Bailed Out Bank, JP Morgan, Dooming Chrysler

The WSJ confirms what we’ve all probably suspected: the creditors that are forcing Chrysler into bankruptcy are the same banks that have been surviving only with the help of the federal government. And of course, they are refusing to offer the same generosity to Chrysler.

Banks that loaned Chrysler LLC $6.8 billion are resisting government pressure to swap more than $5 billion of that for stock to slash the car maker’s debt, according to people familiar with the matter, hindering Chrysler’s effort to restructure outside of bankruptcy court.


The lenders, which include J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc. and Morgan Stanley, hold great influence in moving the process along. As holders of secured debt, they have the right to take control of Chrysler plants, brands and other assets, which were pledged as collateral for the loans, if the company files for bankruptcy protection.

As a result, Chrysler may be worth more to the lenders in a bankruptcy liquidation than if they agree to restructure the debt, and the government has less leverage to force the banks to make concessions.

The negotiations show how the government’s involvement in both banks and industrial companies is creating uncomfortable circumstances: The U.S. has given aid to some of the very banks that are demanding tough terms from Chrysler, also a recipient of government loans.


The Treasury Department began talking with the banks on Wednesday. The bailout money these banks took from the Troubled Asset Relief Program "hasn’t been mentioned, but everyone is aware that issue is there," said a person familiar with the talks.


The J.P. Morgan position, said these people, is that concessions by Chrysler’s creditors should be treated as they would be in a normal bankruptcy — meaning the billions of dollars of government debt and the UAW retiree health-care obligation should be wiped out before the secured lenders lose anything on their $6.8 billion.

JP Morgan has been the recipient of bailout love in many forms: direct receipt of TARP funds, the Fed’s honoring of huge loans JP Morgan made, AIG counter-party funds, and low-risk sweet-heart deals for JP Morgan to "rescue" other banksters–for a total of somewhere between $27 billion and $300 billion. And of course, JP Morgan has already been using its TARP funds for acquisitions, not loans. 

But it is unwilling to take a haircut on loans of $2.5 billion that represent a miniscule percentage of all the welfare it has gotten from the Federal government.

Instead, JP Morgan insists, it should be able to benefit from any upside of a Chrysler restructuring, and to hell with the American taxpayers. And to double hell with the Chrysler workers whose entire lives are being held hostage by JP Morgan.

There’s a lot that needs to be said about this: that if Treasury can’t get JP Morgan to cooperate here, then it must write off JP Morgan as a good faith partner going forward. That this just shot to the top of the list of most loathesome actions among the banksters.

But frankly, all I can summon at this point is a long string of profanities that I’ll spare you.

48 replies
  1. emptywheel says:

    Through Chase’s retail operations, JP Morgan has hundreds of locations in MI (it bought out MI bank Bank One a few years ago). I wonder if we can start a one-state run on the bank…

    • diablesseblu says:

      As always EW, I like the way you think. This is simply unconscionable and I love the idea of the bank run. It might actually get the media to focus on some aspect of the inequities here.

      But then again, lived among these NYC finance types for many years. They don’t have consciences.

  2. behindthefall says:

    Are the people who play with other people’s money worth more to our society that people who make and sell stuff? I don’t think that even “capitalists” are ready for that revelation. Where’s a nice, old-fashioned, worker-oppressing mill-owner when you need him?

    • Synoia says:

      Where’s a nice, old-fashioned, worker-oppressing mill-owner when you need him?

      Running today’s banks.

  3. PJEvans says:

    Chase bought WaMu too. They’re advertising all over California, telling us how ‘friendly’ they are, being new to the state. (Guess they missed how people felt about WaMu, or maybe they think we’ve forgotten already.)

  4. Synoia says:

    Dear Banks:

    You are sadly mistaken about Chrysler’s assets being worth more than Chrysler.

    Who are the buyers for auto plants in the US?

    Please name them. They could become part owners for Chrysler as a going concern.

  5. orionATL says:

    the persistent arrogance and selfishness of the big-money institutions is really astonishing. it is as if they feel they have no debt to society at all.

    i would recommend nationalizing goldman-sachs, chase, or one of the other big-money banks on the grounds of incompetent management over a long time period, which mismanagement has proven damaging to the national economy and the well-being of the nation.

    one such nationalization might serve a “hit’em upside the head with a 2×4 to get their attention” function.

    but i suppose if you have bought and own very influential senators and congressmen you don’t have to worry about the consequence to society of your behavior.

