by Calculated Risk on 4/03/2009 03:51:00 PM

UPDATE: From the WSJ: Banks Balk at Obama Demand to Cut Chrysler Debt

Banks that loaned Chrysler LLC $6.8 billion are resisting government pressure to swap $5 billion of that for stock to slash the car maker's debt, according to several people familiar with the matter ...

The lenders, which include J.P. Morgan Chase & Co., Goldman Sachs, Citigroup and Morgan Stanley ... own the rights to take control of Chrysler plants and assets, which were pledged as collateral for the loans, if the company files for bankruptcy protection.

...the Obama administration is demanding that these lenders cut their debt by $5 billion of its face value, or about 75%, said people familiar with the talks.

The banks still holding Chrysler pier loans are facing even more write-downs. (Pier loans are bridge loans that couldn't be sold and have been stuck on the bank's balance sheet). This was obvious before the Cerberus deal even closed: Chrysler's Bankers: Long Walk, Short Pier?

I'm sure Goldman is happy to have sold some of their loans at 80 cents on the dollar in early 2008.