Far from representing evidence that the Administration has set out sub rosa upon a course of stealthy expropriation, creeping socialism, or outright fascism, the final outcome in the Chrysler case simply represents the triumph of bare knuckled negotiation from a position of overwhelming strength, within the settled confines of existing law and practice. The government simply did what any hedge fund driven by fiduciary duty and self interest would have done if it held the reins: it dictated the terms it wanted to see, and it told the creditors to pound sand if they didn’t like it. The creditors, on the other hand, seemed to sally forth onto the field of battle without fully considering who was supplying their reinforcements (the Treasury), where they were fighting (in the forum of public opinion, as well as the arena of commerce), and the outside chance that their primary opponent might be smarter than a bag of hammers (and therefore realize and exploit its advantages). In return, they got schooled, but good.
There’s a reason self-dealing isn’t allowed, and you can’t sell a company’s assets to another company controlled by the same people. It’s because it’s stealing from your creditors.
I read bago’s link and it indicates that the majority of the secured creditors agreed to the deal, presumably because they wanted cash, and weren’t willing to take over the company in a bankruptcy. If I were running JP Morgan, I’d have put together a board of smart people, led by Shai Agassi, and told the bankruptcy judge that I’d convert 100% to equity, and give some new blood a shot at the game with an established industrial base, and see if they couldn’t make some money at it for my shareholders. You don’t write a mortgage if you can’t foreclose, and you shouldn’t lend billions to a car company if you’re not willing to take the company if it does poorly.
But if they didn’t want to do that, and they wanted to cash out, they really were in a bad position, since liquidation really sucks for getting much cash, and no one but the US Government was willing to buy them out. Since most of the creditors seemed to agree to the deal, I’m guessing that’s the reality, and they took what they could get. Seems like selling low to me, but I don’t run JP Morgan.
