Obama's Italian Job

President Obama's landmark move to force Chrysler into bankruptcy leads on the nation's business pages today, with the New York Times calling it "yet another extraordinary intervention into private industry by the federal government." The attention in the troubled auto sector flipped from Detroit to D.C. yesterday, where Obama announced a deal that would keep Chrysler alive by sending the carmaker into bankruptcy protection and allowing the union to take control (via its retirement plans), while casting Italian automaker Fiat and the U.S. government as "junior partners." Naturally, the finger-pointing has already begun. And it is the hedge funds that refused to budge on the White House's debt-slashing demands that Obama has cast as the villains, or, "speculators," the Washington Post points out. "Some of the characterizations that were used today to refer to us as speculators or to say we're looking for a bailout is really unfair," one unnamed executive moaned to the Washington Post, adding, "What we're looking for is a reasonable payout on the value of the debt ... more in line with what unions and Fiat were getting."  But the damage is already done. As Reuters reports, "the 20 or so funds that balked at the terms of a government-brokered deal to cut Chrysler's $6.9 billion in debt ... face a tough fight in bankruptcy court and the court of public opinion." Michigan Governor Jennifer Granholm named and shamed three of them, saying Oppenheimer Funds, Perrella Weinberg Partners, and Stairway Capital would not get any state business while she remains in office, the news wire reported.

The Wall Street Journal writes the definitive obituary of the Chrysler-Cerberus Capital Management regime that lasted less than two years. In 2007, Cerberus mortgaged all Chrysler's prized assets—plants, brands, patents, real estate—to raise $10 billion, enough, it thought, to get Chrysler back on the road to recovery. "It wasn't enough. As the U.S. economy slid into recession and auto sales plunged, the company blew through every last dollar it had, plus $4 billion more provided by the U.S. Treasury," the newspaper writes. It was that debt load, the newspaper concludes, that forced Chrysler into Chapter 11 and ultimately into the arms of the Italians. Meanwhile, over in Italy, the press is in rare agreement today about the Sergio Marchionne-engineered merger. Turin-based daily La Stampa hailed Marchionne's coups (or golpe in Italian) as "the comeback of the Italian worker."

Warren Buffett is facing a tough weekend. As he's been doing for decades, Buffett will face investors tomorrow "to explain his worst year ever, with the usually adoring crowd set to probe the legendary investor on his bargain-hunting strategy, succession plans and views of the crisis," the Financial Times reports. The FT predicts the occasion will be anything but cordial. "The hard questions will be asked this year," James Altucher, a hedge fund manager and author of Trade Like Warren Buffett, tells the FT. "There will be people who always stand by him and others who will ask: 'Have you lost your way?' " Buffett, as always, will have his sidekick there to help, 85-year-old Vice Chairman Charles Munger. Both Buffett and Munger see a silver lining in all the talk about increased government regulation of banks and financial services firms, the WSJ points out. If regulators start to put limits on the amount of leverage, or borrowed money, banks can use, this will ultimately drive down Wall Street pay and the number of high-risk bets Wall Street firms can make. "There's going to be new rules in the game," Munger tells the WSJ. "For someone like us, that's going to be very interesting."

There's a tale of two differing economic indicators coming out of D.C., the WSJ reports. The Commerce Department announced that consumer spending, the driver of more than two-thirds of U.S. economic activity, was down 0.2 percent from the previous month, as cash-strapped Americans increased the national saving rate to 4.2 percent from 4 percent in February. Then came new Labor Department stats showing that jobless claims fell 14,000 to 631,000 in the week ended April 25, the third week in a row that initial unemployment claims have fallen. While these new figures raise hopes that job losses may have peaked, the fact that "continuing claims for jobless benefits rose 131,000 to 6.27 million in the week ended April 18, underscor[es] the difficulty that job-seekers face in finding new work," the WSJ notes.

Swiss bank UBS is fighting back against the Internal Revenue Service's attempts to have it divulge some 52,000 U.S. account holders by claiming the demand would violate Swiss privacy laws, the Miami Herald reports. In a federal court brief filed yesterday in Miami, lawyers for the bank argued that "the IRS now asks this court to force a Swiss financial institution and its employees, over the express objection of the Swiss government, to violate Swiss law by producing a massive quantity of confidential account information located exclusively in Switzerland." In February, the Justice Department sued UBS to gain access to these additional accounts, having just settled a separate criminal probe with UBS in which it agreed to turn over some 250 other account holders accused of avoiding paying U.S. taxes.

And finally, Hollywood's latest incursion into the online video market is once again predicted to pit tech and media giants against one another. According to Business Week, Walt Disney will start streaming shows via online video site Hulu. What does this mean for Hulu rivals YouTube and the CBS-backed TV.com? And what about Apple's (AAPL) iTunes? YouTube and TV.com are keen to offer as many popular video offerings as they can if their ad-supported business models are to ever take off. But iTunes could face a bigger problem altogether. Michael McGuire, an analyst at Gartner, predicts that if the Hulu or YouTube model succeeds, iTunes could be in trouble. "Over time, perhaps the direct-payment model goes away," he says. Either way, Hulu's increased visibility offers the media a new tech company to hype once they tire of Twitter.