They went to the government because it was the only place where they could get ANY terms. Please cite to a single ready willing and able lender at the time. Retaining net operating loss carry forwards is not exactly unique to the GM bankruptcy reorganization. Normally net operating losses (NOLs) are limited if there is a change in ownerhsip of a company (this is to prevent trafficking in NOLs). One of the exceptions to this continutity of ownership rule is that if the change in ownership is the result of chapter 11 reoerganization in which case quslified creditors get counted as if they were owners of the business before the bankruptcy. The government waived this rule for its own (and Canda’s) ownership and did not count US and Canada ownership in determining whether there was a change in ownership because trafficking in NOLs is nto a concern if the new owners are the federal government and Canada. Any other lender would not have been able to acquire more than 50% of the new equity, they would have been limited to debt. See sections 368(a)(1)(G) and 382(l)(5) if the tax code. But once again, there was no other lender that was ready willing and able to provide the debtor financing.
SCOTUS didn’t say ANYTHING about why they vacated the Chrysler ruling.
The only reason the Indiana pension sued is because it was run by the state treasurer, Richard “rape pregnancy” Mourdock.
The pension owned a peice of a larger syndicated loan and under the terms of the loan, all creditor actions were determined by a vote of the syndicate members. When Chrysler sold all of its assets to Fiat for $2 billion in cash, the secured creditor committee voted on whether to permit this sale (which would fix their recovery to that $2 billion dollars), 92% of the creditors voted to take the money. Mourdock decided that they wanted more than what a willing buyer was willing to pay in 2009, the depths of the recession (or, if you’re cynical, he wanted (or was indifferent to) bad things happening while Obama was President). The bankruptcy court considered whether Mourdock could take a position inconsistent with the syndicate of which the pension was a part and decided that the pension’s rights were limited to its voting rights under the loan syndication.
In fact at one point the lawsuit didn’t want the federal government to put any money into the deal at all, saying that TARP money shouldn’t be used to bail them out.
The sale to Fiat left the secured creditors with a singificant unsecured Chrysler obligation. Mourdock got all butthurt because the deal the feds offered gave the Chrylser pension a better deal than it gave to the other unsecured creditors.
You can legitimately claim that the feds were pandering to unions by giving their pension fund more than they gave to hedge funds and other pension funds (historically, the secured creditors get at least pari passu with other unsecured creditors for its unsecured protion but its not legally required) but there was nothing illegal about it. Why don’t you try to get Bricker or Rand Rover in here to see if they are willing to agree with your assessment of the illegality of what happened.
Here isa paper called Assessing the Chrysler Bankruptcy by Roe and Skeel from the European Corporate Governance institute.
From the abstract "We conclude that the Chrysler bankruptcy cannot be understood as complying with good bankruptcy practice, that it resurrected discredited practices long thought interred in the 19th and early 20th century equity receiverships, and that its potential, if followed, for disrupting financial markets surrounding troubled companies in difficult economic times is more than small.
As you are no doubt aware the Supreme Courts decision merely says that the lower court’s decision to approved the bankruptcy and dismiss Indiana’s suit was vacated, it does not contain any other findings.
The government waived this rule for its own (and Canda’s) ownership and did not count US and Canada ownership in determining whether there was a change in ownership because trafficking in NOLs is nto a concern if the new owners are the federal government and Canada.
Your admitting that the government waived the rules to benefit the new company at the expense of the tax payer.
The only reason the Chrysler bankruptcy was not illegal was they got most of the creditors to agree to it. The reason they agreed to this most of them were recipients of TARP money and had to agree and the others were threatened. Here is what one of their lawyers said “One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight. That’s how hard it is to stand on this side of the fence.”
So the process was the government told the creditors that they would not be getting what they were legally owed and if they objected the government would try to destroy them. Yet in your mind the only reason to oppose this was politics because Richard Mourdouk wanted to deny Barak “I believe that Obama murdered my son” Obama a victory.
And you believe him, because of course the lawyer and his client were immediately disappeared after they had the temerity to go public, right? I mean, you couldn’t possibly have bought into this nonsense without any corroborating evidence.
It sounds like you think we should have let these companies blow up to preserve a technicality in the law. The PURPOSE of the law is to prevent people from trafficking in NOLs, this was not a concern here, the policy behind the law was not being violated. I am not sure how anyone could think it would be a good idea to blow up our auto industry because of such a technicality.
Would it surprise you to know that the federal governemnt waived all sorts of technical regulatory issues during the depths of the financial crisis because people thought it was more important to preserve a working economy?
If there was even one creditor that was getting less than what they would have received in a liquidation (the legal requirement), they could have stopped this in its tracks.
Like I said, everyone got what the law required, a lot of people got less than they wanted or expected.
I am not a bankruptcy lawyer and I was not involved in the case but my understanding of the events is that a smaller creditor was holding the auto industry hostage to turn an investment profit by capturing some of the money that the federal government injected into the company in the form of equity, they were looking to get paid off.
They got what they were legally entitled to, they got the proceeds from a sale of Chrysler’s assets that served as collateral for their bonds. Unless you are saying that the US government colluded with FIAT (an Italian company) to screw the secured debtholders. But why would the federal government do that?
I’m going to need a cite to back up this claim that the government threatened to destroy dissenting creditors (considering Mourdock’s lawsuit and the fact that he survived long enough to destroy himself several years later, makes me think that this is bullshit).
And yeah, I think Richard Mourdock’s lawsuit was politically motivated.
It is not a technicality of the law to determine who gets what and in what order, that is bankruptcy law. By definition all bankruptcies happen in bad times for a company, that is not a reason to ignore the law and the settled practice. Having a settled order lets people invest with confidence and lets bankruptcies proceed quickly without a myriad of disputes over who get what. Everyone knows what they are entitled to and in what order before anything bad happens. Playing favorites based on political connections screws that all up. It makes investing more difficult and bankruptcies slower. This is a dangerous precedent.
As for corroboration, if you do not believe someone with first hand knowledge of what happened and no reason to lie, then I guess you have closed your mind to evidence. The sequence of actions corresponds exactly to what the lawyer alleged. The creditors who did not receive bailout money where holding out, the President publicly spoke out against them and they caved. Short of feeding Barry O and his minions truth serum, I don’t know what evidence you could possibly collect.
I know that you are quoting someone else here, but doesn’t the bolded part strike you as ridiculous? Does this lawyer think that the White House controls the White House press corps, which consists of reporters who work for newspapers and other media companies?
The White House has a large amount of control over the reporters that cover it. They control access to people the reporters want to talk to and have secret information the reporters want to write about. They trade these things for positive media exposure and other favors from reporters. There is no doubt in my mind that the White House could have gotten any large media source in America to write a story full of quotes about how certain a company’s greed was causing Chrysler to go out of business.