Big Banks, Balking at Chrysler Terms, Shouldn't Throw Stones
Some of the nation's biggest financial institutions are taking heat because they have balked at government-proposed terms for a continued bailout of Chrysler.
Gary Peters, a U.S. Congressman from Michigan, said it was "an affront to taxpayers" that J.P. Morgan, Citigroup, Goldman Sachs and Morgan Stanley refused to accept a widely reported offer of 15 cents on the dollar for their Chrysler debt, as a condition of Chrysler receiving additional government loans.
Peters was angry with the refusal, because according to Peters, those four companies have received a combined $86.8 billion in funds from the U.S. Treasury Department Troubled Asset Relief Program. Therefore, they should be willing to help Chrysler, Peters said. But as creditors, the banks reportedly are demanding more money, even if it means Chrysler has to be broken up and sold.
To get another round of government loans, Chrysler needs to win concessions from its creditors and from the UAW, and to conclude an alliance with Italian automaker Fiat. The deadline is April 30 for all those goals.
"It is extremely disappointing that while other stakeholders have agreed to work with President Obama to advance Chrysler's restructuring, financial institutions that have already taken billions of dollars in taxpayer support are refusing to do the same," Peters said in a written statement.
The banks can also expect some arm-twisting from the White House, judging by recent remarks from Press Secretary Robert Gibbs. Gibbs stressed the "good-paying jobs" that are at stake if Chrysler goes bankrupt.
He said, " -- the President continues to be involved in this issue and understanding the tremendous economic importance both for the overall industry and for the dozens of communities throughout the country that are dependent upon Chrysler and auto parts suppliers that supply Chrysler for good-paying jobs that the President believes are tremendously important and can't and shouldn't be lost."
Public opinion is already turning against the banks because of the size of the bailout they received; for the size and timing of executive bonuses for 2008; and for a perceived lack of oversight for how government funds are used.
If Congress calls the banks on the carpet for hearings, they can expect some of the treatment Chrysler, Ford and GM got late last year, or that other business executives have received since the financial crisis got worse.
"These debt holders were offered fair market value for their debt and the banks have responded by asking for a windfall," Michigan's Peters said.