Driving the Bond Markets to Ruin
General Motors bondholders have until 5 p.m. on Saturday to accept a parsimonious offer to exchange their loans for stock and warrants. Most likely, enough of the creditors will say no to force G.M. into bankruptcy. But there is no escaping the long-term damage that has been inflicted on credit markets by the Obama administration’s attempts to reward the United Auto Workers, one of the president’s strongest supporters in the last election, while trampling decades of legal precedent regarding owners of corporate debt.
The G.M. debacle is déjà vu all over again. In the Chrysler bankruptcy arranged by the government in April, bondholders also got short shrift, while the union, which might have received little or nothing in a normal bankruptcy, was awarded 55 percent of the company.… Seguir leyendo »