Rescued banks balk at Chrysler deal

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Rescued banks balk at Chrysler deal
Creditors pushed to surrender claims of billions
By Peter Whoriskey
The Washington Post
updated 5:35 a.m. CT, Fri., April 17, 2009
WASHINGTON - At a meeting with executives from four of the nation's largest banks earlier this month, the chief of the government's auto task force, Steven Rattner, delivered a message that shocked some in the room.

To save Chrysler, he told them, the four banks and several other financial firms would have to surrender their claims to most of the $7 billion the automaker owed them. And what would the banks get in return for this sacrifice? Nothing.

"People's jaws just dropped," said a person familiar with the discussions.

The banks -- J.P. Morgan Chase, Citigroup, Morgan Stanley and Goldman Sachs -- have all since balked at the government's proposal. This week, they are drafting a counteroffer.

But those four banks are themselves recipients of billions of dollars in government largesse. Collectively, they have received $90 billion from the rescue program for the country's banks. Now, their critics say, the firms have an obligation to cooperate as the government seeks to save Chrysler.

"These are banks that have received substantial investments from the government," said Rep. Gary Peters (D-Mich.), whose district includes Chrysler headquarters. "We hope they will understand that what was given to them was not for their benefit, but to get the economy moving again and maintain American jobs. People are angry that again it seems like the banks are standing in the way."

Representatives of the banks and the other lenders have formed a committee to handle negotiations.

"Together, we are focused on providing a thoughtful response to the initial proposal," they said in a public statement this week.

Unfair offer?

Last Edited by Phennommennonn on 09/18/2011 06:08 AM