Obama: Helping or Hurting the Unions?

In what makes absolutely no sense but all the sense in the world it appears that Mr. Obama, despite being a supporter of unions, is substantially hurting their future success.

In an article from Bloomberg http://www.bloomberg.com/apps/news?pid=20601087&sid=asXxg9ZZRjv4, Hedge Fund Manager George Schultze says he will be more wary of lending to unionized companies after being burned in Chrysler's bankruptcy by the Obama Administration. In a similar article out of the Indianapolis Business Journal, http://cms.ibj.com/ASPXPages/6iframes/FrontEndArticlesDetailPage.aspx?ArticleID=38147&NoFrame=1 Indiana Treasurer Richard Mourdock said he wouldn't invest any more money in the debt of companies receiving federal funds.

Essentially what is happening is these creditors feel their legal rights under bankruptcy law have been stolen from them by the pro-labor political motivations of the government.

Normally the way it works in a bankruptcy case (simplified for easier explanation) is priority claims (taxes, lawyer fees, etc..) are paid first, followed by secured creditors, unsecured creditors, and then equity holders. Regardless, of whether you believe these unsecured creditors are being treated fairly or not, the perceived unfairness money managers, like the two mentioned above, have toward government interference will make it harder for union companies to borrow debt. In order to borrow these companies will now have to pay a risk premium to service their debt. This risk premium will increase their cost of doing business and on a macro scale force many more of them into bankruptcy than would otherwise be there.

Ironically Obama's actions are hurting the unions and the companies they work for. Makes perfect sense doesn't it?