The ‘Anointed One’, the judicial system, and the unions have collectively trashed the Constitution for the upteenth time.
Late last night, after a marathon session in court, Judge Arthur Gonzalez basically approved the plan to merge Chrysler into Fiat, rejecting the claims from the senior secured (though minority) bondholders.
The judge rejected claims that the sale was unfair, and said the only way the deal will be derailed is if some dark horse comes in and makes a bid for Chrysler’s assets in excess of Fiat’s offer. To whatever extent the specific hedge funds in this case — or hedge funds as a whole — have taken a reputational hit by not going along with Obama’s plan, it appears that the gambit to push Chrysler into bankruptcy is pretty much a total flop.
Attorney Thomas Lauria has filed a motion to stop Obama’s collusion with the UAW in the Chrysler bankruptcy.
III. The Taking of Collateral through a Direct or Indirect Use of TARP Authority is Unconstitutional.
13. The Treasury Department relies on TARP as the purported authority to justify the disparate treatment under the 363 Sale, even though TARP was enacted after the Senior Lenders’ liens on the Debtors’ property were already in place. The Supreme Court long ago recognized, however, that a secured creditor’s interest in specific property is protected in bankruptcy under the Fifth Amendment. Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 594 (1935). That case involved a Depression-era statute that was intended to help bankrupt farmers avoid losing their land in mortgage foreclosure. The statute in Radford provided that the bankrupt debtor could achieve a release of the security interests either (i) with the lender’s consent, purchasing the property at its then appraised value by making deferred payments for two to six years at statutorily-set interest rates; or (ii) by seeking from the bankruptcy court a stay of the proceedings for up to five years during which time the debtor could use the property by paying a rent set by the court, which payments would be for the benefit of all creditors, with a purchase option at the end of that period. Id. at 856-57.
14. Justice Brandeis noted that the “essence of a mortgage” is the right of the secured party “to insist upon full payment before giving up his security [i.e., the property pledged].” Radford, 295 U.S. at 580. In invalidating the statute, the Court stated that “[t]he bankruptcy power . . . is subject to the Fifth Amendment,” and that the pernicious aspect of this law was its “taking of substantive rights in specific property acquired by the bank prior to the act.” Id. at 589-90 (emphasis added). Thus, Congress could not pass a law that could be used to deny to secured creditors their rights to realize upon the specific property pledged to them or “the right to control meanwhile the property during the period of default.” Id. at 594. That is precisely what the Treasury Department would have Chrysler do here, with respect to the Chrysler Non-TARP Lenders’ property rights that were acquired prior to the enactment of TARP.
15. Relying on purported authority provided by TARP, the Treasury Department is demanding that Chrysler’s assets be stripped away from the coverage of the Senior Lenders’ liens – thereby impairing the rights of the Senior Lenders to realize upon those assets – so that those assets may be put in New Chrysler and used to the benefit of unsecured creditors in this proceeding, who will then be paid much more than the Senior Lenders. But, even assuming that TARP provides the Treasury Department with authority to provide funding to the Debtors and impose the transfer of collateral away from the Senior Lenders, TARP was enacted long after the Senior Lenders contracted with the Debtors and received senior liens on the Debtors’ property. Radford specifically disallowed the use of a law to retroactively alter existing liens on property.
16. Here, the proposed sale of the Debtors’ assets will leave the Senior Lenders with a diluted pool of assets and no further interests in the operating assets covered by their specific liens. The Constitution forbids this application of a law retroactively to undercut the Senior Lenders’ pre-existing property rights in favor or inferior creditors.
17. Finally, that the Treasury Department would take these unconstitutional actions to help the United States address difficult economic times is not an answer. Indeed, the same justification was expressly rejected in Radford, where Justice Brandeis noted that a statute which violated secured creditors’ rights, but which was passed for sound public purposes relating to the Great Depression, could not be saved because “the Fifth Amendment commands that, however great the nation’s need, private property shall not be thus taken even for a wholly public use without just compensation.” Id. at 602.
18. What is really striking here is that what is being proposed by the Sale Motion would strip the Collateral away and allow it to be put to use as new capital in New Chrysler for the benefit of existing and other creditors – even though the Chrysler Non-TARP Lenders have been given no opportunity to realize upon that Collateral to the point of full repayment ahead of at least $14 billion of selectively identified unsecured creditors.
Oh, and remember the $8 billion of loans including about $4 billion in debtor-in-possession financing Chrysler was supposed to pay back? You won’t be seeing it. Ever.
……Lawyers representing Chrysler said in court yesterday that the government would not be getting its $8 billion of loans back, including about $4 billion in debtor-in-possession financing.
Well that news was so stunning — so obviously an admission that the bankruptcy itself is a bailout to the union — that we had a hard time believing it. But it’s totally true.
Some of the main assumptions listed by Robert Manzo of Capstone Advisory Group were that the Treasury would forgive a $4 billion bridge loan given to Chrysler in the closing days of the Bush administration, a $300 million fee on that loan, and the $3.2 billion in financing approved last week by the Obama administration to fund Chrysler’s operations during bankruptcy.
An Obama administration official confirmed Tuesday that Chrysler won’t be repaying the loans. A portion of the bridge loan may be recovered by Treasury from the assets of Chrysler Financial, the former credit arm of the automaker which is essentially going out of business as part of the reorganization.
Obama threatened creditors on behalf of union thugs, and has the fucking gall to chastise dissident shareholders who don’t want to goose-step to Dear Leader’s takover plans.
The names of a handful of Chrysler debt holders who oppose the automaker’s Chapter 11 bankruptcy were disclosed Wednesday, but a number of others dropped their opposition, a week after President Barack Obama publicly chastised the group for not supporting his plan to help remake the company.
Speaking of union thugs, guess who’s going to own at least 55% of Chrysler as part of the deal?
A trust to cover retiree health care for the United Auto Workers union, which reached a settlement with Chrysler for a cost-saving labor agreement, would own 55 percent of Chrysler.
Clifford S. Asness of AQR Capital Management, LLC sums it up:
(Obama’s) attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to “sacrifice” some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power.
In a nutshell: The socialist union-supported regime bailed out the auto industry with billions of pilfered taxpayer’s dollars, forced the companies to take the money—or else—and none of it will ever be paid back. This will happen with every corporation, bank, and private industry under the 9 trillion dollar catastrophe.
The mafia pales in comparison.
2 thoughts on “Welcome to the Kleptocracy”
Welcome to Chicago-style politics writ large on the national stage. “The One” not only learned from the mob, he improved on it.
It’s going to be a long four years.
Al Capone would be