I blogged yesterday (Gangster Government) about the Michael Barone article in which he referred to the Obama Administration as “Gangster Government”. For background on the issue, read that blog entry.
Larry Kudlow has an interview over at cnbc.com with Tom Lauria, the lawyer who represents the senior bondholders in the Chrysler negotiations. Kudlow really wants to get to the meat of the issue for him: did the administration attempt to bully or threaten them into giving up too much:
KUDLOW: I mean was there bullying in those meetings? I have heard from other sources that there was. And some of this stuff is pretty mean and nasty. And that ain’t the American way. What is your take?
LAURIA: Well let me tell you. With respect to the group of investors that I represent, the irony is there really wasn’t any negotiation, or any direct contact with the task force, until after the bankruptcy was announced. We were negotiating with the steering committee of the first lien lenders. There were eight lenders on that committee, four of whom were TARP recipients and four who were not. And you know, we repeatedly reached out through that steering committee to try to get into Washington to sit down with people, to get into an environment where we could find a commercially reasonable resolution. And you know, we got the “Heisman.”
You know, every time we sent a proposal, it was leaked to the press. The negotiation was you know, political falderal. It wasn’t really ever a business conversation. And when we got to the last minute, there was a separation of direction between the TARP recipients and the non-TARP recipients. I think there’s probably room for some speculation about that.
By the “Heisman” we have to assume that he means the stiff-arm of someone who wants to keep you at arms length. Notice also that he pretty clearly says that the TARP recipients in the negotiations were far more willing to give in than the non-TARP recipients, admitting that “there’s probably room for some speculation about that.” Which would mean that the TARP recipient creditors were getting a lot of pressure from the administration. Given that the deal requested by the government involved secured creditors being paid less than nonsecured creditors, this is reason for great concern and is a reasonable topic in the national conversation that we need to have about this accelerating socialistic control of the economy by the executive branch.
Make up your own mind about this exchange:
KUDLOW: All right. Did they threaten to invoke an IRS or SEC investigation? Because I have heard from other sources that they did. An IRS investigation. An SEC investigation. This is like Richard Nixon Redux.
LAURIA: Well I did call my accountant to make sure everything was on the up and up.
LAURIA: I did call my accountant to make sure everything was square.
KUDLOW: So are you telling us that they made those threats?
KUDLOW: You don’t know that for a fact?
I think that Lauria’s comments on the legality of the government’s actions are spot on:
KUDLOW: All right, let me go on. Regarding the issue of the bondholders themselves, has this Team Obama — Rattner and Bloom and so forth — have they violated constitutional principles by trampling on contract rights of the bondholders?
LAURIA: Well I think they’ve done so flagrantly. I don’t think that there’s any question about it. They have cooked up a scheme to try to end run contractual and statutory priority.
And you know I got to tell you, I wouldn’t be dismayed about this — so much of it was a private party and private parties try things in deals and negotiations and litigations all the time. But I think when a branch of the government that is charged with enforcing the Constitution, I think intentionally and knowingly tries to get around the law in order to advance what I think are political interests over clear contractual and legal interests, I think that’s a real problem. And I do think it calls into question the Constitution.
He has scathing comments about what the TARP program has become:
KUDLOW: I mean they’re using bailout nation and TARP as their lever. That’s what they’ve done from day one. And when I read Neil Barofsky — he’s the special inspector general for TARP — and I looked around, I mean to some extent this whole TARP process has degenerated into corruption. You have a thought on that? You’re describing corruption! We are corrupting the Constitution and contract law.
LAURIA: Well I’d like somebody to point out to all of us what statutory scheme the government is acting under when it takes control of an auto manufacturer, as has happened here. TARP applies to financial institutions, and Chrysler is not a financial institution. I think we all know that. And Chrysler is not with any other regulatory scheme of the government that allows it to effectively take over the corporate governance of the company. But that has effectively happened here…
And does not hold back in terms of what he really thinks this deal was all about:
LAURIA: Well if you look at the numbers in terms of the dollars that the government has put into Chrysler, and you look at the dollars that are being paid out to labor-related interests — including the pension, VEBA, other benefit programs, etcetera — it’s interesting that the two amounts roughly match up. About $10 billion going in, and $10 billion going out. It seems like Chrysler is just a vehicle for the government to pay its labor friends.
KUDLOW: Is this redistribution from bondholders to union health trusts? Is that what’s going on?
LAURIA: That’s it. That’s it.
It looked like just an interview where Lauria was simply going to do the soft-shoe about what the government did but he ended up issuing some real indictments. Though I quoted a lot of it, check out the interview here.