Right under the noses of most Americans – Obama has one-upped Hugo Chavez in the Dictatorial usurpation department of imposing Marxism upon a country.
To thunderous applause, Obama has single-handedly, and with threats behind closed doors – nationalized the entire financial system and the Auto Industry virtually overnight. We are in a soft tyranny already, and next up on the block is the hard tyranny this dictatorship will ultimately impose upon the whole country.
For some some people, who were in the way of Obama’s juggernaut to take over and rob them of their wealth and property – the hard tyranny has already arrived, complete with death threats to those who opposed the efforts of Obama’s takeover.
For them, (many of whom actually VOTED for Obama) – welcome to the Hard Tyranny you voted for when you voted for a messiah promising “change”.
He is changing us from a Free Republic, into a Marxist Dictatorship, and with the consent of the Leftist proletariat and the Politburo Elites in D.C.
The American Thinker notes where we have arrived and what is going on under our noses:
At the end of April the Obama administration tested its ability to take direct control of the US financial system. The test was a success. There is a revolution underway which would impress Chavez or Castro. If you were like most people, you did not realize it happened.
As the details of the GM restructuring plan emerged, on Monday, April 27th, Lawrence Kudlow was one of the first to sound the alarm as secured lenders and bond holders were being given a fraction of the amount owed to them under long established bankruptcy law.
What is going on in this country? The government is about to take over GM in a plan that completely screws private bondholders and favors the unions. Get this: The GM bondholders own $27 billion and they’re getting 10 percent of the common stock in an expected exchange. And the UAW owns $10 billion of the bonds and they’re getting 40 percent of the stock. Huh? Did I miss something here? And Uncle Sam will have a controlling share of the stock with something close to 50 percent ownership. And no bankruptcy judge. So this is a political restructuring run by the White House, not a rule-of-law bankruptcy-court reorganization.
Some might have dismissed Kudlow’s comments as partisan hysterics. Kudlow is a radical free marketer with ties to the Reagan administration. On Tuesday, April 28th as details of the Chrysler reorganization began to leak other experts in the financial industry began to speak out.
“To say it’s unusual is an understatement — it’s unprecedented,” said Norman Kinel, a New York-based partner at law firm Duval & Stachenfeld. “The government doesn’t ever get involved in this way.”
Dan Seiver, a finance professor at San Diego State University, said that as some of the automakers’ creditors have received bailout money from the government they may be forced to “ride herd over other lenders” to get a deal done.
“We’re in a new era where the government is calling a bunch of shots,” Seiver added.
Intervening in the auto industry is also seen creating a conflict of interest for the government, where its role as a shareholder collides with its desire to protect jobs and benefits.
There is also concern about what Syd Finkelstein, a professor at Dartmouth’s Tuck School of Business, called the “implied consequences” of disobeying the government.
Since this story lacked stunning visuals like troop columns or burning buildings most people did not notice. By May 3rd 2009, the first cycle of Sunday talk shows since both reorganization plans were announced, more time was spent discussing the Swine Flu pandemic than the auto industry deals. On the few occasions the reorganization plans were discussed it was in terms of the administration’s political victory.
While many Americans were worrying about going to the mall or getting on an airplane, people who understand the byzantine world of corporate finance and bankruptcy were wondering how the executive branch nationalized two giant companies and no one seemed to notice.
To understand the gravity of the events you need a basic understanding of bankruptcy laws. The pecking order of bankruptcy claims is supposed to be:
- 1. Debtor in Possession (DIP) financing which is loaned to the restructuring company
- 2. Secured Lenders – creditors whose loans are backed by assets such as real estate or equipment
- 3. Unsecured Lenders – creditors such as bond holders, vendors and the UAW
- 4. Equity Owners – shareholders
When a company files for bankruptcy the claims that are superior (represented by a lower number) in the pecking order are paid first. Claims with equal status are treated equally; those claims are almost always paid on the same pro rata basis. It is an explicit goal of our bankruptcy system is to treat all creditors equally. This is how Lawrence Kudlow’s rule-of-law bankruptcy-reorganization should work.
Of course the rule of law means nothing to Obama – who on a quest to “CHANGE” America from a Capitalist Free market society into a Marxist Dictatorship. As you read the article you discover that Obama essentially said ‘Screw the Investors and bond-holders – I want the UAW Union to get empowered here”.
Then he went so far as to THREATEN those shareholder who opposed his nationalization and takeover plan blasting them in a press conference:
…he had harsh words for a small group of secured lenders — whom he referred to as “speculators” — who were forcing Chrysler into bankruptcy:
While many stakeholders made sacrifices and worked constructively, I have to tell you some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none [emphasis added]. Some demanded twice the return that other lenders were getting. I don’t stand with them.
