Chrysler will file for bankruptcy in the United States Bankruptcy Court in New York, the Obama administration announced today. Last night, negotiations for a deal between the administration and the automaker’s creditors — which include Citigroup, Goldman Sachs, JPMorgan, and a group of about twenty hedge funds — broke down, after the funds rejected a deal they maintain was riddled with conflicts: “We have been forced to communicate through an obviously conflicted intermediary: a group of banks that have received billions of TARP funds,” the unnamed lenders, who hold about $1 billion of Chrysler’s debt, said in a statement this morning, adding that they had offered to accept 60 cents on the dollar, but “our offer has been flatly rejected or ignored.”
They went on to push the Obama-is-a-Communist button:
In its earnest effort to ensure the survival of Chrysler and the well being of the company’s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.”
The president was not cowed by these accusations, of course, and in his speech just now he blasted the debtholders for ruining the deal for everybody with their unacceptable demands. “While many stakeholders made sacrifices and worked constructively, I have to tell you some did not,” he said sternly. “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. Some demanded twice the return that other lenders were getting. I don’t stand with them. I don’t stand with those who held out when everybody else made sacrifices.” He added that he intends the bankruptcy to be “quick, official and controlled,” and that Chrysler will emerge “stronger and more competitive” owing to its alliance with Italian automaker Fiat. The debtholders, it seems, won’t be getting anything. Including, we suppose, the TARP-funded banks. This is not going to be pretty.