The Chrysler Bankruptcy

Late yesterday the US Supreme court cleared the way for the Obama administration's orchestrated bankruptcy sale to Fiat. There's a big problem with that but it takes some explaining.

First, you have to know the difference between secured and unsecured debt and where they lie in the bankruptcy scheme of things. When the courts dole out the assets of a bankrupt corporation folks holding secured debt get satisfied first. That's what bankruptcy law says plain and simple. After they are satisfied the folks holding unsecured debt divide up what's left.

But under the Obama administration law apparently doesn't count. They gave most of Chrysler's assets to the labor unions who held unsecured debt. Bondholders, who held secured debt were given pennies on the dollar. Naturally upset, they took their complaint to the Supreme court. What's shocking is the Supreme Court backed Obama.

This is illegal, scandalous and just plain wrong. Think about what this does to the economy. What person in his right mind is going to loan any company capital to start or expand a business. Most loans are made with the assurance that if the venture fails the sale of the companies assets will help them recoup at least a part of their investment. Not any more.

The Obama plan gave 55% ownership of Chrysler to the labor unions. The secured debt holders were left with 29 cents on the dollar. What could have motivated such an illicit plan? Payback. From 2000-2008 the labor unions gave 23.7 million dollars to Democrats while giving Republicans $193,540.

To quote Newt Gingrich, "The issue of secured creditors' rights is bigger than Chrysler. It's an essential foundation of our capital markets. And fundamentally, this is about the law." Under Obama the law just don't matter anymore.