Local blogger Nick Schweitzer wonders - well actually he's pretty sure - about GM bankruptcy and the rule of law. One of his points is the manner in which the proposed reorganization crams down senior creditors in favor of junior ones, e.g., the UAW. Whether a similar move (accomplished through a sale to Fiat which is not itself free of legal uncertainty) violates the Constitution's Taking Clause will be addressed in a law suit brought by the Indiana pension fund. Whether it will be successful is unclear. This fellow says no, although, over at Prawfs, Rick Hills suggests that it may not be so clear.
My point is not to wend through the legal niceties. I am not a bankruptcy guy. But it does seem to me that Indiana Governor's Mitch Daniel's reference to Barack Obama's "shock and awe" statism is apt.
Let's acknowledge that the President came into office facing a recession. So did Ronald Reagan and George W. Bush. We should concede that the federal government's fiscal situation was a mess.
But here's what's happened. Obama has criticized the Bush debt and then made the Bush fiscal record look like something from debt hawk Suze Orman. He has decided to hang on to financial institutions that made the mistake of taking TARP funds like a golden retriever with a soup bone. He has taken the Bush administration's ill advised bailout of GM and Chrysler and used it as a vehicle to nationalize the American auto industry. And we haven't even gotten to cap and trade or federal health care. We have no idea how the Obama administration proposes to handle our looming entitlement crisis.
Is this socialism, corporatism or just a bull rush to the left ? Whatever your answer, the President certainly decided that he wouldn't let a good crisis go to waste. But he may have created a greater one.
6 comments:
I'll vote for Bull Rush Fascism.
His problem is that bullrushing is extremely provocative.
Democratic Despotism kind of sings. Kind of apt, considering the way they are ruining, er running things..
I used to be a skeptic but now I think we have to consider that there really must be UFO's.
The reason that led me to think that is when I heard that our gov has spent more in the last 6 months then it had in the previous 30 years. Where is all this money?
This spending has to be from higher alien intelligence because normal people would never even attempt it. Perhaps he really is the messiah of some people.
I am a bankruptcy guy. Neither the sale of Chrysler's assets to Fiat, nor what's contemplated for GM, constitutes "shock and awe statism," "socialism," "corporatism," or a "bull rush to the left." Bondholders have a senior claim on the liquidation value of their collateral, but the going concern premium of an enterprise over its liquidation value is very much in play in bankruptcy cases, and properly subject to division. Section 1129(a)(13) of the Bankruptcy Code requires, in order for a plan of reorganization (or liquidation) to be confirmed, that all retiree health benefits be continued, unless they have been modified pursuant to Bankruptcy Code sec. 1114. And it is very, very difficult for debtors to modify retiree health benefits under sec. 1114. So the position the UAW enjoys in these cases reflects its entitlements under existing laws, passed by Congress (and, I might add in the case of sec. 1114, signed into law by that well-known socialist, corporatist, bull-rush-to-the-leftist, Ronald Reagan, after LTV Corporation defaulted on retiree health obligations following its bankruptcy filing).
In Chrysler, these entitlements are being recognized through the procedural shortcut of a section 363 sale process, rather than the traditional confirmation of a plan. This is not unusual; in fact it has become the norm in bankruptcy cases. Especially where as here you have the corporate equivalent of the proverbial truckload of tomatoes, the Bankruptcy Code allows sales to happen quickly, to salvage enterprise value.
The bondholders' entitlement is to the liquidation value of their collateral. They're getting it. In liquidation, Chrysler's assets would be very much the equivalent of a truckload of rotten tomatoes.
Both of these enterprises should have filed bankruptcy long ago. The Obama administration deserves kudos, not blame, for encouraging them to file -- something the Bush administration didn't have the cojones to do.
It is misinformation to suggest that the way these cases are being run, or how the assets are being divvied up, is anything outside the range of what one might reasonably expect in Chapter 11(within a broad range of potential outcomes). Indiana's lawsuit will fail. There is no unconstitutional "taking" here -- just what appear to be fairly well-managed, long-overdue Chapter 11 cases, saving what's left of the enterprise value of two iconic American companies.
anon 11:33 -
do you also represent or support unions?
Anon 3:11,
Yes, yes -- facts, facts, blah blah blah.
And yet you conveniently failed to answer the question, after all that. The question, to remind you, was this: Barack socialism nationalized something statism something leftist fascism Messiah?
Until you can give a good answer to the rambling recitation of keywords and false trilemmas, your pathetic attempt to provide actual facts and argumentation is unwelcome. I bet you are a union, too!
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