via Susie:

The White House, auto executives and union representatives were all able to come to an agreement last week to keep Chrysler out of bankruptcy. But the car company’s creditors — Wall Street banks and hedge funds — refused repeated compromises and drove the company under.

The refusal doomed a major American auto company to bankruptcy, but it may have been a smart business move for the lenders.

Many of the Wall Street firms holding Chrysler bonds may also own credit default swaps that they bought to hedge their bets. These swaps, which are essentially like an insurance policy on the bonds should Chrysler default, were likely mostly issued by AIG.

AIG, thanks to the government bailout, has paid off swaps in the past at 100 cents on the dollar. Under the deal they would have had to accept with Chrysler, the bondholders would have received as little as 30 cents on the dollar, for example.

Why take 30 or 35 cents on the dollar from Chrysler when you can get the whole buck from the American taxpayer?

I can't find a way to link, so I'm pasting the whole post:

New York Fed Chairman Violates Bank Ownership Law
(posted by counterspin)

Stephen Friedman, chairman of the Federal Reserve Bank of New York, sat on the board of Goldman Sachs, had a large holding of Goldman stock, and purchased an additional 37,300 shares of the firm after it became a bank holding company under Fed regulation in September. Tim Geithner, who at the time was president of the New York Fed, asked the Federal Reserve Board to grant Friedman a waiver despite the conflict of interest and violation of Fed policy. The stock Friedman purchased in December and January now show accrued gains of $2.7 million.

Goldman received speedy approval to become a bank holding company in September and a $10 billion capital injection soon after. During that time, the New York Fed's chairman, Stephen Friedman, sat on Goldman's board and had a large holding in Goldman stock, which because of Goldman's new status as a bank holding company was a violation of Federal Reserve policy...
Jerry Jordan, a former president of the Fed bank in Cleveland, says Mr. Friedman should have stepped down once Goldman became a bank holding company in September and thus fell under the Fed policy barring stock ownership by certain directors of Fed banks. "Any kind of financial transaction at all by any of the directors is always a problem," Mr. Jordan said. "He should have resigned."

...Under law, [Fed bank] directors in Class C, including Mr. Friedman, and Class B can't be officers or directors of banks, and Class C directors like Mr. Friedman also can't own shares of banks. This means not of bank holding companies, either, by the Fed's interpretation of the 1913 law...on Oct. 6, at the urging of New York Fed lawyers, Mr. Geithner asked the Federal Reserve Board for a waiver enabling Mr. Friedman to continue owning Goldman stock and serving on Goldman's board.

Gotta admire the chutzpah. Brazen under Repub WH and Dem WH....

From WSJ.

"AIG spokesman Ashooh said the company’s revised accounting is the result of different wording of the questions asked by Cummings and POLITICO."

Talk about your asymmetrical information.