  6. Valtin says:

    I guess, as we’ve always known, there’s no honor among thieves.

    The ”haircut” the nation has received at the hands of the ruling elite is what worries me. And the nation drags along, drunk on its own dreams of limitless riches and entrepreneurial glory, humming the tune, ”All is for the best in this best of all possible worlds.”

    And from this ”haircut”, no one to staunch the bleeding. The barber is no Figaro, either, but the torturer’s apprentice, sharpening his blades for the final application of his craft.

  7. Teddy Partridge says:

    Maybe now we have a better understanding of the content of Obama’s meeting with the banksters: maybe it wasn’t about the banks at all. Maybe it was about the auto companies. “Item One: Fire Rick Wagoner. Item Two: Let us call our notes.”

  8. Beerfart Liberal says:

    Jesus Christ, Obama, next time they ask for 1 goddamned thing, just tell these bank pricks “Fuck. You.”


  9. JohnLopresti says:

    News reports this past week regarding five TARP recipient banks in a two county area in the immediate vicinity north of the GoldenGate stated directors and officers at three of those institusions have opted to return the loans plus the requisite 5% interest ASAP, rather than proceed to use the funds under congress’ new no-bonus, low-bonus terms. That would be a less draconian approach to the MI bank mentioned, perhaps; convince the bank directors to opt out, and solve the loan-centric pinch by retooling other income streams.

  10. Beerfart Liberal says:

    Jeez, this is a depressing thread. who’s gonna put up a happy thread? Do i have to wait for a cartoon from Suzanne at 2 a.m.? I’m bummed.

  11. phred says:

    Who knows maybe the banks figure they are on the verge of failure, so maybe they want to turn themselves into car companies instead ; )

    It’s way past time to dismantle the banks, but then what would Larry do for pin money?

    I don’t see how Obama will be able to maintain his facade of being on the side of the public and for “change” if he insists on propping up Larry and the ill-gotten gains of Wall Street. I’ve heard Obama is desirous of being a “great President” not just a good one. Greatness requires standing up to your friends when they are wrong and doing the right thing for the public. It remains to be seen if Obama possesses such greatness.

      • phred says:

        Perhaps that explains why he made that comment to a former speechwriter then (Richard Goodwin).
        Good catch ; )

  12. oddball says:

    Since you couldn’t bring yourself to utter that string of profanities, let me do the honor.

    Just who in the fuck do those bankers think they are. If any thing at all, the Michigan delegation to the House and Senate are pissed at the treatment of the auto companies. This just adds fuel to the fire.

    I will be on the phone with Mike Rogers office first thing on Monday morn to express my concern over the way the banks are acting.

    For the record, I second the motion on a bank run on Morgan. There is no better way to wake the powers that be. I highly recommend that this action be advertised on all the usual sites. If Morgan has to respond to this in any way, shape or form, we have done our job.

    JP Morgan you say…..RUN EM on April 15, 2009.

    Make Tax Day a real statement and ask just where do my taxes go?

  13. Kinmo says:

    Can the media shed the “economic downturn” title now and call it a “depression”? I’m depressed, therefore, it should be dubbbed an official depression. Really. Enough with the soft “we don’t want to upset anybody downturn” shit. I’m not educated enough to know the official “book” definition of a depression, but it sure feels like one to me. The sooner we come to terms with what is really happening to us, the sooner we will all band together and affect change. If it aint a depression, we sure are walking the line.

    • eCAHNomics says:

      At the loss of 600,000+ jobs/month, it soon will be a depression by anyone’s definition. It’s like declaring the recession to be official, which occurs after the data are in. So be patient. It is a matter of months before the officials will chime in. BTW, I don’t know if there is an official point at which recession is downdefined as depression (I’ll hunt around for some metrics), but I would guess a double-digit unemployment rate, by the regular measure, now 8.5% and rising about a half a percentage point per month. (U-6, the broadest measure of labor underutlization, is now 15.6%, but that data set only goes back to 1994. By contrast the standard measure of unemployment peaked around 25% during the Great Depression.)

  14. Minnesotachuck says:

    With considerable misgivings, I finally decided to forward this post to my friend Dave, the co-owner of a Chrysler/Plymouth/Jeep dealership in a small town about an hour’s drive west of Minneapolis. Our gourmet club meets at his house this evening and I suspect I know what one of the main topics of conversation will be.

