bankruptcy

A Nation of Lawlessness

The matter of Chrysler’s bankruptcy seems to have rendered quaint our system of checks and balances. President Obama is breaking the law and the other two branches are letting him get away with it. One can probably understand how a smitten public might casually allow this president a stipend of unconstitutional acts, since he doesn’t scowl like Nixon or stutter like Bush.

Indiana: Defender of “the Rule of Law”

While the majority of Chrysler’s senior creditors sacrificed their fiduciary duties and caved into political pressure in accepting the Obama Administration’s pre-packaged bankruptcy of Chrysler, a small group of state pension funds in Indiana has challenged the Obama plan and is asking the Supreme Court to review said plan. As in the 1930s, the protection of contractual rights, one of the most basic pillars of a free society, along with the rule of law, is now in the hands of the Supreme Court.

An Overdue Reckoning in the Auto Sector

Bloomberg reports:

General Motors Corp., facing a probable bankruptcy filing by June 1, is telling 1,100 “underperforming” U.S. dealers they will be terminated as the automaker starts shrinking its retail network.

Most of the closings will occur by October 2010, and none are happening now, Detroit-based GM said today. The targeted outlets will have until the end of the month to appeal the decisions, GM said, without specifying the stores on the list.

“Gangster Government” at Work

With the Obama administration preferring to rely on politics rather than the law to “fix” the auto industry, bondholders have discovered that the new politics of this administration is quite a bit more brutal than the old politics practiced by the Bush administration.

Henry Payne and Richard Burr write of “gangster government” using not just demagogic public attacks on greedy bondholders but apparent threats of regulatory sanction to get its way in bankruptcy court.  They explain:

Mortgage ‘Safe Harbor’ Anything But Safe

After the Senate’s rejection last week of allowing bankruptcy judges to re-write mortgage contracts, the so called “cramdown” provisions, it was starting to look as if the Senate cared about respecting private contracts. Sadly, such concern has been short-lived.

With ‘Cramdown’ Rejection, Is Senate Ready to Respect Marketplace Contracts Again?

After rejecting the proposed ‘cramdown’ changes to the bankruptcy code, the Senate may be slowly waking up to the need to respect contracts.  One cannot rebuild trust and confidence in our markets, while at the same type trying to destroy the trust that underlies contractual relations.  Were the cramdown legislation approved, the message to investors, or any market participants, would be that the enforceability and terms of your private agreements will be subject to the direction of the political winds.

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