be lawyers.
*If you think your wife is not like that then she really has you
fooled.
|5.4.09 @ 12:53PM|#
Highnumber, the only thing I would add is that all women are like that. Married or not.
PR|5.4.09 @ 12:56PM|#
like jsh said, the administration's denial would be more believable if they weren't always trying to get the villagers to storm Castle Frankenstein
|5.4.09 @ 12:59PM|#
No its cool.
My wife convinced me that everything she says is correct. My
opinion is accurate as long as it doesn't disagree with hers,
otherwise I am wrong.
|5.4.09 @ 1:01PM|#
they weren't always trying to get the villagers to storm
Castle Frankenstein
A riot is an ugly thing...and I think its about time that we had
one!!!!
JB|5.4.09 @ 1:21PM|#
So when is the MSM going to come out of the closet as nothing
but an extension of Obama's propaganda team?
Cock-suckers.
|5.4.09 @ 1:23PM|#
"lc, so she's a libertarian?"
As long as the Libertarian view agrees with her own. For example,
her view is that the best cut of meat is Filet Mignon and should be
eaten at least twice a month. I am not sure if this is a
Libertarian view.
|5.4.09 @ 1:33PM|#
White & Case is a top level firm, and this guy is head of
their insolvency practice. He would not have said this unless 1) he
had approval from the client, and 2) he either heard this himself
or his client informed him of this.
Sounds like the investment firm was threatened (again) after this
came out, and had to get rid of their lawyer to mollify the
govt.
|5.4.09 @ 1:46PM|#
"Perhaps she has not had Kobe beef."
Actually she tried a $50 Kobe Steak at Grill 23 in Boston...she
sent it back because it was too well marbled. Tasted like delicious
to me, but there you go.
I felt real bad about that, but amazingly they didn't charge us. To
compensate them I drank a few extra martini's to help balance the
check.
High Every Body|5.4.09 @ 1:46PM|#
Perhaps she has not had Kobe beef.
This fresh after finally getting through the zillion comment
weekend thread where MNG did not attempt to solicit sex from you?
Trying to summon the joe impersonator or something?
High Every Body|5.4.09 @ 1:47PM|#
Tasted like delicious to me, but there you go.
She has not completed your training yet.
Paul|5.4.09 @ 1:58PM|#
Power is a terrible drug.
No, Pro L, the quote for Obama is "Power is a helluva drug..."
Paul|5.4.09 @ 2:01PM|#
I debated lefty economist Dean Baker about the bailouts over
at the L.A. Times last month.
Do you find it ironic that the lefties are defending [more]
corporate welfare?
Paul|5.4.09 @ 2:07PM|#
You only fire him if you are worried about Obama and his
crew.
The term is 'posse'. Get it right.
Naga Sadow|5.4.09 @ 2:09PM|#
HEB,
Too true, my friend. What's strange is that until the last month,
MNG and I would argue a bit but it was cordial at least. He's been
on the temper tantrum path recently.
High Every Body|5.4.09 @ 2:14PM|#
It started on 4/20, if I ain't wrong.
Another amazing Hitler connection . . .
|5.4.09 @ 3:19PM|#
This is a bit long, but a pretty terrific read.
Unafraid In Greenwich Connecticut
Clifford S. Asness
Managing and Founding Principal
AQR Capital Management, LLC
The President has just harshly castigated hedge fund managers for
being unwilling to take his administration's bid for their Chrysler
bonds. He called them "speculators" who were "refusing to sacrifice
like everyone else" and who wanted "to hold out for the prospect of
an unjustified taxpayer-funded bailout."
The responses of hedge fund managers have been, appropriately,
outrage, but generally have been anonymous for fear of going on the
record against a powerful President (an exception, though still in
the form of a "group letter", was the superb note from "The
Committee of Chrysler Non-TARP Lenders" some of the points of which
I echo here, and a relatively few firms, like Oppenheimer, that
have publicly defended themselves). Furthermore, one by one the
managers and banks are said to be caving to the President's wishes
out of justifiable fear.
I run an approximately twenty billion dollar money management firm
that offers hedge funds as well as public mutual funds and unhedged
traditional investments. My company is not involved in the Chrysler
situation, but I am still aghast at the President's comments (of
course these are my own views not those of my company).
Furthermore, for some reason I was not born with the common sense
to keep it to myself, though my title should more accurately be
called "Not Afraid Enough" as I am indeed fearful writing this...
It's really a bad idea to speak out. Angering the President is a
mistake and, my views will annoy half my clients. I hope my clients
will understand that I'm entitled to my voice and to speak it
loudly, just as they are in this great country. I hope they will
also like that I do not think I have the right to intentionally
"sacrifice" their money without their permission.
Here's a shock. When hedge funds, pension funds, mutual funds, and
individuals, including very sweet grandmothers, lend their money
they expect to get it back. However, they know, or should know,
they take the risk of not being paid back. But if such a bad event
happens it usually does not result in a complete loss. A firm in
bankruptcy still has assets. It's not always a pretty process.
