SCOTUS puts hold on Chrysler sale

[Air Commando]

LINK

 

I hope the Supreme Court does what's right and foils Obama's plan for screwing investor's out of the money and I hope the UAW gets nothing for trying to screw people over themselves. Let that company fail and then someone can buy the good assets and the rest get shitcanned.

 

WASHINGTON (AFP) – The US Supreme Court put a temporary freeze on Chrysler's plan to exit bankruptcy protection under an alliance with Italian automaker Fiat.

 

Justice Ruth Bader Ginsburg signed an order postponing the closure of the plan, which is backed by the US and Canadian governments and which would allow Chrysler to emerge from bankruptcy as a new entity.

 

A group of Indiana pension funds opposed to Chrysler's sale to Fiat filed the emergency appeal with the Supreme Court.

 

The Supreme Court's decision will allow the justices to consider whether to allow a full hearing on the legal issues -- a delay which Chrysler and US officials say could cause the plan to collapse.

 

The administration of President Barack Obama tried to play-down the significance of the decision.

 

"We understand this to be an administrative extension designed to allow sufficient time for the Court to make a determination on the merits of the request for a stay," an administration official said.

 

The order calls for a stay "pending further order by the undersigned or by the court."

 

Without the stay, the deal could have been closed as of 2000 GMT Monday under a ruling by the US Court of Appeals in New York, which upheld the decision of a bankruptcy judge.

 

"Absent a stay, the court will be deprived of the opportunity to decide critical, nationally significant legal issues relating to management of the economy by the United States government," the pension funds said in their application.

 

They argued that the sale is unconstitutional because it puts the rights of junior creditors ahead of the rights of senior lenders.

 

The three state pension and construction funds also said the US Treasury Department had overstepped the authority it was granted by Congress under the Troubled Asset Relief Program (TARP), a 700-billion-dollar bailout intended for the financial industry, by financing Chrysler's restructuring.

 

A US government brief argued that "the only other alternative is the immediate liquidation of the company," which would be detrimental to all Chrysler's creditors.

 

Judge Arthur Gonzalez, in an order approving the Chrysler reorganization May 31, agreed to allow the planned tie-up with Fiat to be completed rapidly.

 

The judge said he agreed to the accelerated plan in view of arguments from an adviser to the White House auto task force that the automaker is losing 100 million dollars for each day the plan is delayed.

 

The plan gives Fiat a 20 percent stake in the Detroit group with a possibility of increasing that share.

 

In return, Fiat will allow access to its technology to enable the US carmaker to make the smaller, greener cars that are increasingly in demand.

 

The new firm would be majority owned by the United Auto Workers (UAW) union, with small stakes by the US and Canadian governments, which would contribute some 10.5 billion dollars to the venture.

 

Chrysler's quick bankruptcy plan is also a key for General Motors, which filed June 1 for creditor protection in the hope of a 60- to 90-day exit under a plan that would give the US government a majority stake in the new GM.

 

Jeremy Anwyl, chief executive of the research firm Edmunds.com, noted that "there's always a danger in declaring victory prematurely."

 

Anwyl added: "The real question is: what does this mean for GM? GM may not have followed Chrysler into bankruptcy if it hadn't appeared to be going so smoothly."

[MARKHOLSTRUM]

The three state pension and construction funds also said the US Treasury Department had overstepped the authority it was granted by Congress under the Troubled Asset Relief Program (TARP), a 700-billion-dollar bailout intended for the financial industry, by financing Chrysler's restructuring.

 

I heard (correct me if I am wrong) but Indiana was the one really spear heading this.....stick it to 'em Mitch AAAAAGHHHRRR!

[Air Commando]

Their state treasurer was the one who brought the case up because a lot of state pensions are rolled up in those bonds. Basically it would cause the state to use more of their own money to help take care of these retirees so good for them and screw the gov't for thinking they can walk all over everybody.

[Ocellairs]

Not anymore, the sale is now a GO!

[Air Commando]

I know, makes me want to vomit. I personally will not put a dime into any company that takes bailout money and even though I love my Jeep any plans of getting another one are completely gone. I will buy Toyota and everyone else as long as the cars are made in the U.S. We really don't have to money to invest in bonds except through mutual funds but at this point we feel safer just buying a CD or something that is secured through a reputable bank. My mom sent me a check and she goes through Bank of America so I'm actually going to go there to cash it today and I hope they ask if I want to open an account or say something stupid so I can comment.

[Ocellairs]

I know, makes me want to vomit. I personally will not put a dime into any company that takes bailout money and even though I love my Jeep any plans of getting another one are completely gone. I will buy Toyota and everyone else as long as the cars are made in the U.S. We really don't have to money to invest in bonds except through mutual funds but at this point we feel safer just buying a CD or something that is secured through a reputable bank. My mom sent me a check and she goes through Bank of America so I'm actually going to go there to cash it today and I hope they ask if I want to open an account or say something stupid so I can comment.

 

 

...didn't Toy company take bail out bills too?

[moparcardave]

The 2012 Pelosi GTxi SS/RT Sport Edition

 

 

This is what Pelosi and Obama wants us driving.

[w00dc4ip]

Sad day for the rule of law. What happened, if I'm correct, is the bankruptcy court just voided a legal, binding contract using the following argument, "because I said so". The IN pension funds that challenged the ruling and filed for the stay with SCOTUS held secured bonds, meaning they had loaned money to Chrysler and those loans were secured by specific, named assets of the company. The bankruptcy court judge essentially dissolved all debt of Chrysler and transfered ownership of existing Chrysler assets to other bondholders that held non-secured debt, namely the UAW pension funds and some others. This is a frightening precedent they are setting.

