Despite the President’s assurances that he does not want to be in the car business and that “we cannot make the survival of our auto industry dependent on an unending flow of taxpayer dollars”, in just a few hours, you, the taxpayers of America, will own General Motors. Tomorrow, GM will file for bankruptcy marking the humbling of an American icon that once dominated the industry. The 60% government ownership of the company under the proposed restructuring also marks yet another instance of government intrusion into private business, and yet another instance of putting taxholders on the hook while favoring the UAW over investors.

Not happy about the new ‘asset’ (if you could call it that) that you’ve acquired? Well, you’re not alone. A new Rasmussen poll shows that 67% of Americans oppose the new deal. But wait, it gets worse. Only 18% of people surveyed believe that the UAW and federal government will do a good job of running GM. Not surprisingly, government workers are the only ones cheering on the joint venture, while 54% of private employees believe that this won’t end well.

It’s no secret that the majority of the country, conservatives and liberals alike, are opposed to bailouts and the new bailout and spending addiction that has hit Washington. We’re told that had the Detroit companies been left alone, our economy would not have been able to handle the horrendous aftermath. But, no one is out there explaining why nationalization and spending more taxpayer money were the only solutions. Why isn’t the administration out there making the case and explaining why this was the only choice we had?

And most importantly, just as it happened with Chrysler, the administation muscled its way through these negotiatons and convinced yet another group of secured lenders to step back behind the administration’s friends and supporters, the unions, and accept less than what they should be repaid. In the new world we live in under President Obama, risk-takers and lenders get punished; failure is rewarded. Rich Lowry of National Review recently wrote that this way of running the economy will ultimately be corrupting and stultifying. With the administration strongarming secured lenders yet again, I think we’re already there.

*Originally published May 31, 2009 on the American Issues Project Blog, here.

Last week, when President Obama announced Chrysler’s impending bankruptcy, he lambasted “a group of investment firms and hedge funds that held out” by refusing to go along with the government’s proposal. The President could not have been clearer about his ire toward the group, stating that he “did not stand with them”.

Who are these holdouts? Well, by the time a bankruptcy judge ordered the disclosure of their identities this week, the list had shrunk to just five investment firms.

The revealing of the group’s identities still leaves many of us troubled by the fact that last week, we witnessed the executive branch use their bully pulpit to castigate a group of investors that refused to submit to the administration’s plans for them.

These investors represented none other than pension funds of all kinds of workers, teachers unions’ funds, mutual funds and endowments among others. In other words, the investors represented millions of Americans who have worked hard, played by the rules and invested their money for retirement.

To put it simply, the investors ‘held out’ because the proposed deal was not good enough for them. They held secured bonds in Chrysler which is a fancy way of saying they lent money to Chrysler under the agreement that if Chrysler entered bankruptcy, those lenders would be the first in line to be repaid from any funds available.

During the negotiations, the government offered them 29 cents for each dollar they were owed. In total, the government asked the 46 lenders, who were owed $6.9 billion in secured debt, to accept $2 billion and wipe out the remaining $4.9 billion owed to them.

In the same deal, the government offered the United Auto Workers (UAW), an unsecured lender, 50 cents on the dollar and a 55% stake in Chrysler.

Unhappy with the proposal, some investors rejected the government’s offer. Understandably, they rejected a proposal that would have sent them to the back of the line behind the UAW, despite their contractual agreement to the contrary. Also, as the keepers of other people’s money, investors have an obligation to act in the best interest of the parties they represent – in other words, to get the best deal for their clients. In legal terms, the investors have a fiduciary duty to act with the highest standard of care to minimize losses to their clients.

So there you have it. During this time of financial uncertainty when we have all watched our investments dwindling, this group of investors, knowing that they could certainly do no worse in bankruptcy, stood up for their clients and said no to the government. And for that, the President himself vilified them. Not surprisingly, he was able to do so without much of a backlash given the anti-Wall Street mood that has become so popular recently. And despite the rhetoric and emphasis on these supposedly greedy investors, in reality, the people who stood to lose the most are people like you and me.