I know that there are some who will insist that bankruptcy, even for these limited purposes, is a step that should not have been taken. But it was unsustainable to let enormous liabilities remain on Chrysler’s books, and it was unacceptable to let a small group of speculators endanger Chrysler’s future by refusing to sacrifice like everyone else [emphasis added]. So I recognize that the path we’re taking is hard. But as is often the case, the hard path is the right one.
Among people who understand bankruptcy rules these comments raised eyebrows. Does President Obama mean to say secured loans like mortgages are speculative investments? Is a bank which insists on repossessing a car secured by a note seeking something unjustified? These comments were certainly not comforting to credit markets in the US and abroad.
Obama’s comments were followed on May 2nd by Jake Tapper’s report that a lawyer for one of Chrysler’s secured lenders who opposed the administration was threatened. Threats consisted of an organized media campaign to destroy any company opposing the deal.
By May 4th, The Detroit News was reporting death threats as well. Thomas Lauria, the lawyer for the objecting secured creditors said one client dropped their objections to the reorganization plan after the threats.
Saul Alinsky and the partners at Goldman Sachs would both be impressed with Obama’s team.
… the US Treasury has the power to trump stakeholders at will. Obama used this leverage to take power from the investors and creditors and give it to the government and union as the restructuring was being negotiated.
…Obama will have established control directly (US Treasury at GM) and by proxy (UAW at Chrysler) of two of the largest companies in the US. He will have erased the previously unmanageable corporate debt and amassed a huge cache of personal political capital.
Obama will have funded the juggernaut with taxpayer money and his ability to strong arm creditors. This would be the pinnacle of almost any Wall Street Titan’s — or community organizer’s — career. Obama is just getting started.
The Chrysler and GM reorganizations are certainly astounding in themselves. Leveraging existing bank regulations, TARP loan conditions and the bully pulpit, the administration was able to muscle creditors in an extraordinary way. These two reorganizations also show how Obama can nationalize all the major banks.
…Obama has made it clear he is willing to use his political muscle on the banks as well. Politico reported on this meeting between bank CEOs and the Obama administration during the AIG bonus imbroglio:
“These are complicated companies,” one CEO said. Offered another: “We’re competing for talent on an international market.”
But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.”
“My administration,” the president added, “is the only thing between you and the pitchforks.”
…When one Wall Street CEO raised the issue of paying back TARP funds to avoid public and government scrutiny Obama pushed back.
The president offered an analogy: “This is like a patient who’s on antibiotics,” he said. “Maybe the patient starts feeling better after a couple of days, but you don’t stop taking the medicine until you’ve finished the bottle.” Returning the money too early”, the president argued “could send a bad signal”.
…Regardless of the President’s motives, the more money lent to the banks, the more stock under the control of the US Treasury and Federal Reserve. Anything that causes banks to take more government money moves them closer to direct government control. The administration has already announced a program which will do just that.
…As private investors become leery of investing in companies susceptible to government muscle the only source of additional capital to the banks will be the government.
Another benefit of Pimco’s involvement to the administration is purely political. Pimco’s activities could arguably be described as healthy “creative destruction” in a functioning capital market. If the Obama administration needs to provide the banks more financing it can be framed as a response to the excesses of capitalism. Of course, by pure coincidence the government acquires more control of the banking system as it responds to this excess.
The Obama administration will be able to make a plausible argument that nationalization of the banks was forced upon the administration by capitalism run amok. Given the type of patently absurd statements made by politicians of all stripes, this rather nuanced position will pass without a second thought.
In summary, the mechanism to nationalize the US financial system is now in place. All the levers are controlled by the executive branch. Here how it works:
- 1. The government determines various loses have eroded a particular bank’s balance sheet and regulatory intervention is necessary.
- 2. The bank is ordered to raise additional capital to maintain the proper asset ratio.
- 3. Increasing government activism causes private capital to avoid investing in banks.
- 4. The government is “forced” to loan more money to the bank in exchange for more stock and control via loan conditions like those found in earlier TARP loans and legislation.
- 5. As government acquires more power they force the bank to accept loses to benefit key constituencies of the administration (like the UAW) or the sale of toxic assets to firms like Pimco.
- 6. If the government does not own the majority of the bank’s stock return to step 1and repeat.
…If the administration chooses to do so the largest banks in the country can be nationalized by the end of summer.
There is no additional legislative action required to allow the executive branch to continue on this path. The regulatory framework was reviewed and approved by the judicial branch decades ago. The public at large may not even notice what is happening. Anyone looking for strutting fascists will be disappointed; this revolutionary change will be brought about by clean cut men and women in pinstripes.