administration writes off Chrysler loan
http://rawstory.com/08/blog/2009/05/05/about-that-loan-obama-team-agrees-to-write-off-7-billion-it-loaned-chrysler/
Earlier this week, Senate Democrats quashed an attempt to amend a bankruptcy bill that would have given judges the power to reduce the principal on mortgages of distressed homeowners, swallowing an explanation from the banking industry that reducing the value of mortgages would make it harder for other Americans to get a loan.
Apparently, though, if you're a car company formerly owned by a private equity firm — and soon to be taken over by a powerful union and an Italian automaker, there are different rules.
As part of the company's bankruptcy filing, Chrysler LLC will not repay US taxpayers more than $7 billion it received as part of the company's bailout earlier this year. Instead, the US will get an 8% ownership in a firm whose value continues to deteriorate by the day.
The detail was buried in Chrysler's bankruptcy filings last week, and overlooked until today. A senior Obama official confirmed the news to CNN.
The Obama Administration's Treasury Department has agreed to give up the $4 billion "bridge loan" extended by the Bush adminstration, a $300 million fee on the loan, and another $3.2 billion the Obama administration agreed to shell out — last week.
"An Obama administration official confirmed Tuesday that Chrysler won't be repaying the loans," CNN writes. A portion of the bridge loan could conceivably be recovered from Chrysler Financial, the firm's erstwhile credit arm, only that unit is going out of business as well.
"The reality now is that the face value [of the $4 billion bridge loan] will be written off in the bankruptcy process," an Obama official told CNN, noting the 8% equity stake the US will be receiving.
"While we do not expect a recovery of these funds, we are comfortable that in the totality of the arrangement, the Treasury and the American taxpayer are being fairly compensated," the official added.
Asked about the plan to take more than $7 billion in taxpayer cash, a Chrysler spokeswoman said very little.
"The content of the document needs to speak for itself," spokeswoman Lori McTavish said. "We are simply not in a position to comment."
Chysler could receive billions more in loans the administration says will be paid back. The terms of those "loans" are yet to be determined.
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