Auto czar to banks: Lose it all on Chrysler

posted at 12:18 pm on April 17, 2009 by Ed Morrissey

If anyone doubted that the bailouts have turned into nothing more than a big Ponzi scheme, this Washington Post report on the administration’s attempt to strong-arm debt forgiveness for Chrysler should confirm it.  Auto czar Steven Rattner — under investigation for pay-for-play with the New York state pension fund — tried to force banks holding Chrysler paper to simply write it off and allow the automaker off the hook.  Rattner demanded this after pointing out that most of them had already received TARP funding from Treasury:

At a meeting with executives from four of the nation’s largest banks earlier this month, the chief of the government’s auto task force, Steven Rattner, delivered a message that shocked some in the room.

To save Chrysler, he told them, the four banks and several other financial firms would have to surrender their claims to most of the $7 billion the automaker owed them. And what would the banks get in return for this sacrifice? Nothing.

“People’s jaws just dropped,” said a person familiar with the discussions.

The banks — J.P. Morgan Chase, Citigroup, Morgan Stanley and Goldman Sachs — have all since balked at the government’s proposal. This week, they are drafting a counteroffer.

But those four banks are themselves recipients of billions of dollars in government largesse. Collectively, they have received $90 billion from the rescue program for the country’s banks. Now, their critics say, the firms have an obligation to cooperate as the government seeks to save Chrysler.

Let’s try to break down the reasoning on this.  George Bush, Barack Obama, Henry Paulson, and Tim Geithner have all insisted that the TARP funding was necessary to get banks back into the black so that they could prevent a catastrophic collapse in the world’s financial systems.  How, exactly, does forcing the same banks to take billions in losses help them stay solvent?  The fact that Treasury felt it necessary to inject that much liquidity into these banks should behoove them to insist on sound financial decisions, which doesn’t include eliminating several billions of dollars in bonds.

When people talk about the creeping nationalization of banks and financial companies, this is exactly what they mean.  The debt relationship between Chrysler and JP Morgan Chase should remain between those two entities.  The government shouldn’t be picking winners and losers in this arrangement.  Instead, because they gave the banks a huge payoff, they expect the banks to do the same with Chrysler, who will then be expected to dance to the DC piper as well.

It’s a Ponzi scheme, except it really only has one winner: the political class in DC.  They get to make decisions on who gets the money and when, who gets the profit or not, and how businesses will operate.  That is not a private sector; it’s corporatism.

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The banks need to give the Feds back the money and tell Obama to take a walk off a short pier. And the banks need to loan money only to people who will PAY THEM back.

They missed that sting attached to the money that says they cannot give back or payback the taxpayers money. It does appear that bambi picked our pockets to buy the banks and corporations. The deals are done and the true American people are the losers.

Franklyn on April 17, 2009 at 1:46 PM

Now I drive an ‘89 Honda accord. Runs on a rubber band & foot power.
Has 253,000 miles & it’s a little $hitbox-but it’s like the Energizer bunny!

Badger40 on April 17, 2009 at 1:33 PM

Can’t complain about Hondas. I bought a Civic wagon in 1983, drove it 160,000 miles, sold it in 1995 for $600, when it could still do 83 mph on a level road (speed limit on French autoroutes).

Also had a 1986 Chrysler LeBaron which lasted til 2002, but a real pig on gas. At 150,000 miles, turbo went out.

Also had a 1990 Chevy Lumina Euro, about 25 mpg highway, lousy turning radius, lasted til 2005, 140,000 miles, then transmission went out.


PS: I don’t like depreciation losses on new cars. I drive ’em ’til they don’t run no mo’, but that’s just me.

Steve Z on April 17, 2009 at 1:47 PM

franklyn, you realize when you call THE WON “bambi” you are probably a right wing extremist.

and i know damn well that you are a CO2 polluter.

kelley in virginia on April 17, 2009 at 1:49 PM

What happened to the Fiat deal? Guess they got a good look at the balance sheets…Both of them (The financial and the UAW). Saw those and got the hell out of Dodge!!

Dire Straits on April 17, 2009 at 1:58 PM

Steve Z on April 17, 2009 at 1:47 PM

Interesting that your “American” cars couldn’t last to 200,000.
I have had the same experience except for with the Ford Tempo.
And the awesome granny car the Cadillac.
I mean it. Those Caddys are AWESOME.
I can really cruise the pastures in style.

Badger40 on April 17, 2009 at 1:58 PM

According to Instapundit, Czar Rattner is also a Christopher Dodd donor.