  15. JohnLopresti says:

    Consider the safety factor as a plus in Chrysler’s history: when I was a new driver a Chrysler like the graphic in the diary destroyed part of the ‘53 ford sedan stick I was driving in a dispute over which car would be more courteous after a stop sign. Net result, Ford repair cost more than value of then ancient vehicle, I did not repair it; Chrysler not even bumper damage. It might be that the gold color Chrysler had extra armor plating, however. I have seen a few dinged red Chryslers from that year, but the gold Chryslers were extraordinarly solid. Fortunately, I still had the Schwinn for the commute to highschool, though the Ford held such promise.

  16. eCAHNomics says:

    As I expected, the know-all wiki sez there is no official definition of a depression. National Bureau of Economic Research is the official U.S. arbiter of recession timing, but does not opine on depressions. That could be because they only started doing the dating work post-WWII. But as I said, people will start talking about it’s being a depression when the unemployment rate gets to double digits, in another 3-6 months. (Post-WWII high was 10.8% early in the Reagan administration.) One important current impediment is that the economics forecasting community widely expects a recovery to begin before the end of the year, based on fiscal & monetary stimulus (which, in my calculation is insufficient to get growth into positive territory, but that remains to be seen). And one element of depressions is that they are sustained for a long time. So if the recovery doesn’t happen as forecast, then more “experts” will be drawn into characterizing it as a depression.

  17. Eureka Springs says:

    meaning the billions of dollars of government debt and the UAW retiree health-care obligation should be wiped out before the secured lenders lose anything on their $6.8 billion.

    I know this will sound naive at best…more likely flat out dumb.

    But I cannot fathom how a banker, much less bankster creditors can override retiree health-care in any final priority.

  18. leoklein says:

    JP Morgan Dooming Chrysler? Who cares? They’re dooming me by charging me close to 30% APR on my credit card. And out of the other pocket they’re getting a government bailout.

    Sweet deal.

  19. Rayne says:

    Most of us in Chrysler’s home state of Michigan will recognize Chase and not JP Morgan as the bank down the street or the ATM machine we use.

    Chase = JP Morgan.

    There are a few of us who may be familiar with JP Morgan, but that’s the investment side of the holding company, more commonly used by companies and by investors of higher net worth than most of us who read and comment here regularly.

    If you’re banking at Chase, you’re banking with JP Morgan’s subsidiary; they merged in 2000.

    AND IF YOU USED TO BANK WITH NATIONAL BANK OF DETROIT (NBD) OR FIRST OF CHICAGO and stayed with them as BankOne, you’ve banked with JP Morgan. BankOne was acquired in 2004 by JPM.

    AND IF YOU’VE GOTTEN A MORTGAGE WITH WAMU, you’re banking with JP Morgan even if the mortgage still says Washington Mutual on it, since JPM acquired WaMu last year to keep WaMu from going belly up.

    Got it? They’ve bought up a considerable portion of Chrysler’s home state’s banking — as well as that of across the rest of the country — and now they are going to drive many its customers into the ground by pulling their financial legs out from underneath them, and while taking their tax dollars.

  20. John says:

    Things just get sicker and sicker, the more this “bailout” crap unfolds, a natural and inevitable progression arising from not doing the right thing in the first place: instead of propping up the losers, we should have let them fall. If we had, we’d be starting from scratch without all that debt running around chasing itself, all this to the FURTHER enrichment of the same criminals who brought the banking system down in the first place. At no point do the bankers have the country’s best interests at heart, as this post makes clear.

    Obama has lost this gamble but not admitted it yet. It will destroy him if he doesn’t throw out the Wall Street boys and stand up for the rest of us.

  21. bell says:

    thanks for articulating this so well emptywheel.. it needs to be heard strongly by everyone but especially the politicians who are supportive of it to show just how hypocritical there position really is… thank you..

  22. BooRadley says:

    that if Treasury can’t get JP Morgan to cooperate here, then it must write off JP Morgan as a good faith partner going forward.

    AFAIK, Summers hired Blackwater JP Morgan, GS, and others to prop up the dollar against gold with naked shorts. See this excellent post by plunger for more detail.

    “Goldman, JP Morgan Chase and HSBC Attack Gold/Silver as Dollar Plummets”

    AFAIK, that’s why Geithner won’t ban naked shorts, it’s part of Larry’s really desperate attempt to prop up the dollar, which is understandably getting hammered, because Larry shovelled TWELVE TRILLION to the top one-percent banks.

