Basically, evading bankruptcy laws.
Even more specifically, the Obama administration disregarding American bankruptcy laws for Chrysler & GM.
Besides the small problem of breaking laws willy-nilly, which, beg your pardon, is NOT the American way, this causes some real problems.
1. By not following the bankruptcy system, the car manufacturers can avoid the strict guidelines that would both help them re-organize with a more profitable system, and rid themselves of contracts and debt that are burdening them.
2. By forcing the secured creditors to take far less money than they have a right to--in violation of the usual bankruptcy laws--the Obama administration has put Chrysler into a position where creditors will, understandably, be reluctant to offer capital in the future to the car company, should Chrysler require it.
Note--and yes, the Chrysler creditors were coerced to capitulate to Obama's demands to forgo their rights. According the Washington Examiner, a firm was "threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight.”
3. And (thinking ahead), if creditors are not protected by bankruptcy laws, if the federal government can arbitrarily use, or abuse, these laws, our capitalistic system and our economy will certainly suffer.
4. The meddling of the federal government in bankruptcy proceedings can lead to politicizing of the bankruptcy process.
And it has already happened. Representative Barney Frank (D-Mass), who happens to be the Chairman of the House Financial Services Committee (which controls the bailout pursestrings) has persuaded GM not to close its plant in Massachusetts.
Who benefitted by this sleight-of-hand?
The secured creditors received about 33 cents on the dollar. Unsecured creditors, the United Auto Workers union & retirees, received about 50 cents on the dollar.
I will allow you to connect the dots.
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