­On May 29, three days before General Motors filed for bankruptcy, Marc Ambinder of the Atlantic warned that the Obama administration was “rewriting the rules of capitalism to fashion a deal to its liking.” He was not referring to the administration’s decision to sink billions into car companies and trillions into banks—that, apparently, followed the rules. He was talking about the fact that the White House seemed willing to use its leverage to force the company’s bondholders and stockowners to accept a worse deal in the bankruptcy than the one the United Auto Workers union (UAW) was getting.

To understand why someone might accuse Barack Obama of changing the “rules” of capitalism, it helps to understand how the auto bailouts work. Contrary to all the stories about how well the UAW is doing in the reorganization of the car companies, no one is really winning in the GM and Chrysler bankruptcies. Everyone’s taking a haircut: the workers who were promised benefits they may never receive; the bondholders who loaned money to the company; the stockowners whose investments will be worth next to nothing; and the governments of the United States and Canada, which have spent billions to keep the companies operating. But some parties are getting more closely shorn than others. In this case, the fund that is responsible for paying the union members’ retirement and health benefits is not losing as much as the bondholders and stockowners.

That’s what seems to be driving usually levelheaded commentators such as Ambinder to accuse Obama of changing the rules of our economic system. The UAW’s (comparative) good fortune has more conservative pundits in a tizzy as well. The Wall Street Journal editorial board wrote that Treasury “bludgeoned the bondholders in both Chrysler and GM to take pennies on the dollar.” During the Chrysler bankruptcy, hedge-fund mogul Clifford Asness, who admits that hedge funds “are generally run for rich people in Geneva, Switzerland, by rich people in Greenwich, Connecticut,” complained that Obama was “shaking down lenders for the benefit of political donors”—by which he meant the unions. And on the day of the GM bankruptcy, June 1, a group of more than twenty House Republicans wrote to Timothy Geithner, the secretary of the Treasury, to complain. “The proposal seems to favor the rights and claims of the UAW... over the rights and claims of the company’s diverse group of bondholders,” they wrote.

The House Republicans are right, of course—the bondholders are getting the short end of the stick. But the government isn’t bailing out the car companies to preserve the value of investors’ bonds. It’s bailing out the car companies because losing tens of thousands more jobs would be devastating to a very fragile economy. Obama’s not trying to pay back lenders. He’s not trying to be evenhanded. He’s trying to save jobs and bolster the economy. It’s worth remembering that some of the bondholders who tried to get the Supreme Court to block the Chrysler sale included the Indiana state pension fund. It’s not just hedge funds that own the automakers’ debt. But it’s hard to have much sympathy for a state pension fund that was doing things as risky as holding on to Chrysler and GM bonds in late 2008 or early 2009. By holding on to Chrysler and GM bonds during the companies’ death throes, investors were betting on two things: first, that the government would step in to save the companies, ensuring that their bonds would be worth something; second, that when the government stepped in they’d be able to bully it into giving them a good deal on their bonds.

They won the first bet but not the second. What the bondholders forgot was a fundamental rule of lending: Whoever is willing to put in money when no one else will usually gets to decide how distressed assets will be divvied up. The financiers who run the funds that hold Chrysler and GM’s debt were used to being the top dogs precisely because they had always been the people willing to lend when no one else would. But now that the federal government has spent billions in tax dollars to save the companies, the financiers should not be surprised that the government has an enormous amount of leverage over the outcome of the bankruptcy. Union pension and health funds have taken priority over other creditors’ interests before. Bankruptcy settlements in the steel industry often gave preferential treatment to unions, because the companies knew they would still need their workers if they reemerged from bankruptcy. Just as bondholders are free not to buy GM bonds ever again, thereby making it more difficult for GM to borrow money, union members are free not to work for the new GM if they feel they’ve been treated unfairly. Companies need to hold on to a skilled workforce, and that means they have a legitimate interest in honoring obligations to workers first. I should note at this point that I am a UAW member in another dying industry, although I won’t see any personal benefit, financial or otherwise, from the car bailout. When the magazine I work for, Mother Jones, was unionized in the 1970s, the journalists chose to join what then looked like the strongest union. So that makes me a member of UAW Local 2103. While my UAW membership makes for good cocktail-party chatter, it hasn’t had much effect on my life. Mother Jones never promised me a pension or retirement health benefits, but that’s exactly what the car companies promised their employees. Payment for those benefits was deducted from employees’ paychecks. By giving the UAW pension and health-care fund preferential treatment, the White House was trying to ensure that as many of those promises as possible were kept.

The bondholders, by contrast, were the recipients of an entirely different type of promise. Chrysler and GM promised to pay up for their bonds, but every bond investor knows that not every company pays back the money it borrows. Bonds may not be as risky as stocks, but no bond is without risks. When you’re promised a pension, you assume it will be there when you retire-that’s the whole point. Unlike bonds, pensions aren’t about risk and profit; they’re about security in exchange for labor and loyalty. So the moral claims of the bondholders and the union members are not the same. It’s amazing how folks whose entire business is risk—and who expect to be extravagantly rewarded when their risk-taking pays off—suddenly start whining when they lose a risky bet. Investing in Chrysler or GM in early 2009 is like investing in any other industry undergoing massive government intervention. You might get in cheap, but you have to accept that political considerations will affect the outcome of your investment. That’s why Marc Ambinder’s contention that Obama is changing the “rules of capitalism” is hyperbole at best. The only rule of capitalism is that the rules of capitalism are not set in stone. Capitalist countries have varying levels of government intervention. The rules change as different political and ideological groups fight over the structure of their economies. Assuming those rules are all going to stay the same during a time of crisis is imprudent, to say the least. By attacking the unions instead of the bailout itself, Obama’s critics have helped him reframe the debate. The argument used to be about whether GM and Chrysler should be saved. Obama might have lost that argument. Now, though, the argument is about what should be saved: the pensions and health insurance of tens of thousands of middle-class people in the upper Midwest, or the fortunes of hedge-fund managers in Greenwich. The president is not about to lose that one.

Portions of this story were adapted from Nick Baumann's blog posts for Mother Jones magazine.

Read more: Letters, August 14, 2009