Monday, June 08, 2009

Supreme Court Stays Chrysler Bankruptcy

The Executive Branch of the government is constitutionally required to enforce the laws of the United States.  As I stated in Depression 2.0, Obama was attempting to rewrite the U.S. bankruptcy laws in the Chrysler bankruptcy as a way to payback the UAW for supporting him.  While Congress refused to stop him from doing this, a small group of Indiana investors successfully appealed to the Supreme Court and the proceedings have been stopped pending a potential hearing at the highest court of the land.  The UAW has no claim to anything in this bankruptcy, but were going to be gifted a large stake in the company, as well as cash and warrants.  Obama played hardball with the secured investors, and softball with the UAW.  Had everyone agreed to this, fine.  Many did, but any objection to this would require the Bankruptcy laws to be followed and there were objections.   This is great news, because it shows that Obama's unlimited power is going to get checked (as is should be), by another branch of government.  I do not see anyway that they will not actually hear the case, and if they do there is no way they are going to allow bankruptcy laws to be destroyed for political reasons.  This will also effectively kill the GM "prepackaged" bankruptcy as well.  What should have happened is the UAW should have taken nothing, but received the opportunity to save some jobs through bankruptcy.  That's how it supposed to work.  Had that happened, it would have been possible for Chrysler to survive bankruptcy.  You basically go the UAW, and say you will get nothing, and if you do not agree to that we will liquidate the company, and all union jobs will be lost.  That is a pretty good incentive to take the deal.  Unions are like parasites.  They are not supposed to be able to kill the host and still survive.  Finally, some much needed sanity from the government, and a chance of continued investment in U.S. companies.

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At 7:08 PM, Blogger on_thg said...

A couple of nits:

1. The UAW is actually owed something - they are probably Chrysler's biggest creditor. The Big 3 set up VEBAs a couple years back as part of a plan to "offload" retiree health care costs onto the union.

2. The suit to hold up the Chrysler bankruptcy wasn't filed by Indiana investors, it was filed by the State of Indiana.

At 8:57 AM, Blogger Blinders said...

The UAW can only get paid per existing bankruptcy laws, after all of the secured creditors have been paid back in full. Since secured creditors will not be paid in full, they are not entitled to anything.


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