Pro-gov't intervention opinions needed, RE: Bondholders

Discussion in 'Politics, Religion, Social Issues' started by Clive At Five, Jun 11, 2009.

  1. Clive At Five macrumors 65816

    Clive At Five

    Joined:
    May 26, 2004
    Location:
    St. Paul, MN
    #1
    I need to understand something and I need someone who supports the government intervention in the Chrysler bondholders situation to explain it to me.

    In normal Bankruptcy, the bondholders who purchased the secured debt of a company are the first to get their investment back. That's what "secured debt" means. If there aren't enough funds on-hand, assets are liquidated to cover the debt owed. Only if there aren't enough assets to cover the debt do the bondholders get short return on their investment.

    Chrysler's bankruptcy would have been the same, except that the bondholders were forced into a swap-deal of $2B when they were entitled $6.9B. In their own words, they could not "withstand the enormous pressure and machinery of the US government." This is based on criticism from Obama who said the lenders were seeking an "unjustified taxpayer-funded bailout."

    So here are my questions:

    1) While the Bondholders are financial institutions, the assets from those bonds contribute to mutual funds of many "common peoples'" holdings, perhaps in their 401ks or private retirement funds. This in mind, how does the demand of financial institutions to receive the full value of the bond imply a "unjustified taxpayer-funded bail-out" when the money would directly end up in Americans' 401ks? Instead, it's a double-whammy: Taxpayers overwhelmingly disapproved of the TARP bail-out but were forced into it anyway, then they get docked again in their retirement accounts because of how the bailout was/wasn't spent.

    2) Why is government allowed to break those financial contracts, especially when the Constitution forbids State modification of Private contracts (see "Contract Clause")? Even modern interpretations of the Contract Clause are pretty clear. A situation must pass this "test":

    (i) Does the state legislation substantially impair a party's rights under an existing contract? Since it means the seizing of private property, the answer is yes.
    (ii) Does it serve an important and legitimate public interest? a) The public unanimously disapproved of bailing out failing companies. b) As I've explained many times, the bankruptcy of GM or Chrysler would not lead to a massive economic collapse. The sale of Chrysler to FIAT to maintain American jobs proves this.
    (iii) Is it a reasonable and narrowly tailored means of promoting that public interest? Maintaining the strength of our domestic auto business by allowing it to be sold it to an Italian company is not a "reasonable" way to promote the public interest. If the argument is that it will maintain jobs in America, it only goes to prove that my reasoning in the above link is correct, and therefore the contract serves no real purpose but to subsidize the sale of Chrysler to another company, covered by the American tax-payer. Again, it's a burden on the public to subsidize something that would just sell to some other company eventually.

    Have I misinterpreted the answers to this test? If yes, how so?

    3) If the above test is answered correctly, as I believe it is, please justify why didn't the Supreme Court stop the contract intervention since it is their responsibility to block the Legislative branch from acting Unconstitutionally?

    I'm honestly not trying to be an ass. I'm looking for serious answers from people who agree with what is going on here. I am asking these questions because I need to understand more about the reasons people support this. It is the only way I can stop going completely mad over something which only seems so obviously flawed to me and the crazy nut-jobs they talk about on the news. Am I, too, a crazy nut-job for thinking that government is overreaching here or are my feelings well-founded?

    -Clive
     
  2. Clive At Five thread starter macrumors 65816

    Clive At Five

    Joined:
    May 26, 2004
    Location:
    St. Paul, MN
    #3
    Can you not answer the questions? I require information on that which I do not understand.
     
  3. .Andy macrumors 68030

    .Andy

    Joined:
    Jul 18, 2004
    Location:
    The Mergui Archipelago
    #4
    You do not require information at all. Your post is pinning the current economic situation and the steps that the united states government is taking onto a political ideology to demonise it. It's a culture war thread. People who are the US version of liberal don't necessarily support the bailouts any more than conservatives do.
     
  4. NT1440 macrumors G4

    NT1440

    Joined:
    May 18, 2008
    Location:
    Hartford, CT
    #5
    Why exactly can you only get an answer from one of those good for nothing scum sucking liberals? :rolleyes:

    .