 

Generally, in the bond world, secured assets pay a lower percentage than non-secured because the lender has recourse to claim specific assets of the borrower should the borrower default. Like a mortgage, if the homeowner doesn't pay, the lender can take the house. Secured lenders accept the lower rate because of the added security. In this case (I'm not sure what the named assets were, probably assembly plants or something of that sort) IN pension funds are being denied their legal claim on the assets of Chrysler corporation in the bankruptcy proceding. The assets the IN pension funds have claim to are being given to other non-secured lenders to be sold to FIAT and the US government. This is one of the gravest violations of the rule of law I've ever heard of in the USA.

 

There are only two results that can come out of this case when it is finally heard by the SCOTUS, as IN has every right to challenge the ruling even after the transfer to FIAT takes place. Result one is IN is awarded the assets they have legal claim to, or money equal to the amount in the bond contracts including the interest. Result two is the US government has legal precedent to void any contract they see fit for any reason. I've never seen anything overstep the bounds of the Constitution so far.

 

Can't wait to see State of Indiana vs. United States in the Supreme Court, because the only way United States can win is by violating the legal authority they derive from the Constitution. I'd almost like to see the IN pension funds call on the Indiana legislature and sherrifs to take posession of all assets of the Chrysler corporation within the borders of the state of Indiana and hold them in receivership, effectively stopping the sale to FIAT, until the bond dispute is settled according to LAW.

[MARKHOLSTRUM]

Can't wait to see State of Indiana vs. United States in the Supreme Court, because the only way United States can win is by violating the legal authority they derive from the Constitution. I'd almost like to see the IN pension funds call on the Indiana legislature and sherrifs to take posession of all assets of the Chrysler corporation within the borders of the state of Indiana and hold them in receivership, effectively stopping the sale to FIAT, until the bond dispute is settled according to LAW.

 

[w00dc4ip]

Is this helping the economy?

 

LINK

Un-American Government Intervention

 

“Crony capitalism” is a term often applied to foreign nations where government interference circumvents market forces. The practice is widely associated with tin-pot dictators and second-rate economies. In such a system, support for the ruling regime is the best and only path to economic success. Who you know supersedes what you know, and favoritism trumps the rule of law.

 

Unfortunately, this past week's events demonstrate that the phrase now more aptly describes our own country.

 

On Monday, the Supreme Court refused to hear an appeal from Chrysler's secured creditors based on the government's argument that the needs of other stakeholders outweighed those of a few creditors. In this case, the Administration concluded the interests of the United Auto Workers outweighed the interests of the Indiana teachers and firemen whose pension fund sued to block the restructuring. Given the enormous financial support that the UAW poured into the Obama campaign, such partiality is hardly surprising.

 

When making their investment in Chrysler just a few months ago, the Indiana pension fund agreed to commit capital because of the specific assurances received from the company. In allowing this sham bankruptcy to be crammed through the courts, we have shredded the vital principal of the rule of law, and have become a nation of men, rather than one of laws.

 

The risk that legal contracts can now be arbitrarily set aside will make investors think twice before committing capital to distressed corporations. Oftentimes enforcing contracts imposes hardships. That's precisely why we have contracts.

 

Without absolute faith that deals will be honored, it will be extremely difficult for U.S. companies to borrow money. This will be particularly true for those companies already struggling with too much debt. Without the ability to issue secured debt, how will such companies access the necessary capital to turn around? If secured creditors cannot count on the courts to enforce their claims, they will not put their capital at risk. What good is being a secured creditor if courts can allow the assets securing your claim to be sold for the benefit of others?

 

Another problem with the government imposing losses on secured Chrysler creditors is that in its bailouts of financial companies (like Citigroup and AIG), the government took steps to specifically pay back creditors, even when those creditors should have been wiped out. This inconsistency and lack of equal protection further undermines faith in our economy.

 

The message here is clear: loan money to financial entities with friends in Washington and no matter how risky the loan, taxpayers will bail you out if it goes bad. However, loan money to a unionized manufacturer, even if prudently secured by real assets, and you have as much chance of getting your money back as finding Jimmy Hoffa's body.

 

As if this wasn't bad enough, testimony on Thursday from former Bank of America (BAC) CEO Ken Lewis revealed a concerted effort on the part of Fed Chairman Ben Bernanke and former Treasury Secretary Henry Paulson to pressure Lewis into hiding relevant financial information regarding Merrill Lynch losses from BofA shareholders. Recently released e-mails make it clear that the government threatened to remove corporate leaders if they failed to go through with the merger and keep quiet about the losses.

 

Again, the justification for the interference seemed to be the “greater economic good” the merger would serve. The right of BofA shareholders to be informed that their company was about to buy a financial black hole was clearly considered to be an acceptable sacrifice.

 

More importantly, the fact that two of the highest-ranking government officials can conspire to violate both securities laws and private property rights is abhorrent to everything America supposedly stands for. If they get away with it, which I believe they will, the precedent and the message will be chilling.

 

As a broker who specializes in foreign investments, I am always wary of political risk. I must consider how the threat of arbitrary government action could undermine the value of my investments.

 

However, recent events show that political risk is now greater here than abroad, and U.S. assets, which have historically traded at premium valuations based on faith in our legal system, will soon trade at discounts to reflect this new threat.

 

The fear of having contracts abrogated or property rights violated when doing so serves some contrived greater good will substantially raise our cost of capital and further reduce our competitiveness.

 

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While I don't think the UAW's support of the Obama administration held much influence over the Supreme's decision not to stay the bankruptcy, I would guess it may have influenced the lower courts decisions on how to proceed through the "quick" bankruptcy proceding.