# Obama, Chrysler and Secured Creditors **URL:** \ **Category:** Great Debates\ **Created:** [May 26, 2009, 6:21pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716 "2009-05-26T18:21:30Z")\ **Posts on this page:** 14\ **Page:** 1
**Author:** ![Kalhoun](https://avatars.discourse-cdn.com/v4/letter/k/3bc359/32.png) [@Kalhoun](https://boards.straightdope.com/u/Kalhoun)\ **Post date:** [May 26, 2009, 6:21pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/1 "2009-05-26T18:21:30Z")
I’m sure there’s a debate in here somewhere, but if the mods want to move it, feel free. I’m not in a position to debate this one way or another. I’m hoping others will chime in with regard to this article: > **["Hope," "Change," And Lawsuits: Obama's Battle For American Collectivism](https://townhall.com/columnists/austinhill/2009/05/24/hope,_change,_and_lawsuits_obamas_battle_for_american_collectivism-n1263278)** > > At this stage in the American story, It is now about Barack Obama’s need to save everybody, and, thus, it is the “collective good” that matters. I really know nothing about the legal aspects of what’s going on in the Chrysler dealings. The article, written by some dude named Austin Hill, states: > [@](#): > > Two weeks ago in this column I wrote about the President inserting himself in between the Chrysler Corporation, and some of Chrysler’s secured creditors. I pointed out that the status of being a “secured creditor” (as opposed to being an “unsecured creditor”) implies some specific legal rights. For example, in the event that a borrower - in this case, the Chrysler Corporation - declares bankruptcy, a “secured creditor” has the right to full payment of what the borrower owes, before the borrower goes about “negotiating” reduced ‘settlements” with the unsecured creditors. In the case of Chrysler, there are a handful of hedge funds that loaned money to the company, and, thus, these hedge funds are legally entitled to 100% repayment. > > The legal rights of secured creditors are grounded in constitutional law, and the constitutional rights of individuals to make contractual commitments with each other. It’s also a very serious legal problem for an individual or group to disrupt other peoples‘ contractual relationships- in legal-speak, it’s called “tortious interference” - and until now, it has been unthinkable that the President of the United States would do such a thing, while in the process trample upon these very sacred Constitutional rights of private U.S. citizens. > > But things are different now. We’re on a journey towards “collectivism,” and in “saving” Chrysler, Obama will serve the “collective good” and save us all. > > So when the hedge fund managers refused Obama’s “offer” of 29 cents on the dollar as “payment” of Chrysler’s debt, and instead insisted on exercising their legal rights and demanded 100% payment from Chrysler, Obama threw a fit. Legal rights be damned, the President began accusing the hedge fund managers of being unpatriotic and selfish. I don’t believe we’re on a journey toward collectivism, but some of my pathetic relatives are saying that what Obama is doing is an “impeachable offense”. Is there anything illegal about how the auto industry woes are being handled? If so, how so? Or is this more bullshit from the right? ---
**Author:** ![Jimmy\_Joe\_Meager](https://avatars.discourse-cdn.com/v4/letter/j/bb73d2/32.png) [@Jimmy\_Joe\_Meager](https://boards.straightdope.com/u/Jimmy_Joe_Meager)\ **Post date:** [May 26, 2009, 6:30pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/2 "2009-05-26T18:30:31Z")
It is neither an “impeachable offense” nor “bullshit from the right”. The article provided a fairly accurate, and simplified, explanation of secured vs. unsecured creditors. Obama asked secured creditors to take less than the full amount they were due. They refused. Obama was (I assume) within his legal right to _ask_, the creditors were within their legal right to refuse. Obama’s actions after the fact – calling the creditors unpatriotic, allowing his administration to bully the creditors (reportedly) – may rightfully be considered “bullshit”, and I’ll leave you to determine which direction they came from. ---
**Author:** ![Kalhoun](https://avatars.discourse-cdn.com/v4/letter/k/3bc359/32.png) [@Kalhoun](https://boards.straightdope.com/u/Kalhoun)\ **Post date:** [May 26, 2009, 6:36pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/3 "2009-05-26T18:36:06Z")
So asking them to take less than what’s owed them isn’t “tortious interference” as the author claims? > [@](#): > > The legal rights of secured creditors are grounded in constitutional law, and the constitutional rights of individuals to make contractual commitments with each other. **It’s also a very serious legal problem for an individual or group to disrupt other peoples‘ contractual relationships- in legal-speak, it’s called “tortious interference”** - and until now, it has been unthinkable that the President of the United States would do such a thing, while in the process trample upon these very sacred Constitutional rights of private U.S. citizens. I guess I just don’t know if _asking_ is considered “disruptive” or “interfering.” ---
