Forbidden Donut

Dear Senator,

Can you explain your position on the Obama administration’s decision to tell the bankruptcy court in the Chrysler case to prioritize what Chrysler owes to the Union over what Chrysler owes to its lenders? I would like to encourage you to oppose this position.

Chrysler owes the Union future money for benefits and owes the lenders repayment on loans. The lenders have secured loans and the Union has loans that are not secured. The usual process in bankruptcy court is to give preference to secured lenders over non-secured lenders.

Some lenders have not balked on being last in line (those that have received TARP money might feel like they are being pressured to accept the administration’s position OR the govt has ownership interest in the company from TARP so that it simply made the decision for it), but some have balked at the suggestion (like Oppenheimer).

Allowing the Obama administration to set the precedent that unsecured lenders will get paid before secured lenders turns the lending world on its head. If a company is about to go bankrupt and needs a small loan to help it keep going, then how can it convince a lender to give it money when the lender might be scared that the obligations the company has to the union will come first if the company does go bankrupt? Putting up security (like the place of business) will not make the lender feel safe either. This would tighten the credit market even further and would make more companies lose out on important loans and die off.

And the banks/lenders that have agreed to this (the TARP ones) will only get like 27 cents on the dollar bank from these loans which means they will suffer more losses and have to ask for more bailouts.

Please don’t say that helping the Union members is more important than helping the greedy banks. The greedy banks purposely got Chrysler to put up security on its loan as protection. Also, the Union members will need new jobs and a tighter credit market that hurts companies will increase unemployment even more.

Thanks for your time,