Bankruptcy court is about figuring out how to most fairly divvy up
the remaining assets based on who is owed what and whose contracts
come first. The process already has built-in partial protections
for employees and pensions, and can set lenders' contracts aside in
order to help the company survive, all of which are the rules of
the game lenders know before they lend. But, without this recovery
process nobody would lend to risky borrowers. Essentially, lenders
accept less than shareholders (means bonds return less than stocks)
in good times only because they get more than shareholders in bad
times.
The above is how it works in America, or how it's supposed to work.
The President and his team sought to avoid having Chrysler go
through this process, proposing their own plan for re-organizing
the company and partially paying off Chrysler's creditors. Some
bond holders thought this plan unfair. Specifically, they thought
it unfairly favored the United Auto Workers, and unfairly paid
bondholders less than they would get in bankruptcy court. So, they
said no to the plan and decided, as is their right, to take their
chances in the bankruptcy process. But, as his quotes above show,
the President thought they were being unpatriotic or worse.
Let's be clear, it is the job and obligation of all investment
managers, including hedge fund managers, to get their clients the
most return they can. They are allowed to be charitable with their
own money, and many are spectacularly so, but if they give away
their clients' money to share in the "sacrifice", they are
stealing. Clients of hedge funds include, among others, pension
funds of all kinds of workers, unionized and not. The managers have
a fiduciary obligation to look after their clients' money as best
they can, not to support the President, nor to oppose him, nor
otherwise advance their personal political views. That's how the
system works. If you hired an investment professional and he could
preserve more of your money in a financial disaster, but instead he
decided to spend it on the UAW so you could "share in the
sacrifice", you would not be happy.
Let's quickly review a few side issues.
The President's attempted diktat takes money from bondholders and
gives it to a labor union that delivers money and votes for him.
Why is he not calling on his party to "sacrifice" some campaign
contributions, and votes, for the greater good? Shaking down
lenders for the benefit of political donors is recycled corruption
and abuse of power.
Let's also mention only in passing the irony of this same President
begging hedge funds to borrow more to purchase other troubled
securities. That he expects them to do so when he has already shown
what happens if they ask for their money to be repaid fairly would
be amusing if not so dangerous. That hedge funds might not
participate in these programs because of fear of getting sucked
into some toxic demagoguery that ends in arbitrary punishment for
trying to work with the Treasury is distressing. Some useful
programs, like those designed to help finance consumer loans, won't
work because of this irresponsible hectoring.
Last but not least, the President screaming that the hedge funds
are looking for an unjustified taxpayer-funded bailout is the big
lie writ large. Find me a hedge fund that has been bailed out. Find
me a hedge fund, even a failed one, that has asked for one. In
fact, it was only because hedge funds have not taken government
funds that they could stand up to this bullying. The TARP
recipients had no choice but to go along. The hedge funds were
singled out only because
they are unpopular, not because they behaved any differently from
any other ethical manager of other people's money. The President's
comments here are backwards and libelous. Yet, somehow I don't
think the hedge funds will be following ACORN's lead and trucking
in a bunch of paid professional protestors soon. Hedge funds really
need a community organizer.
This is America. We have a free enterprise system that has worked
spectacularly for us for two hundred plus years. When it fails it
fixes itself. Most importantly, it is not an owned lackey of the
oval office to be scolded for disobedience by the President.
I am ready for my "personalized" tax rate now.
Naga Sadow|5.4.09 @ 3:19PM|#
Hey it was a celebration then. And the prophet Rick James said "Enjoy yourselves . . . bitches."
|5.4.09 @ 3:28PM|#
Naga, and I did, as she was once, twice, three times a
brickhouse. That's why I'm easy.
Easy like sunday mornin'.
|5.4.09 @ 3:34PM|#
Don't cross the Richie and the James streams,
please.
There is no Ritchie and James... there is only CAMEO!
|5.4.09 @ 3:42PM|#
Naga,
Naturally. Though I'm only a minor deity, with invites to Olympus
only on holidays and that sort of thing.
|5.4.09 @ 3:52PM|#
This is america dagnabbits. I'll show me some Commodore/Ritchie love all I want. Bitches.
Naga Sadow|5.4.09 @ 3:54PM|#
Unfortunately you are correct Brotherben. Free will brother. You just can't mess with it. You just can't.
|5.4.09 @ 4:33PM|#
Don't cross the Richie and the James streams,
please.
But that's the only way to kill the Stay-Puft Marshmallow Man!
|5.4.09 @ 4:57PM|#
Once this story turns out to be true, we'll hear...
"That's not the Steve Rattner I knew..."
|5.4.09 @ 5:13PM|#
I have to believe there would have been suits for breach of
fiduciary duty against the officers and directors who agreed to the
government offer in Chrysler. There should have been. I'm sure the
firms holding GM bonds are pondering that issue right
now.
R.C. is right. Any fund managers and firms that go along with the
President's plan should be sued by their investors. This is why I'm
sure it won't be long before we'll be seeing Obama "urging"
congress to pass retroactive immunity for fund managers who go
along with his plan.
|5.5.09 @ 10:47PM|#
It was the prospect of having to defend the democrats in stories like this that drove Joe from this website.
Site comments/questions:
Media Inquiries and Reprint Permissions:
(310) 367-6109
Editorial & Production Offices:
3415 S. Sepulveda Blvd.
Suite 400
Los Angeles, CA 90034
(310) 391-2245