Legal Commentary

Why I celebrate Chrysler Corporation's petition for Chapter 11 reorganization

By Beldar

Count me as one person entirely unsurprised to read that representatives of the Obama Administration were making outrageous and improper threats to the Chrysler bondholders whose refusal to capitulate ended up in Chrysler's Chapter 11 filing. White & Case bankruptcy lawyer Tom Lauria gave a radio interview to Detroit talk radio host Frank Beckman, portions of which are transcribed here, in which he said:

One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under the threat that the full force of the White House Press Corps would destroy its reputation if it continued to fight. That?s how hard it is to stand on this side of the fence.

Beckman: Was that Perella Weinberg?

Lauria: That was Perella Weinberg.

And Obama himself actively participated in the shakedown:

Peter A. Weinberg and Joseph R. Perella are part of a band of Wall Street renegades ? ?a small group of speculators,? President Obama called them Thursday ? who helped bankrupt Chrysler.

That, anyway, is the Washington line.

In fact, Mr. Weinberg and Mr. Perella, with sparkling Wall Street pedigrees, are the epitome of white-shoe investment bankers. And their boutique investment bank, a latecomer to Chrysler, played only a small role in the slow-motion wreck of the Detroit carmaker.

But now the two men, along with a handful of other financiers, are being blamed for precipitating the bankruptcy of an American icon. As Chrysler?s fate hung in the balance Wednesday night, this group refused to bend to the Obama administration and accept steep losses on their investments while more junior investors, including the United Automobile Workers union, were offered favorable terms.

In a rare flash of anger, the president scolded the group Thursday as Chrysler, its options exhausted, filed for bankruptcy protection. ?I don?t stand with those who held out when everyone else is making sacrifices,? Mr. Obama said.

Chastened, and under intense pressure from the White House, the investment firm run by Mr. Weinberg and Mr. Perella, Perella Weinberg Partners, abruptly reversed course. In a terse statement issued shortly before 6 p.m. Thursday, Perella Weinberg Partners announced it would accept the government?s terms.

It was too late.

What made Perella Weinberg ultimately give in, when others like Oppenheimer Funds refused? One word: Vulnerability (emphasis mine):

Representatives for Perella Weinberg, which is advising the government on a wide range of banking issues, initially defended the firm?s decision to rebuff the government?s offer.

(Recall that I blogged on March 26 of this year about the odd fact that Obama's chief of staff, Rahm Emanuel, had earned somewhere between $16-$20 million in something between two and three years as an investment banker at Wasserstein Perella & Co. when the Clinton Administration went into exile in 2001, even though Emanuel had zero education, training, or experience as an investment banker or any sort of businessman. And yes ? that's the same Perella; he'd moved on to Morgan Stanley by the time Emanuel was at Wasserstein Perella & Co., but it's such a small world, isn't it?)

Glenn Reynolds and Ed Morrissey note the White House press corps' silence ? which might be read to imply acquiescence ? about being used as part of this threat. And I agree that that's an interesting facet of the story.

The bigger story, however, is that the Obama administration is engaged in a colossal abuse of power whose magnitude far exceeds a mere subversion of the White House press corps. Barack Obama has become Guido, the thug who everyone knows has not only a nasty habit of, but a nasty taste for, breaking kneecaps. And the beneficiary of his current shakedowns are the United Auto Workers.

Full post as published by BeldarBlog on May 02, 2009 (boomark / email).