In announcing the Chrysler bankruptcy, President Obama launched a broadside attack on creditors who declined to buckle under White House pressure to cut a bad deal.
The assault on hedge funds, derided by the Bully in Chief as a small band of "speculators" seeking a "bailout", was more than President Obama's usual opportunistic populism - it's a signal of the pernicious effect of the increasingly intrusive federal role in the private sector.
To set the record straight, some investors in Chrysler debt are asserting their legal rights - in fact, their legal obligation to shareholders - by electing to make their case in bankruptcy court. These creditors believe the government's deal unfairly compensates their senior positions, and that less senior stakeholders are getting a better deal. Bankruptcy courts exist to properly align the rights of stakeholders in an orderly and predictable way, and that's where this matter appropriately belongs.
So President Obama maligned a group asserting their legal rights, while praising those firms - especially large banks - who buckled to White House pressure to accept the deal.
But the large banks holding Chrysler debt are hardly grateful for the praise - and for good reason: they're not accepting the deal out of altruism; they're accepting the deal because they're in the impossible position of negotiating with a Treasury Department that holds their futures in its hands.
Major banks holding Chrysler debt are at the same time waiting for the public release of the government's stress tests, determinations on repaying TARP funds, and the prospect of new financial regulations going forward.
When a bank sits at the table with a regulator holding those cards - who also happens to be a shareholder - it's not a negotiation; it's something closer to extortion. And more so when they know the President is willing to use his bully pulpit to take populist pot shots at any firm failing to buckle.
Banks will continue to be forced to make business decisions on unfair and unforgiving terms that meet the political aims of this White House as long the government maintains its large positions in these firms.
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Tony Fratto is a CNBC on-air contributor and most recently served as Deputy Assistant to the President and Deputy Press Secretary for the Bush Administration.