There are numerous articles today an all the major news networks. Here is one summary: Obama Screws Bondholders in Favor of UAW.
When you buy a bond, you expect that it’s a safe investment. You should get your principle back with interest. If the company goes bankrupt, you stand a good chance of getting a substantial portion of your investment back, because bondholders would be paid back right after secured assets. It’s not like stock – which in bankruptcy probably becomes worthless. A bond is basically a personal loan TO a corporation.
Bondholders had more than 27 billion invested in GM, the UAW around 10 billion.
Under Obama’s dictum, the bondholders will end up with a 10% stake in GM, and the UAW a 40% stake. It’s even worse at Chrysler, with UAW getting 55% (a controlling interest) in the company. Obama’s administration owns the rest of both companies.
Now, without putting on your Democrat hats, can anyone out there explain that math to me?
Of course you can’t. It’s a political restructuring of companies designed to redistribute wealth wherever Obama sees fit. In this case, it’s payback to the UAW for the many years of support, and philosophically it gives money back to the “hard working people” of the companies while screwing the “greedy corporate investors.” Never mind that it’s completely unfair and sets a precedent we won’t end up liking.
Who in their right mind would help a company by investing in bonds if the government can swoop in and give the company to someone else?
In bankruptcy, GM and Chrysler would have had a completely different restructuring, one that rewarded people for their ACTUAL investment in the companies rather than rewarding people for their contributions to a political campaign.
If you aren’t outraged, you aren’t paying attention.