Yikes!

I almost feel like I'm not understanding this whole story, because from how I have interpreted things, this is one of the most disgusting uses of force by government I have ever seen. These funds didn't want to take a deal because they didn't think it would be in the best interest of the fund. Isn't that how it's supposed to be?

It sounds like the government is saying "we don't care about your rights, you are going to do what we want even if is not in your best interests".

Can someone correct me here or is that really the basic synopsis of the situation?

Wow, people are getting a bit dramatic over this. The administration was trying to strong-arm the lenders (which it successfully did) in order to expedite the restructuring process. How exactly is this a use of force?

Keep in mind that numerous other presidents have strong armed unions and banks before, including the conservative savior Ronald Reagan. This isn't a violation of the law, but certainly an assertive use of the power of the White House. Obama is certainly using his political capital in this exercise.

1) What is elitism? I really don't understand how people are making this connection to Obama's administration. I know the GOP started throwing this word around on the campaign but it doesn't make any sense at all. Seriously how is his attitude toward 'tea baggers' elitist, that is in the purest sense of the word elite. It's absolutely retarded (and if you tell me it's b/c he went to Harvard I'm going to kill you with your own fucking stupidity).

2) Given the deflationary trend in the past year printing money (ie true seigniorage) wasn't a bad idea but I don't think people are really perturb with the Fed adding liquidity, I think that their more pissed off with this idea of big government (which I am as well). Saying that I think there is a big difference between increasing government in the traditional sense (more departments, bureaucrats, oversight committees of oversight committees, etc) and adding to the nations balance sheet via investing the country in it's financial sector. The nation will be getting a great return on their investment when the banks pay back their TARP funds, some of which already have and others are ready to do so as well.

Furthermore where were all the [fox sponsored] tea-baggers these past 8 years when the federal deficit was growing out of control, with NOTHING to show for it but a massive financial clusterfuck?

The president could very well use the military forces of this country to invade any country in the world whenever he felt like it but that certainly doesn't make it right, although I suppose you would presumably just explain to everyone he is just "using his political capital."

I can recall one very recent president that did the above twice and his name wasn't Obama.

Obama is using political capital...he did not FORCE the lenders to do anything. The lenders could have (and almost did) force the bankruptcy without any preexisting agreement. They weighed the costs - pissing off the president and treasury - against the benefits of the likely enhanced debt return. In my mind, I'd rather stay in the good graces of the president.

I don't agree with what Obama did, since it is largely a populist maneuver, but to come on here and say "it's time to get armed to the teeth" is ridiculous. The lenders could have easily gone the other way and would have been supported in law.

It's kind of refreshing to see business being conducted with the interests of the greater good being considered, albeit a bit coerced. Sure they could have screwed/squeezed for a few more cent on the dollar but if the company is able to restructure and come out competitive doesn't everyone win? If that's the case then I'm all for this admins light market intervention.

I am really sick of the short-term solution/strategy/gains that businesses, congress, and (to a lesser extent, although you could argue that their demand for short-term results causes businesses to focus on them) investors have striven for in the past because it gets us into fucked up situations that we have to eventually deal with, such as our current state... and healthcare in 10 years... and SS in 20.

Sure push yourselves to do better and be more competitive today but not at the expense of your future potential - that's my type of capitalism. If it takes government intervention to keep everyone on this path then so be it. I think it's human nature to try to stray from this ideal for short-term gain (think about your current saving/spending patterns realistically and see how you're doing) and maybe a little slap on the wrist every now and then isn't a bad thing.

We could have all used that a few years ago.

Boy - lot of misinformation on this thread.

The basic problem is that the senior debt was forced to take a bigger haircut than the junior debt. Why? Because the senior debt happened to be owned by hedge funds and the junior debt happened to be owned by entities like the UAW. It's one thing for them to have the same recovery rate but it's ridiculous to expect senior debt to take a BIGGER hit.

When a hedge fund complained that this was unfair and said they would not take this deal, the president allegedly smacked them down.

What you guys may not realize is if this allegation comes out to be true, the fund managers may be liable for prosecution by the limited partners for violating their fiduciary responsibility.

Change your minds now?

Both the respective funds and the President are saying that this is not the case and that they were managing risk v. return like business as usual.

I think that they're safe.