Treasury loses Money On Chrysler Deal

Discussion in 'Wall St. News' started by cstfx, Sep 5, 2009.

  1. cstfx


    US Treasury says it lost 11.5B USD on it's loan to the Chrysler Corp when it defaulted on a loan payment june 30 and the Treasury admitted it will not recoup it's investment:

    Old Chrysler Defaults on Bankruptcy Loan From U.S. (Update3)
    By Linda Sandler and Erik Larson

    Sept. 4 (Bloomberg) -- The U.S. Treasury has sent the bankrupt remains of Chrysler LLC a default notice, saying the company failed to pay back a loan due June 30.

    Treasury sent the notice of default on Aug. 13, said old Chrysler, now known as Old Carco LLC, in a bankruptcy court filing today. The U.S. government lent Old Carco $3.34 billion to complete its bankruptcy, according to the filing.

    Old Carco said it was negotiating with Treasury to “address” the default. The best assets of the old company were sold to a group led by SpA. Old Carco has now reported an $11.8 billion loss on the Fiat sale, leading to a net loss of $10.2 billion in June, court records show.

    The company’s private creditors, who lent Chrysler $6.9 billion and expected to get about $2 billion back from the Fiat sale, might get nothing if the Treasury demanded payment of its loans, said the lawyer for a group of creditors who tried to block the Fiat deal earlier this year.

    “Having stripped Chrysler’s first lien lenders of $5 billion in connection with the sham sale of Chrysler’s assets to a shell corporation, Treasury is now trying to make it difficult for the lenders to recover any of their losses from the scraps that were left behind,” said Thomas Lauria, who represented the group, in an e-mail today.

    Treasury spokeswoman Meg Reilly declined to comment.

    ‘Nothing at All’

    “Neither Chrysler nor the government could have expected the loan would actually be repaid that quickly,” said Lynn LoPucki, who teaches bankruptcy law at the University of California, Los Angeles and Harvard.

    “What they must have intended was that the bankruptcy estate of old Chrysler would be at the mercy of the government. In the current negotiations, the government will decide how much, if anything, it will leave in the estate for other creditors of Chrysler -- including the professionals working in the case. That can be nothing at all,” he said.

    On a related move, Arthur R. Connelly, Chairman of the American Bankers Association, has called for a Transfer tax on all new automotive purchases to help repay the gov't for the loans made to the big Three that may not be repaid in full, similar to the tax prosals made for TARP recipients.

    (What are the odds of something similar to the last paragraph actually happening?)
  2. It's all monopoly money anyways.
  3. I think debaser is correct in this particular instance (lol, tyring to be careful to not get lumped into the survivalist goldbug camp).

    It took me a long time to really grasp the true implications of this very simple concept, so I'll write a blurb or two on it, just in case there's someone out there who hasn't quite yet tripped to it.

    15 years ago I would hear over and over that the dollar was backed by everyone's faith in the US government, and I would react dismissively: "yeah, yeah, whatever... 100 dollars gets me 5 lapdances and all that faith in the govenrment stuff is just noise that economics professors make while moving their lips."

    That was back when I didn't have any dollars. Now that I've actually accumulated a few, I'm sad to find out that it really just is a "scheme," where some appointed "expert" constantly fiddles with the notional outstanding amount (or maybe the perception of the outstanding amount) of dollars. What's worse is that they are not really concerned with preventing the devaluation of this abstract unit of currency, but instead they manage the perceived outstanding amount up and down wildly in an attempt to keep the product of the outstanding amount and its velocity to be slightly declining.

    This should really piss off everyone that owns dollars, but few seem to really be upset (or vocally upset, anyway). I’ll try little analogy.

    Let’s say you’ve spent a significant amount of your time amassing cowry shells, because you know that most everyone around you is willing to trade cowry shells for stuff that you use and consume. People are even willing to borrow 95 cowry shells from you, and after a while pay you back 100, since the temporary use of these cowry shells is of real value to them. Now along comes this “expert” who decides that they are in charge of determining (artificially) how much a cowry shell should trade for. If he is unhappy about the cowry shell being too valuable (given that maybe there’s a massive surplus of whatever the hell the “expert” deems important; could be Chinese undershirts, or maybe computing power, or empty houses) he simply quadruples the amount of cowry shells in circulation, with his magic cowry shell creation machine. Free cowry shells for everyone! Your carefully hoarded life savings of cowry shells is now massively diluted. You should be livid!!!

    Or let’s use this example: you’ve spent your whole life accumulating stock in your company to fund your retirement, and all of a sudden the company issues 30 trillion more shares, effectively diluting your wealth to ZERO. Wouldn’t that piss you off?

    Well, it doesn’t seem to piss many people off when they do it to the US Dollar, because they’re doing it right now, and have been for decades and decades. They’re not diluting it to zero (yet), but they steadily dilute it just enough to “tax” the savings of people who accumulate any. If they’re unhappy with the product of outstanding $’s and their velocity, they might triple or quadruple the amount outstanding, supposedly to withdraw it again whenever they feel it takes too many dollars to buy Chinese undershirts, etc.
    Any dollar owners who think that they actually own anything of real value are deluding themselves.

    In the 40’s and 50’s people would start at Goldman Sachs for 3,600 per year. Don’t tell me they’re not inflating the dollar away. Fuck tracking the dollar price of Chinese undershirts, or happy meals, or Walmart “staples.” Look at what genuinely valuable (in the real sense of value) stuff has done over time. Health care; Education; Energy (not natty, that’s a case of massive surplus at the moment); stock or commodities exchange seats... shoot, even jsut stuff that's desirable (and not classically "valuable"): Rolexes and Ferrari’s… runaway inflation.

    I guess shame on me for having faith in the thing that’s supposed to make the dollar valuable.

    P.S.: I know all kinds of people say that the infrastructure of the US is worth a lot, the highway system, the industrial complex, the small pockets of real brain-power and entrepreneurship. All of that is true, but it does not have anything to do with the real value of the dollar. No-one will ever be able to trade in their dollar for its real share of that value.
  4. This has me all worked up.

    Not only do they first give a POS company 12B of my money (without asking), then they force the POS into bankruptcy right afterwards, essentially flushing my money (that they gave without asking me) down the toilet.

    I really shouldn't be upset, since it really doesn't matter. the "experts" would simply print $12B less the next week, and everything is back to approximately the same.

    It's just a hard adjustment of thinking to make for someone who has spent a most of his life believing that money was actually worth something concrete.
  5. ron2368


    Who would have ever guessed that would happen??
  6. Reading comprehension and math, something both of you have forgotten or never studied in school.

    Which is not to say the US decision to lend to Chrysler was a good decision as expression by this Logan Robinson: