Chrysler, And The Obama Administration's Penchant For Scapegoating

by Pejman Yousefzadeh on May 1, 2009

Those who believe that this Administration is an enemy of business cannot be blamed:

Peter A. Weinberg and Joseph R. Perella are part of a band of Wall Street renegades — “a small group of speculators,” President Obama called them Thursday — who helped bankrupt Chrysler.

That, anyway, is the Washington line.

In fact, Mr. Weinberg and Mr. Perella, with sparkling Wall Street pedigrees, are the epitome of white-shoe investment bankers. And their boutique investment bank, a latecomer to Chrysler, played only a small role in the slow-motion wreck of the Detroit carmaker.

But now the two men, along with a handful of other financiers, are being blamed for precipitating the bankruptcy of an American icon. As Chrysler’s fate hung in the balance Wednesday night, this group refused to bend to the Obama administration and accept steep losses on their investments while more junior investors, including the United Automobile Workers union, were offered favorable terms.

It should come as no surprise that the Administration would upend the rights of investors with nothing more than naked partisanship as its guide; placing the rights of unions over people like Weinberg and Perella is entirely in keeping with the Administration’s modus operandi. It should also come as no surprise that people who actually understand business, are entirely sympathetic to Weinberg and Perella:

Whether the other Chrysler holdouts will capitulate as well remained unclear. At least one, OppenheimerFunds, insisted it would not back down.

But whatever the outcome, this bit of brinkmanship — which many characterized as a game of chicken with Washington — has become yet another public relations disaster for Wall Street.

Representatives for Perella Weinberg, which is advising the government on a wide range of banking issues, initially defended the firm’s decision to rebuff the government’s offer. They characterized the move as a principled stance against the administration’s growing intrusion into American business. Many in the financial and in the legal worlds said the investors were within their rights to challenge the proposal.

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.”

Not if the Obama Administration has anything to say about it. Fiduciary obligations take second place to the need to pay off political masters of the White House.

Who actually believes that the rampant instability being introduced into the economy and the financial system by this Administration will help rebuild financial confidence? Who thinks that this kind of bullying will be constructive in any way, shape, or form? And weren’t we supposed to be denouncing the Imperial Presidency, instead of celebrating it under this Administration?

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