Hugo & Barack on a Similar Track
Monday May 11, 2009
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This is the kind of stuff which used to make headlines, back in the days when it was rare for central governments to take control of private companies. But, these days it passes almost without comment.
Friday, this headline from the BBC:
Chavez seizes oil service firms
The article describes how the president of Venezuela "sent troops to take over companies that provide services for the oil industry."
Chavez didn't try to couch the takeover in terms of TARPs or Stimulus Packages or Stress Tests. Chavez said, "This is a revolutionary offensive."
Chavez nationalized oil companies operating in Venezuela a couple of years ago. The firms which were seized last week "are owed billions of dollars" by the now-nationalized oil company.
The "state firm says lower oil prices mean the contractors are being paid too much" so Chavez went for efficiency and simply seized the services companies and now the state-owned oil company owes them � nothing.
At the end of April the American automobile manufacturer Chrysler declared bankruptcy. This was a pretty big deal because Chrysler is one of the Big Three auto makers, blah, blah, blah.
That Chrysler went into bankruptcy was of some interest. That it was announced by the President of the United States from the White House was extraordinary. And, like Chavez' takeover of Venezuela's oil services companies, went largely unnoticed.
This morning's Wall Street Journal contains a report which makes the Chavez takeover and the Obama takeover eerily similar. According to the piece by reporters Neil King and Jeffrey McCraken, Chrysler's lenders reminded the Obama Administration that they were owed $6.9 billion and they wanted to be repaid.
"And not a penny less," said James B. Lee Jr., vice chairman at the bank, in a call to auto task-force boss Steven Rattner on March 29.
Note the parallel. Chavez decides the oil services companies were owed too much, so he took them over. Obama decides Chrysler's creditors were owed too much so he took Chrysler into bankruptcy.
The advantage that Obama had was the lenders were largely Wall Street bankers, brokers, and hedge funds. Hardly the current darlings of the American press or public.
The Banks had been recipients of billions in TARP funds and there was no need for the Administration to say out loud how it would look to Americans for rich bankers to demand every dime while tens of thousands of blue-collar workers in factories and local dealerships were thrown out of work.
Not the same as sending in armed troops, but using the power of the Treasury Department as a club to get private companies to do the government's bidding is a little creepy.
Nevertheless, the creditors turned down a government offer of a settlement of about 29 cents on the dollar. So, according to the WSJ:
The next day, Mr. Obama called the banker's bluff. The president stepped before a podium to announce that Chrysler could face a disorderly bankruptcy or even liquidation. His meaning was clear: If that happened, the lenders would get nowhere near $6.9 billion.
At noon the next day, April 30, Mr. Obama said Chrysler would file for bankruptcy. He blamed "speculators" who had turned down the $2 billion offer for their $6.9 billion of debt.
Think that deciding how much Chrysler's debtors should get is a one-time intrusion by the Obama team? Think again.
A headline in today's Advertising Age:
Obama Halves Chrysler's Planned Marketing Budget
It seems the company wanted to spend $134 million over the next couple of months while it's plants are closed and the deal with Fiat is finalized, but "the U.S. Treasury's auto-industry task force gave it half that."
If the Obama administration can put the United Auto Workers on Chrysler's board of directors, negotiate the terms of its bankruptcy, give a third of the company to Fiat and can even decide how much marketing it should do � does anyone see a functional difference between Hugo Chavez' and Barack Obama's views of private companies?
On the Secret Decoder Ring today: Links to the BBC, the NY Times, the WSJ and Ad Age. Also a Mullfoto which is only mildly interesting and a Catchy Caption of the Day.
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