"chicago-style Enforcement Techniques"

Republicans Darrell Issa and Lamar Smith released this statement about the Obama administration's muscling of Chrysler bondholders:

As Ranking Members of the House Committee on Oversight and Government Reform and the House Judiciary Committee, we are writing to express our concern over the recent actions of your Administration that culminated in Chrysler’s bankruptcy filing. We are deeply troubled by your Administration’s tactics in strong-arming and subsequently demonizing certain Chrysler bondholders for refusing to comply with your Administration’s plan for restructuring the company.

While you criticized some Chrysler bondholders as “speculators” who were “refusing to sacrifice like everyone else,” what you did not mention is that Chrysler borrowed and spent the $6.9 billion that it owes these bondholders. Your Administration offered only $2 billion to these creditors, who are first in line to get repaid in a bankruptcy proceeding. It is not surprising that they rejected your offer. Indeed, it is perfectly appropriate for them to have done so. The bondholders owe a fiduciary duty to their shareholders to maximize returns on their investments, which rightly precludes them from making “sacrifices” to appease aggressive politicians.

Moreover, the hedge funds and other investment funds that refused your Administration’s demands often include pension funds as investors. Thus, the ultimate “sacrifice” that you were demanding may have to come out of the retirement plans of the teachers, firefighters, and police officers who depend on these investments.

We are also troubled by reports that the White House threatened to destroy the reputation of at least one of the Chrysler bondholders. The reports indicate that Perella Weinberg, which subsequently capitulated to your Administration’s demands, “was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight.” These reports, if true, raise disturbing questions about your Administration’s willingness to engage in Chicago-style enforcement techniques.

The full text of the letter can be read here.