Don’t Bailout Chrysler

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[The Big Commentary]

The U.S. Treasury has committed a minimum of $750 billion to bail out the financial system.  The automobile manufacturers, General Motors, Ford and Chrysler are requesting $50 billion from the Treasury. 

President-elect Barack Obama shall accede to their wishes.  But this is not a beneficial idea. 

While I favor federal loans to General Motors and Ford, I am opposed to any federal funds for Chrysler.  Chrysler is 80.1% owned by Cerebrus Capital Management LP, a hedge fund, and 19.9% by Daimler AG, of Mercedes Benz fame, while General Motors and Ford are publicly held corporations.

I am vehemently opposed to the bailout of hedge funds by the government.  Hedge funds have enough advantages, thanks to George W. Bush, Sen. Chuck Schumer, and Rep. Barney Frank- namely a 15% federal tax rate while working stiffs pay a federal tax rate of 35%. 

Hedge funds always boast that they are much more nimble and better equipped to take advantage of restructuring businesses- and always neglect that they then sell the businesses at a profit.  Of course one of the advantages of hedge funds is their ability to borrow money from banks at a lower rate than the corporations, which they purchase--and then utilize the loans to pay a dividend to themselves.

Renault-Nissan has shown interest in purchasing Chrysler- albeit at a loss to Cerebrus.  Cerebrus purchased Chrysler for $7 billion and Chrysler has in excess of $11 billion cash on hand. Let Renault-Nissan purchase Chrysler.  Or better yet, make an offer to the Korean car manufacturers, Hyundai or Kia, to purchase Chrysler. 
After all, the American government is always crying that Korea does not permit hedge funds to rip off the Korean economy. But the US must not bail out Cerebrus under any circumstances. 

Let the vulture investors feed off another carcass- not taxpayer money.



 

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