The 'Greedy' Speak

Found on The Business Insider, a communication from the non-TARP debt holders of Chrysler.

The TARP bondholders have some incentive for going along with what the gummint *ahem* suggests. Those debt holders that aren't on the public dole, however, have been frozen out of negotiations regarding debt relief for Chrysler. I especially find these lines informative from their communique:

As of last night’s deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country’s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money.

[SNIP]

Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler’s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars.

Greedy indeed - they end up losing. And the rule of law is being subverted in this process.

AIG and GM's Viability

This is surreal. Basically AIG has government guarantees that its CDSs will be worth face value at the end of the day and that includes some holders of GM bonds who also hold CDS hedges on those bonds. If GM goes belly-up then those holders of CDS hedges for GM bonds get all their money invested in GM bonds back. So why then would those GM bondholders want to exchange bonds for stock? Sheesh - talk about the left hand not knowing what the right is doing. ;-)

Hat tip to The Business Insider.