Extortion

In criminal law, extortion is "the crime of obtaining something such as money or information from somebody by using force, threats, or other unacceptable methods."

Bonds, in law are "a document that legally obliges one party to pay money to another."

In finance bonds are more specifically defined as "a certificate issued by a government or company promising to pay back borrowed money at a fixed rate of interest on a specified date."

Senior debt is "a bond or other form of debt that takes priority over other debt securities sold by the issuer."

Investopedia tells us that “in the event the issuer goes bankrupt, senior debt must be repaid before other creditors receive any payment.” That’s the law. (Unless the court approves an ‘end run’ using Section 623, but though related, that’s a other topic.)

With the Chrysler corporation facing it ’”settle or go bust” deadline, President Obama made ‘hedge funds’ the villains. Hedge funds hold bonds. The Chrysler bonds they held were ‘senior debt’ instruments. Lest there’s any confusion here, those bad boy 'hedge funds' include Oppenheimer Funds and Fidelity, who manage a lot of 401k’s and pension funds. If they managed yours, the President was talking about you – and ultimately, his “committee” (the ones that managed the Chrysler bankruptcy filing) took your money and gave it to the UAW, which has “junior” debt, entirely derived from the monetization of their (bloated) retiree health care entitlements (benefits you probably don’t come close to).

The “big debtors” who folded so quickly? All TARP recipients. (Go back and read that definition of extortion again.)

Dan Calabrese at paints a painful picture of what this all means to “real people” at http://www.northstarwriters.com/dc280.htm

This week, with GM next under the “settle or go bust” gun, the Obama Administration and GM have offered the holders of $27 billion of ‘senior debt’ a bit of cash along with common stock equivalent to 10% of the ‘new GM’ while handing the UAW 39% for cancelling $10 billion of the debt owed the retiree health care trust fund (the ‘new GM’ would still owe another $10 billion to the fund). The ‘offer’ is ‘non-negotiable,’ says the Administration.

So, if you’re the UAW, the Administration's committee of career (Geitner) bureaucrats hands you the second largest stake in the company (the US gubm’t takes 40%) for what? Helping to sink the company in the first place?In the coming weeks, be prepared to hear Mr. Calabrese’s Teresa Waller again villianized by the President as “greedy Wall Street,” but please remember that she is a 58-year-old with a bonds in a 401k who can no longer look forward to retirement anytime in the foreseeable future. Evil indeed. Now, go back and read that definition of extortion one more time.