  23. Mary says:

    I’m having a really hard time believing that in this economic setting and that industry setting and the locations of plants, etc. in the center of the economic and industry downturns that the plants, assets, etc. are actually going to be of a sufficient turn value that the banks would end up being anything other than undersecured. Stick them with the costs of carry on a bunch of closed plants and leave them with general creditors for a big chunk of undersecured debt and make them take the real word write down today and it might not be the worst thing that happened – but whoever is negotiating wtih them needs to spell out the situation on undersecured status v. fully secured status and ask them which they REALLy think they have. fwiw.

    OT – elsewhere, the Navy is removing Khadr’s defense counsel – again. First Vokey bit the dust, now Kuebler.…..y8mnhZ.3QA

    • skdadl says:

      OT – elsewhere, the Navy is removing Khadr’s defense counsel – again. First Vokey bit the dust, now Kuebler.…..y8mnhZ.3QA

      That’s one of the reasons I’m bitter this weekend. Kuebler has been a hero imho, has just done such wonderful work at GTMO, in Washington, and in Ottawa. I wouldn’t normally link to anything from CanWest, but there is actually some believable detail about Masciola’s purposes in this report:

      Kuebler’s conflict of interest charge centres on Masciola’s alleged efforts to ensure that his office and staff remain in place even if a review President Barack Obama ordered of the Bush-era commission system ends up shutting down the whole operation.

      He was trying to do this, Kuebler argued, by manoeuvring so that his staff military lawyers continued to represent detainees even if their cases are shifted to civilian courts.

      Kuebler had argued Masciola should have left the way clear for him to make the case to the Obama review team that the evidence suggested Khadr would be better repatriated than prosecuted.

      Also, I don’t know what to make of this. Is it possible that Obama would let the Pentagon go after Clive Stafford Smith and put him in jail for his work on behalf of Binyam Mohamed?

    • Rayne says:

      Mary, I’m not certain how to put this nicely, I’m sorry if what I’m going to say sounds terse.

      This bit:

      Stick them with the costs of carry on a bunch of closed plants and leave them with general creditors for a big chunk of undersecured debt and make them take the real word write down today and it might not be the worst thing that happened

      is the last damned thing I’m worried about. It’s not the worst thing.

      My husband is going to have to shut down his plant and lay off all the employees including himself in about two weeks if something doesn’t turn around in days. Chrysler has been one of his biggest customers.

      There are employees who’ve worked for decades at his shop; at least one is being treated for cancer, there’s at least a couple single parents, there are others with children in college, the list goes on. All of them count on their paychecks and their health insurance from these jobs related to making capital equipment for the auto industry, including Chrysler.

      The worst that could happen is that these people would have no jobs to go to — ever. We’re talking about the death of the American auto industry and the millions of jobs which it creates; we’re talking about banks who’ve screwed up every way to Sunday deciding for this country that they are more competent at deciding the future of our manufacturing base and whether to transfer technology to other countries like China (because that’s what they’ll do). We’re talking about the depression this state is already in spreading more widely across the country.

      The worst that could happen isn’t JP Morgan taking a haircut we’re already subsidizing.

      • bmaz says:

        Yep. If the equation only involved Cerberus/Chrysler and the creditors/banksters, then this might be satisfying. But there is so much more than that – the plant employees, vendors, the parts suppliers, the local ecomony – crikey the whole ball of wax. I do think that Chrysler as we know, and have known, it is going to die. But it cannot be a direct shock ending like Mary suggested; that would be catastrophic I think.

  24. PJEvans says:

    banks who’ve screwed up every way to Sunday deciding for this country that they are more competent at deciding the future

    Right up there with insurance companies deciding who gets what medical treatment ….

  25. Loo Hoo. says:

    I owed Chase $1 on a credit card bill, and accidentally clicked on an old Chase account I had. The late fee was $15.00.

  26. JohnLopresti says:

    @40 I had a bunch of fee scam like that at a MN bank, and moved accounts to other institutions. Maybe new Democratic party led Senate congress and administration will improve comptroller of the currency policy in that respect. Historically it is the kind of thing Democratic leadership does well. hat/tip to my former state assemblywoman for the advice.

    At one time I thought I saw a Paulson link to JPM, platinum Wall St house.

    @25, it was nice to read that capsule review. I wonder about the outcome of the G20 tete-a-tete between O and Медведев, whether he and Putin are prepared to denominate rubles in Euros or base their currency on some other standard.

  27. Mary says:

    37/38 – I guess my point got lost. The post indicates that JP et al won’t sit at the table and work to keep things going bc they are relying on their status as a secured creditor to say, “hey, we get all our money back and everyone else can suck eggs.”

