Obama's use of Chavez-esq tactics to crush bondholders and other lenders to Chrysler and GM is going to have serious unintended consequences.
First, how can either of these two companies ever emerge from bankruptcy with private financing. ? What lender would risk such a beating again ?
Second, lending to ANY union-dominated firm of size must now be viewed as having serious political risk. That political risk WAS largely absent from US lending criteria and confined to places like Ukraine, Russia, South America and Africa. Now a large segment of US industry must be considered as having substantial political risk.
Isn't lending to large states & large municipalities in the same situation ? If California got into trouble, would not Obama likely hammer its bondholders ? Bond buyers beware.
To me, lending to government supported entities like green industries falls into the same group. Would Obama let such fail in the old-fashioned way with lenders getting the firm out of BK ? Or would he step in & "save" them as a national goal ?
The same applies to major health care firms.
You can imagine if this is on my radar screen, it's now on the radar screens of every major private lender in the world.
Word of the Day
"Perfidy" - noun [$10]; perfidious - adjective
Perfidy means 1. the quality or state of being faithless or disloyal; deliberate breach of faith; calculated violation of trust.
Sentence: The perfidy inherent in Obama's gangster-esq treatment of traditional principals of financial reorganization will certainly cause serious disruption in future lending to any firms with political risk.
Le Mot du Jour
"Rompu, e" - adjective
Rompu means 1. worn out, exhausted; 2. well-versed, experienced.
La Phrase: Personne dans l'adminstration d'Obama n'est rompu aux affaires. C'est un problème !
Sentence: Nobody in the Obama administration has wide experience in business affairs. That's a problem !