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 Warren Buffett endorsed Barack Obama for president last year and has generally remained positive about the new president's actions to try to restart the economy. But the Oracle of Omaha apparently has significant reservations about the way the administration handled secured lenders of Chrysler LLC in the days leading up to the automaker's bankruptcy last week, predicting that the government's actions to abandon principles that govern what creditors have priority "would have a whole lot of consequences."Chrysler filed for Chapter 11 protection last week after some holders of its $6.8 billion in secured debt refused to go along with a government-mandated restructuring that would have seen them receive just pennies on the dollar. The lenders complained that they were being treated unfairly, noting that the United Auto Workers' unsecured claim would receive 55% of the company's equity. Obama had harsh words for those lenders during a press conference announcing the bankruptcy, saying "a group of investment firms and hedge funds" had decided to hold out for what he called "the prospect of an unjustified taxpayer-funded bailout." Buffett, speaking to CNBC's Becky Quick at Berkshire Hathaway Inc.'s annual meeting, uses the sort of colloquial language that has earned him the title "America's billionaire next door" to explain in simple terms what he sees as the danger of the administration's actions. He said: "The bondholders want a secure bond. IIf I have a first mortgage on my house here, and the first mortgage is for half of what the house is worth, and somebody says I want you to take a big haircut because I've got credit card debt someplace else, that's got problems. It has problems in terms of future lending. I mean, if priorities don't mean anything that's going to disrupt lending practices in the future." He warned that the Chrysler example could make lenders more hesitant in the future, perhaps delaying an economic recovery. "If we want to encourage lending in this country," Buffett said, "we don't want to say to somebody who lends and gets a secured position that that secured position doesn't mean anything." - Lou Whiteman See related post about Buffett from Dealscape
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From: anonymous,
ramjet- 1.) What's left of Chrysler does not justify the "for the greater good" argument. 2.)The UAW is partly responsible for the position of Chrysler today as a company that can't compete with the likes of Toyota. They have been getting more than they deserve for years.
Posted on:
May 6, 2009 1:35 PM
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dear Mr Buffet
with no disrespect, i believe that if all these people are out of a job, including the entire chain, you of all people should understand the math here. A LOT MORE PEPLE THEN THERE ALREADY ARE HOLDING FIRST MORTGAGES WOULD LOSE A LOT LOT LOT OF MONEY. You may not need that(for you are well to do), but certainly in that chain their are way more people holding first mortgages or even better simply trying trying to pay for these overinflated mortgages created by those lenders or investment companies. So why don't they let the sun shine for the ones who really need it the bottum of the chain.Maybe that is exactly what Obama is trying to do.
P.S. do the right thing mr gonzalez I have faith.