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'Main Street' GM Bondholders Feel Left Out, Blame Obama

A group of small General Motors bondholders calling themselves the "Main Street bondholders" complained today in Washington that the Obama administration has left them out of negotiations with the failing Detroit automaker and that their needs -- and investments -- have take a back seat to everyone else's.

The Main Street bondholders are typically older, savings-oriented Americans who bought GM bonds -- as opposed to riskier stock -- in recent years. They say they bought GM bonds to fund their retirements and pay for college educations for their children. Before the recent declines, corporate bonds in companies as blue-chip as GM were rock-solid, long-term investments, offering better returns and nearly the assurance level of U.S. Savings Bonds. No longer.

As part of its plan to restructure GM, the Obama administration's auto task force wants the Main Street bondholders to take a small equity stake in GM in exchange for the billions in debt they hold.

But the bondholders say the United Auto Workers -- which will get a much larger equity stake in GM in exchange for holding a lesser amount of debt -- are getting a much better deal.

The conflicts illustrates how incredibly complicated it will be to work out a bankruptcy of GM, a company as deeply rooted in the U.S. economy as any. Its reach stretches nearly everywhere across the nation, well beyond the 1 million or more jobs GM directly and indirectly supports.

"We represent middle America. We are the savers," said Jim Dillahunty, a retired bond trader from Southern California, according to Dow Jones Newswires. "I don't know of any speculators here. What we expect as lenders of our hard-earned capital ... is fair treatment."

Dillahunty's "speculators" comment was a reaction to the harsh treatment accorded the holdout Chrysler bondholders by President Obama in late April, when he announced the government-run bankruptcy of the ailing automaker. He accused the bondholders of being un-American "speculators" by refusing to take 30 cents on the dollar for their Chrysler bonds.

One of the Main Street bondholders speaking on CNBC today said that she had been a big supporter of Obama, but decried what she called his "discrimination" against the regular-folk GM bondholders.

Another said that he and his wife had purchased $240,000 in GM bonds five years ago. "I don't feel an-American," he said. "I don't feel unpatriotic."

-- Frank Ahrens
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By Frank Ahrens  |  May 21, 2009; 4:07 PM ET
Categories:  The Ticker  | Tags: Chrysler, GM, Obama, bankruptcy, main street bondholders  
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