Obama is using taxpayer money to reward a principal contributor to the bankruptcy of the US-owned auto industry, viz. the UAW.
For fifty years, the UAW was at the trough and was quite successful, obtaining health care, wage and pension benefits for its members far beyond anything common in the workplace. Two of the most idiotic benefits that management capitulated to give were retirement at full pay after 30 years and payments of wages while laid off. The full health care benefits for such early retirees is a close third. Remember, these are not low paid, government clerks or soldiers, but persons whose cash wages made them well up on the pay distribution.
Fine. That was what they negotiated and the companies accepted. I have no problem for that. People should try to obtain the most pay and benefits they can.
BUT ... these contributed to driving GM and Chrysler into bankruptcy. And now who is paying for this ? The US taxpayer. And cheated bondholders.
Some of these very bondholders purchased obligations of GM that were sold to FUND the pension plan. Now they are being given cents on the dollar while the obligations of the pension plan are being transferred in full to the new GM. No write-down for them.
These GM and Chrysler "reorganizations" are wholesale looting of the bondholders AND the US taxpayer. Obama is forgiving billions of debt incurred to the taxpayer. He is trampling on decades of precedence in bankruptcy to favor the UAW and labor.
According to Barron's, the UAW and related entities are receiving between 60 and 70 cents on the dollar for the post-retirement health benefits AND the full pension benefits are being transferred to the surviving new companies. That means they pay for the full retirement pay after 30 years, which can be at age 50.
Bondholders who lent in good faith to GM are getting around 15 cents on the dollar. The UAW recovery is 4-5x that of the bondholders. Even the taxpayer gets less than the UAW, around 50 cents on the dollar for super-senior debtor in possession financing.
Here's what the UAW said about its deal: "For our active members, these tentative changes mean no loss in your hourly base, no reduction in your health care and no reduction in pensions." Quite a deal for one of the guilty parties. Obama protects his supporters.
This whole procedure and outcome is so outrageous. But I don't expect the courts to intervene. They are part of the government and quite political at times. For now, I fear they will bent over for the new golden boy in town.
The unintended consequence: no lender in its sane mind would ever lend to either GM or Chrysler ever in the future. That means these two firms will NEVER cease being wards of the US taxpayer. Obama is curing a short term problem with a long term disaster.
I'm glad I bought an SUV made in Alabama, not by the UAW.
Word of the Day
"Paludal" - adjective [$10] a Mencken word
Paludal means 1. of a marsh; 2. malarial.
Sentence: Obama is leading the taxpayer into the paludal swamps of UAW appeasement, which destroyed two great companies. A bad move.
Le Mot Du Jour
"Amoureux, -euse" - adjective and noun (M.F)
Amoureux means (adjective) 1. in love (de with); 2. love, amorous; 3. amorous; (noun) lover; love; sweatheart.
La Phrase: L'homme du bunker est amoureux du mot.
Sentence: Bunkerman is a word lover.