**Author:** ![Caldazar](https://avatars.discourse-cdn.com/v4/letter/c/8e8cbc/32.png) [@Caldazar](https://boards.straightdope.com/u/Caldazar)\ **Post date:** [May 26, 2009, 6:39pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/4 "2009-05-26T18:39:50Z")
> [@Kalhoun](#): > > I don’t believe we’re on a journey toward collectivism, but some of my pathetic relatives are saying that what Obama is doing is an “impeachable offense”. Is there anything illegal about how the auto industry woes are being handled? If so, how so? Or is this more bullshit from the right? Obama’s administration has not done anything that is outright illegal, no (at least, not anything that I’m aware of as an ordinary citizen). It’s not as though he ordered the creditors to accept the deals by fiat in direct violation of bankruptcy law. That said, there is a bit of a gray area. On the one hand, he is trying to save jobs (or believes he is trying to save jobs) by keeping Chrysler going. But on the other, he is using his political influence to initiate negative publicity against the creditors that are attempting to assert their rights. It’s a bit dishonest of him to claim these secured creditors “held out when everybody else is making sacrifices.” They were attempting to claim what they are legally entitled to. But bad-mouthing someone hasn’t typically been considered an impeachable offense. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [May 26, 2009, 6:40pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/5 "2009-05-26T18:40:28Z")
Some prior discussion [here](http://boards.straightdope.com/sdmb/showthread.php?t=516067). ---
**Author:** ![Captain\_Amazing](https://avatars.discourse-cdn.com/v4/letter/c/6de8d8/32.png) [@Captain\_Amazing](https://boards.straightdope.com/u/Captain_Amazing)\ **Post date:** [May 26, 2009, 6:43pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/6 "2009-05-26T18:43:26Z")
It’s only tortious interference if Obama had taken steps to actively prevent the creditors from pursing their claims. His saying bad stuff about the creditors who didn’t take the deal he tried to broker was just him making an ass of himself, and there’s no law against that (which is probably a good thing for the office of the Presidency in general). Besides, totrious interference is neither a high crime or misdemeanor. It’s a tort, hence its name. ---
**Author:** ![mazinger\_z](https://avatars.discourse-cdn.com/v4/letter/m/5f9b8f/32.png) [@mazinger\_z](https://boards.straightdope.com/u/mazinger_z)\ **Post date:** [May 26, 2009, 8:24pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/7 "2009-05-26T20:24:32Z")
> [@Kalhoun](#): > > So asking them to take less than what’s owed them isn’t “tortious interference” as the author claims? > > I guess I just don’t know if _asking_ is considered “disruptive” or “interfering.” Tortious interference, while available as a complaint at the common law, may require an actual statute (depending on the jurisdiction) in order to properly file a complaint. Since these actions are in the purview of the office of the President, I would assume (I’m not a litigator) that there is a specific law/procedure to overcome Presidential immunity. I’m pretty sure that the President has immunity from such proceedings. Anyway, a quick google search shows that the following elements are needed for a claim of tortious interference: 1) existence of a valid and enforceable contract; defendant’s knowledge of the contract; 3) intentional inducement of breach; 4) the actual breach of the contract by defendant’s wrong actions; and 5) damages to plaintiff. So, if assuming if Obama could be sued as a natural person, applying the facts from the post to the law above, the issue would center on if asking parties to re-negotiate the amounts of the secured claim can be considered to be a “wrongful act.” Simply interfering (if such a thing has been established in the jurisprudence) does not appear, I’d argue, to warrant a charge of tortious interference. ---
**Author:** ![Kalhoun](https://avatars.discourse-cdn.com/v4/letter/k/3bc359/32.png) [@Kalhoun](https://boards.straightdope.com/u/Kalhoun)\ **Post date:** [May 26, 2009, 8:47pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/8 "2009-05-26T20:47:31Z")
> [@mazinger\_z](#): > > Tortious interference, while available as a complaint at the common law, may require an actual statute (depending on the jurisdiction) in order to properly file a complaint. Since these actions are in the purview of the office of the President, I would assume (I’m not a litigator) that there is a specific law/procedure to overcome Presidential immunity. I’m pretty sure that the President has immunity from such proceedings. > > Anyway, a quick google search shows that the following elements are needed for a claim of tortious interference: 1) existence of a valid and enforceable contract; defendant’s knowledge of the contract; 3) intentional inducement of breach; 4) the actual breach of the contract by defendant’s wrong actions; and 5) damages to plaintiff. > > So, if assuming if Obama could be sued as a natural person, applying the facts from the post to the law above, the issue would center on if asking parties to re-negotiate the amounts of the secured claim can be considered to be a “wrongful act.” > > Simply interfering (if such a thing has been established in the jurisprudence) does not appear, I’d argue, to warrant a charge of tortious interference. Thank you (and everyone else)! ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [May 26, 2009, 10:15pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/9 "2009-05-26T22:15:52Z")
As a further note, it is not so much that Obama asked, publicly or otherwise, but also allegations that he and Geithner put improper pressure (possibly inclyuding veiled threats) to the creditors. Furthermore, these threats may have also forced the creditor’s public agents (because the “greedy big investors” are dealing in _other people’s money_) to violate their fiscal duty. That might actually be an impeachable offense, and it is certainly highly improper. As a further note, some of Obama’s statements could also amount to improper influence on the _judge_. This is not unprecedented, but it is extremely unseemly and probably an impeachable offense. However, proving it is rather impossible. ---
