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Gunfight Looming Between Politicians, Banks and Treasury at the Chrysler Corral

Secured debt might not be so secure if the government forces bankruptcy or politics intrude.

by on Apr.23, 2009

Is Citibank being a piggy bank in its demands for worthless Chrysler bonds?

Are Citibank and others being piggy banks by demanding too much for worthless Chrysler bonds?

Chrysler LLC’s creditors will have to make a judgment soon on whether they accept an offer to exchange their debt for equity in the company for pennies on the dollar or risk a political showdown over whether to force the company into bankruptcy.

Michigan’s Democratic Governor Jennifer Granholm and the state’s Republican Attorney General in a rare agreement have in recent days characterized the battle over debt and bankruptcy as a struggle between Wall Street and Main Street. Cox has accused Steve Rattner, the head of President Obama’s Auto Task Force of favoring a Wall Street-oriented solution at the expense of small businesses, retirees and workers in Michigan.

Rattner has a New York banking and financial services background, and Rattner himself is under investigation for bribing New York politicians to secure lucrative pension fund management contracts for his firm.

Chrysler’s creditors have proposed forgiving a very small part of their stake in return for as much 40% of the equity in a reorganized Chrysler. In addition, the creditors also are asking Fiat, Chrysler’s potential Italian partner, to invest cash in Chrysler. So far, Treasury has countered with far less cash, about $1 billion, and only 5% of the equity in the re-organized company. Expect this to go back and forth right  down to the deadline. (more…)

Finally, A Car Czar of Sorts

The Obama administration’s latest appointee supported Hillary Clinton’s presidential campaign.

by on Feb.24, 2009

 Steven Rattner, committee czar, has money and political savvy, but no experience in vehicle manufacturing.

Steven Rattner, committee czar, has money and political savvy, but no experience in auto making.

The co-founder of a private equity group with long-standing political ties to the Democratic party is joining the U.S. Treasury Department to head the team that will recommend whether or not Chrysler and General Motors should continue to receive government loans or be liquidated.

Steven Rattner is now Counselor to the Secretary of the Treasury and no longer Managing Principal of Quadrangle Group, a private investment firm he co-founded. Quadrangle has more than $6 billion of assets under management, and invests in media and communications companies.

Rattner will advise Secretary Timothy Geithner regarding “a variety of economic and financial matters” and “will lead the team” advising Secretary Geithner and National Economic Council Director Lawrence Summers on the automobile sector.