- The Washington Times - Friday, May 22, 2009

“Creditors have better memories than debtors.”

Benjamin Franklin could not have imagined a spectacle like the bailout and restructuring of General Motors in 1758, but thousands of individual bondholders across the country are getting a bitter reminder of the Founding Father’s wisdom.

Chris Crowe, a home inspector from Lakewood, Colo., stands to lose almost all of the $115,000 that he has put into GM bonds over the years.

He estimates that he would get $200 under the automaker’s restructuring plan, plus some “worthless stock.” The investment was meant to fund his retirement and college tuition for his son Cameron, 13.

Mr. Crowe and his fellow small investors are now “stunned,” he says, not just by the fall of once-mighty GM, but also by the way they say the company and President Obama are running roughshod over their rights as lenders.



“The [administration’s] auto task force is calling all the shots,” he said after a press conference Thursday at the National Press Club. “They’ve already taken GM over, and they are railroading the bondholders.”

The news conference was organized by the 60 Plus Association, a conservative advocacy group for seniors that has formed a “Main Street Bondholders” group to lobby for changes to GM’s restructuring plan.

“These little mom-and-pop investors, they aren’t part of the mismanagement that led us into the situation we are in now,” said Jim Martin, president of 60 Plus.

Noting that bailed-out giants like GM were deemed “too big to fail,” Mr. Martin asked, “Are these folks too small to survive?”

Mr. Martin said the United Auto Workers union and the federal government make out far better than the private lenders under GM’s plan.

He is seeking some “breathing time” of at least 30 days to allow attorneys for the bondholders to be heard.

An administration official who requested anonymity said the president is committed to acting in a fair and reasonable manner.

A GM spokeswoman did not return a call seeking comment.

GM is required to prove it is viable by Tuesday, and to do that, it needs to come to terms with the UAW - as it did Thursday - and its bondholders. A bankruptcy filing is widely anticipated by June 1, and some bondholders are counting on getting a better deal in bankruptcy court.

Mr. Martin bridled at Mr. Obama’s description of Chrysler creditors as “a small group of speculators” three weeks ago.

Several of the more than 20 small investors at Thursday’s news conference said they invested in GM bonds because they felt bonds were safer than stocks, even for retirement savings.

“My financial adviser said to buy stocks, but I said, ‘No, they are too risky,’ ” said Bill Zastrow, 59, of Charlton, Mass.

“I wasn’t a speculator. I thought I was doing the safe thing, the responsible thing,” said the small businessman and father of four.

Mr. Zastrow invested $240,000 in GM bonds in 2005, when they were trading at face value, as they were as recently as 18 months ago. GM’s debt obligations were downgraded to “junk” status in 2005.

GM bondholders could have sold their investments at 80 percent of face value in early 2008. They are now worth 5 percent of face value.

Although they are furious over their treatment in GM’s plan, many of the bondholders - including some former GM employees - clearly still had emotional ties to the company.

“The company could survive if we could derail this bankruptcy,” said Bob Mitchell, a retired sales manager from New Orleans, who invested $10,000 with his wife in GM bonds. “They are capable in almost any area of manufacturing. Let GM get back to manufacturing, innovating and making money, and this could all be repaired.”

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