It was bound to happen. A secured bond holder in Chrysler is contesting the sale of "good" assets to Fiat and aims to block the transaction. Indiana pension funds, which contains retirement savings for the state's teachers (among others), filed papers Saturday (June 6) seeking a Supreme Court review allowing the sale. The funds have asked Justice Ruth Bader Ginsburg, who handles emergency requests, for an order blocking the scheduled transfer of assets on Monday, June 8 to the Italian automaker until the high court decides whether to hear the funds’ appeal.
Ginsburg's decision could seriously complicate the "fast track" bankruptcies of Chrysler and GM. If she deems the claim worthy of consideration, it will derail the reorganization process and could potentially throw both car companies into liquidation instead. We may well know the outcome before the end of today.
Let's analyze the suit. Indiana pension funds lent Chrysler $42.5 million. They want their money back! They will get nothing if the deal with Fiat goes through. They may not get much more in liquidation. The funds suit, however, is hedging on a technicality in the law that may not pass muster: Indiana pension funds contend the Fiat deal is a misuse of the Troubled Asset Relief Program (TARP), which they say was intended for financial institutions, not car makers.
What does TARP allow? It provides United States Department of the Treasury to purchase or insure up to $700 billion of "troubled" assets. "Troubled assets" are defined as "(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress." No mention of car makers there!
That would appear to favor the funds. But here's the fly in the ointment. On December 19, 2008, President Bush used his executive authority to declare that TARP funds may be spent on any program he personally deems necessary to avert a financial crisis, and declared Section 102 to be nonbinding. This allowed Bush to extend the use of TARP funds to support the auto industry, a move applauded by the United Auto Workers.
That the Act’s criteria for participation remains very unclear has been recognized from the outset of TARP. Yet, there is a provision for a judicial review of Treasury activity. Specifically, Treasury actions may be held unlawful if they involve an abuse of discretion, or are found to be “arbitrary, capricious . . . or not in accordance with law.”
My prediction? Indiana pension funds will lose. The political momentum for both Chrysler and GM's fast track bankruptcy will not be hindered by any one force: judicial, legislative or executive. The cards have already been dealt by a corrupt dealer: the U.S Government. The rule of law was trounced way before this suit when the bondholder's rights were thrown under the bus at the outset of the Chrysler, and later GM, bankruptcy. Strong-armed by the thugs in the Fed, those sweet little old retired teachers in the mid-west understood math and science, but didn't bother to learn the history of Washington politics. Their loss.
The UAW contributed $4 million to the Obama campaign for the last election and $24 million to Democrat Candidates since 2000. This is litle more than a socialist wealth distribution scheme that rewards political cronies at the expense of most Americans. We are declining, folks, and the end of greatness in this country is gone.
ReplyDeleteRoger, MI.