Yesterday evening, the Supreme Court cleared the sale of Chrysler to Fiat over the objections of the three Indiana secured bondholders. From SCOTUSblog.com:
Insisting that it was denying a postponement “in this case alone,” the two-page order said the challengers had not met their burden of showing that a delay was justified. The reference to this case alone perhaps was a signal that the Court did not want its order to appear to give advance clearance for any other government rescue plan — such as that to save another auto company, General Motors.
The order allows a closing of the deal by no later than next Monday, because it lifts a temporary stay that Justice Ruth Bader Ginsburg had issued on Monday; she did so, apparently, only to give the Court time to ponder the issue.
Presumably, the closing could occur before next Monday, since that was the “end date” only in the Chrysler agreement.
The Court said nothing about the biggest issue lurking in the case: the legality of using federal “bailout” money to pay for the rescue of an auto manufacturer. In fact, the order stressed that “a denial of a stay is not a decision on the merits of the underlying legal issues.”
Actually, a second but no less important issue (at least in my mind) is the legality of the Federal Government (specifically, the Executive Branch) to flout bankruptcy law to place unsecured creditors interests before secured creditors. The Supreme Court did not address this concern at all in its decision. But I’m not surprised…
If you remember, the Supreme Court ruled in 2005 that the Government could acquire property via eminent domain and sell that property to another individual if that action would be in the public good. While this could be considered a “stretch” of that decision, the sale of Chrysler could be considered in the public good since the company would not be liquidated, thereby saving the livelihoods of thousands of workers and preserving the tax-base of many communities.
Caught in this mess are still the 789 Chrysler dealers that are being closed down (also devastating many communities) and the bondholders like the Indiana group that were forced to accept pennies on the dollar for their $Billions in secured investments.
Quite frankly, if I was an investor, this decision would send a chill down my spine. This means that any secured investment is not secured, and that the terms of the note could be ignored.
Yeah, it really is all about money…but should it?
What is disturbing to many (including the few readers of this blog) is that our government is now in the business of business more than ever. Make no mistake, is always has been, but now it is more blatant than ever. It used to confine itself to regulations, rules, & tariffs to try & keep consumers from being injured and otherwise harming the environment unnecessarily. Now government is making sweeping changes including deciding ownership of companies and how they are run from within the companies themselves.
We, as a nation, must decide if this is the role that we want our government to take. If so, then we are no better than the old USSR, Venezuela, Cuba, and a host of other Socialistic countries. And look where their economies are. And that is cause for alarm.