    .


    .
    ;)
     
  5. .Andy macrumors 68030

    .Andy

    Joined:
    Jul 18, 2004
    Location:
    The Mergui Archipelago
    #6
    No. You changed the title because you were called on your smug culture wars post. The fact that you equate and substitute "liberal" with "pro-govt" just shows how simplistic your views on politics are.
     
  6. Clive At Five thread starter macrumors 65816

    Clive At Five

    Joined:
    May 26, 2004
    Location:
    St. Paul, MN
    #7
    I used "Liberal" against my better judgement in an attempt to be breif in my title. As you can see, I've now changed that.

    @.Andy if you believe I am demonizing Liberalism, you obviously don't believe that I am honestly looking for arguments that support what is going on, which, in fact, I am. This is not a culture war as I am not "against" Liberalism, as I even consider myself socially liberal. "Liberal" is just a common label of one who would be able to best answer my questions.

    -Clive
     
  7. .Andy macrumors 68030

    .Andy

    Joined:
    Jul 18, 2004
    Location:
    The Mergui Archipelago
    #8
    Your questions relate to (a) economic theory which an economist would best answer and/or (b) constitutional legal expertise. I don't see how either of these correlate to a someone who ssimply self-identifies as 'liberal'.


    Presumably you can 'socially' answer your own questions then.
     
  8. skunk macrumors G4

    skunk

    Joined:
    Jun 29, 2002
    Location:
    Republic of Ukistan
    #9
    Why? Are those you would characterise as "Liberals" more intelligent, perceptive, well-versed in economics and law, and/or articulate? If so, and if you (as you allege) class yourself as "Liberal", why can't you answer the questions for yourself?
     
  9. Clive At Five thread starter macrumors 65816

    Clive At Five

    Joined:
    May 26, 2004
    Location:
    St. Paul, MN
    #10
    You are so obviously wrapped up in playing the stupid Political Game that you cannot even discuss the issues.

    The reason things are so f'ed up is because people won't stop playing ***** politics! Can we just talk about the issues???!!?!! Can we have a sensible discussion about anything anymore, or does it all have to end in twisting words and wringing semantics to trick your "opponent" into a corner? Can we do it without the stereotypes and stupid the belittling tactics? Or can we be adults and discuss an issue here?
     
  10. NT1440 macrumors G4

    NT1440

    Joined:
    May 18, 2008
    Location:
    Hartford, CT
    #11
    I dont know, can we have a thread that doesnt start off that way?
     
  11. Clive At Five thread starter macrumors 65816

    Clive At Five

    Joined:
    May 26, 2004
    Location:
    St. Paul, MN
    #12
    Apparently you missed where I said this: I used "Liberal" against my better judgement in an attempt to be breif in my title. As you can see, I've now changed that.

    I corrected myself and you still won't let it die. Obviously you're more concerned with shutting me up than you are answering the questions.

    Pathetic.
     
  12. NT1440 macrumors G4

    NT1440

    Joined:
    May 18, 2008
    Location:
    Hartford, CT
    #13
    You can change a title, but it doesn't change this thread from having the obvious undertones you injected into it. It still even says you need a Liberal to explain it to you.
     
  13. Clive At Five thread starter macrumors 65816

    Clive At Five

    Joined:
    May 26, 2004
    Location:
    St. Paul, MN
    #14
    There. I changed the first sentence... a use of the word "Liberal" that I missed. Are you happy? Now can you proceed with the discussion?

    :confused: This is so stupid............... :confused:
     
  14. mactastic macrumors 68040

    mactastic

    Joined:
    Apr 24, 2003
    Location:
    Colly-fornia
    #15
    Government overstepping it's bounds? I dunno... theoretically the government doesn't have the power to hold American citizens indefinitely, nor to torture them. But go ask Jose Padilla how that's worked out for him.

    The question no longer is "what is it legal for the government to do", but rather "what are you going to do to stop it". Thank the unitary executive crew for that.
     
