The Chrysler Bankruptcy: Plain and Simple A Battle Between Fascism and Capitalism

About 40 financial entities including many hedge funds own roughly 30 percent of Chrysler's debt.

In the normal ways of bankruptcy, their title to Chrysler's assets is superior to that of most other entities. That is, they should receive their money before any money goes out to most others and before options are discussed as to whether Chrysler remains an ongoing business and what shape that business should take.

When the debt holders analyzed the risk and bought the debt, they did so with this belief.

But, the demands by the hedge funds that this basic obligation be met has forced Chrysler into bankruptcy, since the Obama Administration would like to ignore the rights of these debt holders and force a restructuring that gives debt holders less than is rightfully owed to them, and more to a newly restructured Chrysler that heavily favors the demands of the United Auto Workers that chiefly, under the Obama plan, would be reflected in the formation of a VEBA that would end up owning a 55% stake in the new Chrysler.

A VEBA or Voluntary Employee Beneficiary Association is a voluntary association of employees; The organization must provide for payment of life, sick, accident, or other similar benefits to members. Bottom line, with VEBA's 55% share of Chrysler, it's a cover for an employee takeover.

Of the hedge funds demands for what is clearly a legally correct demand, Obama said, "I don't stand with them."

Of further note is a release by 20 "Non-TARP" debt holders that said they had been sidelined during negotiations between lenders and the government.

The group, which said it holds $1 billion in Chrysler debt, complained that the four banks agreeing to the plan were "obviously conflicted" because they had accepted money from the government's Troubled Asset Relief Program.

The group said its offer to the Treasury Department to reduce its claim to 40 percent was "flatly rejected or ignored."

Thus, while the Administration claims that it is not interested in running banks, when key decisions must be made that are important to the government, TARP recipients side with the government, when non-TARP conflicted financial entities act differently. This pure and simple is fascism, i.e. important government influence or control over corporate actions.

The next battle ground will be the bankruptcy courts. Will the courts uphold the rule of law or will they bend to Obama Administration pressure?

The results from that battle will be an important signal as to how far along the road to fascism we are. An Obama win will not be promising for the future of free markets and the rule of law.