It was a moment of reckoning. While laying out the terms of a deal that would have averted bankruptcy for Chrysler, President Obama blasted the speculators who were unwilling to accept their share of losses: “They were hoping that everybody else would make sacrifices, and they would have to make none…. I don’t stand with them.”

Most of the large banks involved were willing to agree to the deal. The holdouts were financiers from hedge funds and boutique investment funds. These financiers felt that other investors were getting more favorable terms. They were particulary irked by the terms being offered to the UAW. Today, there are rumblings that some of these renegade investors might go before the bankruptcy courts and argue for Chrysler’s liquidation, if they think it would give them a better return on their investments. Which makes it very clear: they don’t care what happens to the larger economy, let alone an important US industry, never mind the workers, the dealers, the hundreds of industries that are tied to Chrysler. For them, money is still King.

In the wake of the Chrysler bankruptcy, you would think that the GE bondholders would put a better face forward in their negotiations to avoid a similar bankruptcy. Instead bondholders are proposing a restructuring plan that benefits them at the expense of the investing public and the workers. Their proposal would give the government no equity stakes (even though the government has given GM $15.4 billion in emergency loans). The government’s role would be held to that of secured creditor of the reorganized company. Meanwhile, the unions would be forced to give up all future claims in exchange for stock – 41 percent to offset the $20 billion that GM owes the union. Bondholders would walk away with 58 percent of the restructured company. In summary, if bondholders have their way, they get the lions’ share, the government (and we, the public investors that the government represents) assume most of the risks, and the unions lose all flexibility in pressing their claims. This is exactly the kind of thing the President was talking about --- they want to let everybody else make the sacrifices.

If there is a silver lining, it is this:  ‘speculator’ has become synonymous with ‘greed’ of the worst kind. Speculators don’t want to be accountable to the real economy. Hopefully, this weakens Wall Street’s case for ‘no-strings-attached’ bailouts and informal agreements’ wherein bankers claim they will do the right thing by the economy if only the government buys up their toxic waste.

As Frank Rich pointed out in a recent column, the financiers still don’t get it. The old ways of doing business have to change. For everyone, not just autoworkers and struggling consumers. Frank quotes a technical analyst at Citigroup who is trying to get his peers to stop living in denial about the new financial realities: “we are witnessing the end of ’25 to 30 years worth of excess.’ The new ‘normal’ in lifestyle, wealth creation and profitability of companies ‘may be a shadow of the past.’" Still, this situation is very much in flux; as a society, we haven’t settled upon an alternative narrative yet.

The role of speculators in the Chrysler bankruptcy reminds me of what is so annoying about the TARP bailouts. In an interview with the Boston Globe, Elizabeth Warren suggested that Wall Street still wants it all: “Anyone who thinks they can take tens of billions of dollars of taxpayer money and continue to operate business as usual lives in a fantasy world that I just don’t understand.”

Warren is a member of the Congressional Oversight Panel that is supposed to keep tabs on the Treasury Department's management of the Troubled Assets Relief Program (TARP). She is very concerned about the privileged role of Wall Street investors in this process, which creates an ‘insider’ (Wall Street investors) versus ‘outsider’ (taxpayers) dynamic. The insiders don’t want to change their way of doing business. They are willing to use the outsiders’ money to prop up a failed system. Outsiders are afraid of what will happen if the insiders really do collapse. So the insiders have the upper hand.

Warren reminds us of what is at stake: “Are we moving to a cyclical economy with high wealth, high risk and crashes every 10 to 15 years. Or will we emerge with a more stable economic system that benefits people across the economic spectrum?”

As a nation, we need to get clear about what our goals are in a Wall Street rescue. According to Warren, when this crisis began, Treasury made the mistake of trying to save every institution. Instead, Warren argues, Treasury should have asked: How do we make sure that there are some financial institutions to keep the economy going forward while we let the failures go?

According to Warren, citizens must get more involved. “If the American people stay out of the policy debates, then Treasury can spend at will and reshape the American economy with no one in the room but insiders. If they are involved, the policies will look different.”

Speculators’ behavior with regard to Chrysler should make us stand up and take notice.

--Sandra Hinson