  15. .Andy macrumors 68030

    .Andy

    Joined:
    Jul 18, 2004
    Location:
    The Mergui Archipelago
    #16
    This is dishonest. It wasn't only the thread title. It was also in the body text of your post. It's still all there on your blog which doesn't need to be edited for forum brevity. Having liberal there was very much deliberate and removing it changes the tone of your entire post.

    I've happily discussed the issue of this economic governance in a multitude of other threads on exactly the same issue. However this thread was obviously not about that. It was about liberals. Which I consider very much an important issue and one of the greatest impedances to constructive political dialogue.
     
  16. Clive At Five thread starter macrumors 65816

    Clive At Five

    Joined:
    May 26, 2004
    Location:
    St. Paul, MN
    #17
    What undertones?

    The only reason you detect "undertones" is because you think I'm cooking something up out of a political play-book. My intentions are sincere and my questions are legitimate. I've tried to make clear why I am inclined to disagree
    based on my line of reasoning. The only way I can change or reaffirm what I believe is to hear and consider other arguments. That is all I ask.

    I am not playing games. I am looking for a discussion.
     
  17. jjahshik32 macrumors 603

    Joined:
    Sep 4, 2006
    #18
    I wouldnt be surprised if FIAT gets chrysler and its liquidations for free.
     
  18. .Andy macrumors 68030

    .Andy

    Joined:
    Jul 18, 2004
    Location:
    The Mergui Archipelago
    #19
    They weren't even really undertones.

     
  19. Macky-Mac macrumors 68030

    Macky-Mac

    Joined:
    May 18, 2004
    #20
    lol, while I can't give you "Liberal Help", I'll give you a response of sorts


    I don't think your argument applies in bankruptcy law

    As I understand it, federal bankruptcy laws allow bankruptcy courts to reject contracts, or require the modification of many types of contracts. Indeed, the heart of chapter 11 is to reorganize a business and its obligations so that it may return to operation in a potentially viable manner. This isn't an issue of "the state" modifying a contract but rather the action of a bankruptcy court creating a reorganization plan under federal bankruptcy laws......and the supreme court ruled that the bankruptcy court was acting within federal law.
     
  20. Clive At Five thread starter macrumors 65816

    Clive At Five

    Joined:
    May 26, 2004
    Location:
    St. Paul, MN
    #21
    Thanks for at least answering the question.

    I disagree, btw, with the indefinite holding of American citizens, cruel unusual punishment, warrantless wire taps as well, so if you were trying to bait me like the others here have... (forgive me for being conditioned to think it :p)

    What's with you? Even blog titles need brief titles. I haven't changed it because I've been trying to combat your ridiculous run-around even since you brought it up.

    Look. I admitted it was a mistake to use that word. I changed it. Now can we move on?

    I don't make a habit of coming here, and certainly wouldn't remember the arguments of each individual poster...

    I agree that mischaracterization and categorization hampers constructive political discussion. An even greater menace is the political battle as a whole that rages on, preventing those who wish to have a legitimate ideological discussion from actually doing so.
     
  21. Clive At Five thread starter macrumors 65816

    Clive At Five

    Joined:
    May 26, 2004
    Location:
    St. Paul, MN
    #22
    Ah, this is good information.

    I definitely realize that Ch11 bankruptcy allows for contracts to be changed... the purpose of secured debt, as I understood, was to be the first in line for assets when an entity went bankrupt (correct me if I'm wrong). The only thing that can (theoretically) break that contract is an insufficient amount of assets (or proper negotiation of the terms between the parties). The Bankruptcy proceedings in this case seemed to be less of a typical bankruptcy negotiation proceeding and more of a bail-out "facilitated" by the bankruptcy process, guaranteed to go through, thanks to the gov't.

    Thank you for your legitimate response!
     
  22. Macky-Mac macrumors 68030

    Macky-Mac

    Joined:
    May 18, 2004
    #23
    one thing to remember is that this is a Chapter 11 bankruptcy and not Chapter 7 which is a liquidation proceeding. Indeed, one of the primary purposes of a Chapter 11 bankruptcy is to restructure debt and avoid liquidation.

    Bankruptcy doesn't necessarily lead to a distribution of assets at all.
     

Share This Page