The Obama White House apparently has adopted the hard core gang like politics of Obama’s home city.
Bond holders of the now bankrupt Chrysler auto company have accused Mr. Obama of threatening them with ‘public humiliation’ if they didn’t agree to the disadvantageous terms set by the government for restructuring of the company.
Attorney Thomas Lauria, on WJR radio in Detroit, claimed the following:
Lauria: Let me tell you it’s no fun standing on this side of the fence opposing the President of the United States. In fact, let me just say, people have asked me who I represent. That’s a moving target. I can tell you for sure that I represent one less investor today than I represented yesterday. One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under the threat that the full force of the White House Press Corps would destroy its reputation if it continued to fight. That’s how hard it is to stand on this side of the fence.
Beckman: Was that Perella Weinberg?
Lauria: That was Perella Weinberg.
Lauria said his clients “are mainly fiduciaries for pension plans, college endowments, retirement plans and credit unions who invested in low yield supposedly very secure first lien debt” with Chrysler. Business Insider has corroborates the story.
President Obama singled out Lauria’s clients for criticism when he announced the Chrysler plan on Thursday.
“While many stakeholders made sacrifices and worked constructively, I have to tell you some did not,” the president said. “In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none.”
Lauria and his allies have also filed an appeal against the government, claiming that the deal violates their 5th amendment rights. The Supreme Court long ago recognized, however, that a secured creditor’s interest in specific property is protected in bankruptcy under the Fifth Amendment. The Supreme Court has ruled that contracts are inviolate in numerous cases, including Louisville Joint Stock Land Bank v. Radford. The court on numerous times has backed the validity of contract law, especially in the face of a government interest in paying off politically-connected unsecured creditors ahead of the senior creditors.
Jake Tapper of ABC News has also grabbed on to the story.
Steve Rattner, the leader of the Obama administration’s Auto Industry Task Force, threatened one of the firms, an investment bank, that if it continued to oppose the administration’s Chrysler bankruptcy plan, the White House would use the White House press corps to destroy its reputation.
The White House denies to the story as false. “The charge is completely untrue,” said White House deputy press secretary Bill Burton, “and there’s obviously no evidence to suggest that this happened in any way.”
Of course, Lauria and the bondholders testimony doesn’t count.
Why anybody is surprised by these tactics are beyond me. This is the kind of politics Barack Obama, Rahm Emanuel, and much of the White House grew up with. Other than Jake Tapper at ABC, there has been almost no talk about this story outside of local Detroit News, which is as expected.
There will be more severe arm twisting in the future…you watch.