Wethal on April 17, 2009 at 2:04 PM

What happened to the Fiat deal? Guess they got a good look at the balance sheets…Both of them (The financial and the UAW). Saw those and got the hell out of Dodge!!

Dire Straits on April 17, 2009 at 1:58 PM

Effectively true. Fiat walked in and said that the UAW and CAW (Canadian autoworker union) had to take paycuts or they’d walk.

The money-quote on the subject by a Fiat exec was “The minute you talk to me about historical entitlement in an organization that is technically bankrupt, it’s a nonsensical discussion.”

teke184 on April 17, 2009 at 2:09 PM

“But there may come a day when I will need a favor from you. That day may never come. But, when it does, I will need you to do that thing for me.”

Theophile on April 17, 2009 at 2:46 PM

Ed, you shouldn’t call this a Ponzi scheme. A Ponzi scheme is about fleecing victims who walk away without their money, but with their freedoms. A Ponzi scheme does not seek to leave its victims bestrode by an elite in need of victims upon which to practice their “benevolence.”

njcommuter on April 17, 2009 at 2:50 PM

Those banks need to ship the money back to Timmy, saying “Fuck you very much, but no thanks, keep your money”.

GarandFan on April 17, 2009 at 3:04 PM

Oh, God. We’re actually IN Atlas Shrugged. We’re so screwed…

PersonalLiberty on April 17, 2009 at 12:26 PM

So true, so sad, and so funny. Thanks for the cathartic laugh, really.

deesine on April 17, 2009 at 3:07 PM

This administration will do ANYTHING to save the UAW’s hide and, knowing the public is substantially against more money to Detroit is trying to launder the money through TARP-receiving banks.

This is a scheme worthy of Tony Soprano, not of the highest elected official in the land. Disgrace.

redfoxbluestate on April 17, 2009 at 3:16 PM

The BK threat to GM is also kabuki designed to intimidate their bondholders into eating it. Central government planning! What could go wrong?

We Loooove the UAW

PattyJ on April 17, 2009 at 3:19 PM

It’s a Ponzi scheme

And attempted extortion.

Buy Danish on April 17, 2009 at 4:02 PM

Just as an illustration of how people are being conditioned, this link to “The Buckets” shows that people are expected to believe that there is a “central controller” and that it was just done wrong in the past.

AZfederalist on April 17, 2009 at 4:10 PM

But those four banks are themselves recipients of billions of dollars in government largesse.

Correction: Those 4 banks and many others received LOANS from the government that are supposed to be paid back. Rightly or wrongly, these institutions weren’t given money,they were loaned money. There is a difference. If we had an unbiased media in this country, folks would know the difference.

xblade on April 17, 2009 at 4:11 PM


What is the government doing? Why are they involved in this at all??

skatz51 on April 17, 2009 at 4:29 PM

So, did the “executives from four of the nation’s largest banks” wake up to a horse head in their beds yet?

oakpack on April 17, 2009 at 4:34 PM

Ponzi scheme???

Doesn’t a Ponzi scheme have early investor winners?

This scheme has nothing but losers no matter when they invest.

Ponzi wouldn’t touch this transparently-idiotic scheme with a 10 foot pole!

landlines on April 17, 2009 at 5:00 PM

I drive a 1991 Toyota Camry V6 and it has 259,115 miles on it and still has the ORIGINAL CLUTCH AND STARTER in it. The interior doesn’t look like crap and I’ll never buy an American made car as long as the UAW is throwing them together. If the UAW wasn’t demanding outrageous wages for simple work, maybe people would buy an American car for $5 or $10k less than a Japanese or Korean car of similar size. Does anyone know what the starting wage is for an autoworker compared to a school teacher? Which one is providing the more valuable service to the nation? I say let the auto companies go broke and eliminate the extortionists who have been successfully operating against the auto companies for many years. Auto companies have been just like the surrender monkeys who don’t want to fight against enemies who want to destroy this country. They didn’t have any steel in their backbones to stand up to the union demands for MORE AND MORE AND STILL MORE without eliminating the featherbedding and stupid work rules that require more workers to be on the payroll than are necessary to get the work done, but that pay union dues to the fat cat heads of the unions.

TruthToBeTold on April 17, 2009 at 8:09 PM

So, you put the competition out of business and the government comes along and props it up. . . how long until laws start favoring one company over another. . . . Any Cola Company starting with the Letter P will get a tax credit which Cola Companies starting with C will pay for.

– The Cat

MirCat on April 17, 2009 at 8:39 PM