Monday, May 04, 2009

Feces, Fan Collision

Something very interesting is going on regarding the Chrysler bankruptcy. Apparently, a very well respected bankruptcy lawyer has claimed that the "Car Czar" (fresh off from his latest pay to play meeting) told his firm that they had to accede to the agreement that gave majority control of the remnants of Chrysler to the unions. The White House has supposedly threatened to unleash their lap poodles (the White House Press) if the little old ladies who had invested in Chrysler bonds to fund their retirement didn't agree to accept basically ten cents on the dollar. (Why is it that Obama hates poor old retired people?) The White House of course has denied any such allegations in total. Which may have been the end of it, but the lawyer's client won't confirm or deny the allegation. Now, if it's just plain untrue, why not deny it? On the other hand, if it is true, wouldn't that invite the ankle biting press in anyway? It would seem to fit the expected pattern of using the courts to reward the Democratic constituencies that elected "The One." Very suspicious, but not yet beyond a reasonable doubt.
But the lawyer has just filed a motion in bankruptcy court to stay the agreement since it is in essence an unconstitutional taking under the V Amendment.
As Hot Air points out, you would think that our constitutional scholar/President would know that sort of thing.


Dave Budge said...

I dunno, Steve. Lauria makes a hell of a case in the motion but there are precedents in BK law that require only 2/3rds of the senior secured lenders to agree to debt forgiveness to allow an asset discharge under Sec. 363. This is a tough battle and I think, given the fact that the judge, Gonzales, has already affirmed the DIP financing (read: let the horse out of the barn), that the creditors will have to eventually try to win on appeal with a complaint under equitable subordination. Of course, if that becomes the case the shit will really hit the fan as the transaction will be deemed an excused fraudulent conveyance but would have to be undone nonetheless. I don't know if even the SCOTUS would have the political balls to hear it.

But I think Lauria is missing a substantive tack here by not arguing that the TARP lenders have a conflict of interest and shouldn't be allowed to "vote" per se because of their financial relationship with the Treasury. Then again, I'm not a lawyer

Steve said...

It's been 13 years since I took bankruptcy, and have managed to avoid it ever since. But I think that there is a good takings element here with the intercession of the government. Kelo could be used to justify it in a way, but that would open up a political can of trouble that the government probably wouldn't survive.

Max Bucks said...


The “Non-TARP Lenders” have raised the conflict-of-interest issue in a recent filing:

They also claim to be receiving death threats. Ha ha ha.