    The heart of my point was meant to be that if anyone who is handling the negotiations is letting them sit on their secured status a handful of trump cards, they shouldn’t. The banks status as secured, vs VERY UNDERsecured, is completely dependent on the economy and industry. As a result, their security interest in plants, equipments etc. are very dependent on the nature of the industy as a “going concern.”

    Which is what I tried to point out with:

    I’m having a really hard time believing that in this economic setting and that industry setting and the locations of plants, etc. in the center of the economic and industry downturns that the plants, assets, etc. are actually going to be of a sufficient turn value that the banks would end up being anything other than undersecured.

    So anyone letting the banks pretend that they can let the industry tank and still end up “secured” is doing a very bad job negotiating. What they need to do is show them how letting the industry tank devalues all their security AND leaves them stuck with carry costs in an environment where they won’t get turn.

    I understand you are looking at it from a standpoint of having a large part of your personal world collapse if the banks don’t come to the table. I don’t have that degree of personal stake (a lesser one I won’t go into, but not that degree) but I have the same interest in not wanting to have people lose jobs left and right (KY is one of the largest parts supplying states) Fear usually doesn’t move the ball down the field though.

    Obama and/or the industry needs an SOB in the negotiations who will graphically explain to them how every nail in the industry’s coffin will get driven through their fingernails first. If no one is willing to do that, then the industry is screwed. And actually, the banks are too bc they will NOT be oversecured or evenly secured but instead they will be very undersecured and have collateral costs to maintain what security they have. That needs to be a point rammed down and crammed down – that they will suffer if they don’t sit at the table – I’m not sure that Obama and Geithner are willing to make the pressure point come from the bailout (they should, but they aren’t giving off that vibe) so you have to make it a real world argument.

    To the bank: your assets are in autoland, they are premised on autoland’s survival, and they derive all their value from autoland. If you let autoland fail – you shoot yourself in the foot. You can try approaching them with a “people will lose jobs” argument, but I just don’t think it would do much for you. (It’s been a long long time, but troubled loan workouts is what I used to do a couple of decades ago and generally representing banks.) In essence, this is the approach that allowed Trump to have his projects end up in bankruptcy and yet in the end have the banks pay him to operate his way out rather than them taking their “security” back. They realized how much of their value was tied up in his ability to make the projects going concerns and that they needed him. The banks need to feel the same need about the industry IMO. fwiw and you can be as terse as you’d like. My personal concern is the loss of jobs as well, my professional approach would not be to focus on that (although given the politcal aspects of gov involvement in the loans, it might have a lot more impact than it would in a normal business workout setting).

  28. Mary says:

    36 – saw that about Clive Stafford Smith as well. It’s pretty ridiculous -Obama is not only CIC but also the figurehead for all agencies reporting to him, including the Dept of Justice. But would he let them do it? Apparently so – they have already filed the complaint. Obama seems to have either decided to be Lil’er Boots on all things torture, or to have just abandoned his responsiblity and duty on that front. Whichever, he hasn’t been much of an inspiration.

  29. Mary says:

    35 – thanks for that link. I didn’t know they were even working on that. All the Kabuki “hearings” in armed services and intel and judiciary committees seemed to *underutilize* the prior Seton Hall studies – how you generate something like the MCA and DTA if anyone bothered to read those studies and let the profs and students who put them together testify is beyond me.

  30. Dismayed says:

    I’d like to see well organized rebellion against these big banks one at a time.

    The way to take their ass down is for everyone to simply refuse to pay their credit card bills for a month.

    Chase would go under like a lead bubble. And what would it cost the participants in this civil disobedience, perhpas one 30 day deliuency on the record, big deal. Then Citibank. Eveyone with a CTI card just doesn’t pay for a month – hell it wouldn’t take a week.

    We can put these people into recievership any time we want without breaking a single law or even exposing the participants to any risk. It’s just a matter of organization and targeting.

    We can take ‘em down one by one. Certainly, even beginning to organize such an event would put the administration on notice that we’re not going to sit areound and let them prop up these goon any longer. Any real organization to this and the administration would step in and start taking them down. The question now is do the major blogs have the gusto to take action? I sort of doubt it.

    But the simple fact is Washington, nor the corporate elite give a tinkers damn what we think, they’re only going to stop with the daisy chain in the congressional showers when we MAKE them. And phone calls and whining, don’t do it. Punches need to be thrown, and i think even the republican side of the citizenry would go along with a plan like this.

    When do the people start throwing punches? Do we just sit here and let them boil us? When it would be so very easy to kick them right square in the balls??

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