Melonie
06-03-2009, 01:31 PM
oops ... it appears that Obama may run up against some minor problems re his 'bending' of the US constitution to facilitate the Chrysler bankruptcy / bailout after all ...
(snip)"June 3 (Bloomberg) -- Chrysler LLC’s plan to sell its best assets to a new entity on June 5 was put on hold by a federal appeals court that will hear arguments that day by creditors challenging terms of the deal.
U.S. Bankruptcy Judge Arthur Gonzalez in New York had said the sale to a group led by Fiat SpA could be completed at noon June 5. He moved the date up from June 15, noting in an order that Chrysler is losing $100 million a day as it awaits a sale designed to make it a viable company in world markets.
The Manhattan-based appeals court is to hear the challenge to terms of the sale by a group of Indiana pension funds at 2 p.m. and written arguments are due by noon tomorrow, the appeals court said in an order late yesterday.
“I expect they’ll lift the stay and let the sale close,” said Stephen Lubben, a bankruptcy-law professor at Seton Hall University in Newark, New Jersey. “I think the courts all understand that the consequences for Chrysler are dire if the deal with Fiat falls through.”
Indiana Treasurer Richard Mourdock said he was pleased the Court of Appeals agreed to hear state funds’ arguments that they and other secured creditors have been made secondary to government-preferred unsecured creditors “in contravention of longstanding bankruptcy law.”
“Indiana retirees and Indiana taxpayers have suffered losses because of unprecedented and illegal acts of the federal government,” Mourdock said today in a statement.
TARP Funds
Illegal acts include using Troubled Asset Relief Program funds, designated for aid to “financial institutions,” in the Chrysler sale, the treasurer said.
Gonzalez, in approving the sale May 30, rejected objections, including those of the Indiana funds, that hadn’t been withdrawn.
“Not one penny of value of the debtors’ assets is going to anyone other than” lenders who deserve it, the judge wrote. "(snip)
At issue of course are two constitutional provisions. The first involves Constitutional 'takings clause' violations whereby the gov't is effectively 'seizing' the assets of private investors (i.e. the owners of Chrysler corporate bonds ) without fairly compensating the owners of those assets. The argument essentially boils down to Chrysler corporate bondholders being paid something like 18 cents on the dollar for their bonds, while Chrysler sub-suppliers will be paid in full, while Chrysler UAW employees will be paid at something like 80 cents on the dollar for promised Chrysler benefits etc. This point was originally raised by some big hedge fund investors, who were quickly shouted down in mainstream financial media as being 'greedy bastards'. However, other Chrysler bond holders i.e. state employees and pensioners of all sorts of state and municipal retirement funds, have successfully escaped the 'greedy bastards' label and have managed to successfully appeal the bankruptcy auctioning of Chrysler's assets in hopes of receiving a 'fairer' percentage.
The second involves constitutional authority of the US gov't to provide financial support at all to non-financial business entities ... or to selectively provide financial support to one non-financial business entity, while not providing 'equal treatment' to similar non-financial business entities. If this point gains any traction, it opens Pandora's box for the foreign owners of US vehicle assembly plants (i.e. Honda, Kia, Toyota, BMW) to apply for their 'fair share' of US gov't financial support. The main grievance is of course the US gov't subsides being provided to GM and Chrysler auto loan arm GMAC ... which in turn allows GMAC to write new loans to 'subprime' buyers of new Chevy's and Chryslers at interest rates which are lower than those available when purchasing a Honda, Kia, Toyota, BMW etc. Thus Honda, Kia, Totota, BMW etc. must now subsidize interest rates on new US loans to purchase their autos out of their own corporate pockets to remain competitive (i.e. the US gov't is now providing an unequal / unfair subsidy to the two auto manufacturers which it now 'owns').
Obviously, the eventual results of this successful appeal will also directly apply to GM's bankruptcy proceeding as well.
~
(snip)"June 3 (Bloomberg) -- Chrysler LLC’s plan to sell its best assets to a new entity on June 5 was put on hold by a federal appeals court that will hear arguments that day by creditors challenging terms of the deal.
U.S. Bankruptcy Judge Arthur Gonzalez in New York had said the sale to a group led by Fiat SpA could be completed at noon June 5. He moved the date up from June 15, noting in an order that Chrysler is losing $100 million a day as it awaits a sale designed to make it a viable company in world markets.
The Manhattan-based appeals court is to hear the challenge to terms of the sale by a group of Indiana pension funds at 2 p.m. and written arguments are due by noon tomorrow, the appeals court said in an order late yesterday.
“I expect they’ll lift the stay and let the sale close,” said Stephen Lubben, a bankruptcy-law professor at Seton Hall University in Newark, New Jersey. “I think the courts all understand that the consequences for Chrysler are dire if the deal with Fiat falls through.”
Indiana Treasurer Richard Mourdock said he was pleased the Court of Appeals agreed to hear state funds’ arguments that they and other secured creditors have been made secondary to government-preferred unsecured creditors “in contravention of longstanding bankruptcy law.”
“Indiana retirees and Indiana taxpayers have suffered losses because of unprecedented and illegal acts of the federal government,” Mourdock said today in a statement.
TARP Funds
Illegal acts include using Troubled Asset Relief Program funds, designated for aid to “financial institutions,” in the Chrysler sale, the treasurer said.
Gonzalez, in approving the sale May 30, rejected objections, including those of the Indiana funds, that hadn’t been withdrawn.
“Not one penny of value of the debtors’ assets is going to anyone other than” lenders who deserve it, the judge wrote. "(snip)
At issue of course are two constitutional provisions. The first involves Constitutional 'takings clause' violations whereby the gov't is effectively 'seizing' the assets of private investors (i.e. the owners of Chrysler corporate bonds ) without fairly compensating the owners of those assets. The argument essentially boils down to Chrysler corporate bondholders being paid something like 18 cents on the dollar for their bonds, while Chrysler sub-suppliers will be paid in full, while Chrysler UAW employees will be paid at something like 80 cents on the dollar for promised Chrysler benefits etc. This point was originally raised by some big hedge fund investors, who were quickly shouted down in mainstream financial media as being 'greedy bastards'. However, other Chrysler bond holders i.e. state employees and pensioners of all sorts of state and municipal retirement funds, have successfully escaped the 'greedy bastards' label and have managed to successfully appeal the bankruptcy auctioning of Chrysler's assets in hopes of receiving a 'fairer' percentage.
The second involves constitutional authority of the US gov't to provide financial support at all to non-financial business entities ... or to selectively provide financial support to one non-financial business entity, while not providing 'equal treatment' to similar non-financial business entities. If this point gains any traction, it opens Pandora's box for the foreign owners of US vehicle assembly plants (i.e. Honda, Kia, Toyota, BMW) to apply for their 'fair share' of US gov't financial support. The main grievance is of course the US gov't subsides being provided to GM and Chrysler auto loan arm GMAC ... which in turn allows GMAC to write new loans to 'subprime' buyers of new Chevy's and Chryslers at interest rates which are lower than those available when purchasing a Honda, Kia, Toyota, BMW etc. Thus Honda, Kia, Totota, BMW etc. must now subsidize interest rates on new US loans to purchase their autos out of their own corporate pockets to remain competitive (i.e. the US gov't is now providing an unequal / unfair subsidy to the two auto manufacturers which it now 'owns').
Obviously, the eventual results of this successful appeal will also directly apply to GM's bankruptcy proceeding as well.
~