**Author:** ![Trom](https://avatars.discourse-cdn.com/v4/letter/t/958977/32.png) [@Trom](https://boards.straightdope.com/u/Trom)\ **Post date:** [May 26, 2009, 11:28pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/10 "2009-05-26T23:28:20Z")
For those interested, here’s an interview from today with Richard Mourdock, manager of the Indiana police and teachers’ pension funds. Mourdock holds, as fiduciary of the pension funds, secured debt in Chrysler and is the “opposition” to the Federal Government. > **[Latest News](https://www.cnbc.com/latest-video/?video=1133643470&play=1)** > > View our CNBC video gallery to find news clips on the stock market and more! Play live videos and find up to date market news. Break down your selection by: Top Videos, Most Viewed, US, Europe, Asia, Analyst Interviews, CEO Interviews. ---
**Author:** ![Kalhoun](https://avatars.discourse-cdn.com/v4/letter/k/3bc359/32.png) [@Kalhoun](https://boards.straightdope.com/u/Kalhoun)\ **Post date:** [May 27, 2009, 3:49pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/11 "2009-05-27T15:49:17Z")
> [@smiling\_bandit](#): > > As a further note, it is not so much that Obama asked, publicly or otherwise, but also allegations that he and Geithner put improper pressure (possibly inclyuding veiled threats) to the creditors. Furthermore, these threats may have also forced the creditor’s public agents (because the “greedy big investors” are dealing in _other people’s money_) to violate their fiscal duty. > > That might actually be an impeachable offense, and it is certainly highly improper. As a further note, some of Obama’s statements could also amount to improper influence on the _judge_. This is not unprecedented, but it is extremely unseemly and probably an impeachable offense. However, proving it is rather impossible. I’d like to see some cites and evidence that any of that happened. If there are none (and I expect there aren’t) then we can’t call Obama’s request anything more than a request. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [May 28, 2009, 9:17pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/12 "2009-05-28T21:17:13Z")
> [@Kalhoun](#): > > I’d like to see some cites and evidence that any of that happened. If there are none (and I expect there aren’t) then we can’t call Obama’s request anything more than a request. I didn’t say it had, and in any case proof would be hard to come by. But certain allegations have been made. Strictly speaking, it was Geithner making some very “maybe-threatening” phone calls while Obama makes some “veiled threats” on the air. It was the pepple against whom those threats were made who complained, but even then only under the table. Secondly, you can call it whatever you want. I may differ if I choose. ---
**Author:** ![athelas](https://avatars.discourse-cdn.com/v4/letter/a/5e9695/32.png) [@athelas](https://boards.straightdope.com/u/athelas)\ **Post date:** [May 28, 2009, 11:15pm UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/13 "2009-05-28T23:15:00Z")
[Here](http://www.economist.com/opinion/displaystory.cfm?story_id=13610871) is a relevant Economist article: > [@](#): > > Bankruptcies involve dividing a shrunken pie. But not all claims are equal: some lenders provide cheaper funds to firms in return for a more secure claim over the assets should things go wrong. They rank above other stakeholders, including shareholders and employees. This principle is now being trashed. On April 30th, after the failure of negotiations, Chrysler entered Chapter 11. Under the proposed scheme, secured creditors owed some $7 billion will recover 28 cents per dollar. Yet an employee health-care trust, operated at arm’s length by the United Auto Workers union, which ranks lower down the capital structure, will receive 43 cents on its $11 billion-odd of claims, as well as a majority stake in the restructured firm…he objectors have been denounced as “speculators” by Barack Obama. The judge overseeing the case has consented to a quick, “prepackaged” bankruptcy, which seems to give little scope for creditors to argue their case or pursue the alternative of liquidating the company’s assets. In effect Chrysler and the government have overridden the legal pecking order to put workers’ health-care benefits above more senior creditors’ claims, and then successfully argued in court that the alternative would be so much worse for creditors that it cannot be seriously considered. > > The Treasury has also put a gun to the heads of GM’s lenders. Unsecured creditors owed about $27 billion are being asked to accept a recovery rate of 5 cents, says Barclays Capital, whereas the health-care trust, which ranks equal to them, gets 50 cents as well as a big stake in the restructured firm. If creditors refuse to co-operate, the government will probably seek to squash them using the same fast-track legal process. ---
**Author:** ![Trom](https://avatars.discourse-cdn.com/v4/letter/t/958977/32.png) [@Trom](https://boards.straightdope.com/u/Trom)\ **Post date:** [May 29, 2009, 4:44am UTC](https://boards.straightdope.com/t/obama-chrysler-and-secured-creditors/497716/14 "2009-05-29T04:44:27Z")
> [@athelas](#): > > …In effect Chrysler and the government have overridden the legal pecking order to put workers’ health-care benefits above more senior creditors’ claims, and then successfully argued in court that the alternative would be so much worse for creditors that it cannot be seriously considered. I have no holdings in Chrysler in any way. I am genuinely interested in the arguments that have been given in support of the UAW and other unsecured creditors over secured creditors . In layman’s terms, can someone please explain the legal arguments that have transpired?