Thursday, April 30, 2009
What's the main thread in these disparate stories? It's the brilliantly acute insight that running an organization � be it commercial or otherwise � is hard. Remaining afloat is hard. Making payroll can be extra hard.Link added. How hard is it to run a company? So hard that people who naturally would have an affinity for government are fuming over the intrusions of President Savoir-Faire (or is that Savior Faire?)
Let's say you own a new business. Every dollar you have may be tied up in it. Sure you fantasize about getting rich, but for the time being at least, just about everything in your life is consumed by your dream. Your employees also rely on your success for their own families to stay fed and sheltered. Sleepless nights aside, you take satisfaction in contributing to your community in the most tangible ways you can: providing products, services and jobs. Not incidentally, you also generate a reasonably steady stream of tax revenues.
But then you fire up your computer one morning and read that DFLers in the Minnesota Legislature � on the off-chance your business has a decent year despite the worst economic downturn in three-quarters of century � expect you to pay one of the highest income tax rates in the country: 9 percent if their House bill prevails; 9.25 percent if their Senate bill does.
I'm not unmindful of how difficult it is to balance a biennial budget that's almost $5 billion out of whack. But I'm more mindful and admiring all the time of what it takes to run a successful business and how dependent we are on the men and women who do so here � as opposed to the overwhelming majority of other states with lower tax burdens. (Note: The personal income taxes of many business owners are based on their companies' revenues.)
Ayn Rand once noted that "The American businessmen, as a class, have demonstrated the greatest productive genius and the most spectacular achievements ever recorded in the economic history of mankind. What reward did they receive from our culture and its intellectuals? The position of a hated, persecuted minority."
As of last night�s deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country�s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money.
As much as anyone, we want to see Chrysler emerge from its current situation as a viable American company, and we are committed to doing what we can to help. Indeed, we have made significant concessions toward this end � although we have been systematically precluded from engaging in direct discussions or negotiations with the government; instead, we have been forced to communicate through an obviously conflicted intermediary: a group of banks that have received billions of TARP funds.
What created this much-publicized impasse? Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler�s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars. In contrast, over at General Motors, senior secured lenders are being left unimpaired with 100% recoveries, while even GM�s unsecured bondholders are receiving a far better recovery than we are as Chrysler�s first lien secured lenders.
It is these people that some want leading the charge to combat swine flu.