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So the co-investors that came together in 2007 to stupidly blow $6.9 billion on the Cerberus buyout of Chrysler thought they had gold on their balance sheets for an otherwise worthless investment. Their loans were in first position and secured, which meant that even if the company got chopped up and sold for parts, they'd be entitled to whatever was left in the event of bankruptcy.

Only that didn't happen. The UAW's VEBA trust had a $10.6 billion lien (and junior creditor position) against Chrysler. In bankruptcy, the judge gave the VEBA trust 55% of the stock, or .43 on the dollar for their investment, and the first position creditors got .30 for theirs, or so went the popular math.

"Long story short, a junior creditor was able to leap the senior-most creditor and in the process make a mockery of longstanding US bankruptcy law...capitalists have no choice but to sit up and take notice," said the cowering Eric Landry of Morningstar.

“The creditors’ rights were trashed and the unions got 55 percent of the company,” said "afraid to speak out" Jack Welch.

Gee, what's missing from this story. Oh yeah:

1. The US government has already dumped $7 billion into Chrysler.
2. At that point, taxpayers became the "super senior creditors." That's what it means when it says "debt owed to the government would be senior to other debts."
3. As Steven Pearlstein and others have observed, the secured debt had a street value of .30 on the dollar -- exactly what the hedge funds got.
4. Had the government not loaned the $7 billion already, that secured debt would have been worth about zero cents on the dollar.
5. The US government will take 8% of the company, which means they've essentially just transferred the bulk of their first position interest to the UAW and all other Chrysler stakeholders -- they haven't robbed the hedge funds crybabies of a dime.

In other words, Jack Welch and the rest of the corporate welfare set just assume that the government investment should go to them. As Pearlstein notes, the hedge funds were free to pump cash into Chrysler too and mitigate the need for government intervention, but they didn't. They wanted to be cocooned from risk by the taxpayers and screw the workers too.

They're incapable of seeing that the government acted not to help its "big labor donors" (which is garbage -- finance dwarfed labor in direct contributions to the Obama campaign). The goal was not to give a way a bunch of money, but to keep Chrysler's collapse from triggering a wave of 2 million job losses that could have precipitated a global economic meltdown.

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