Court Filing: Obama’s “Ends Justify the Means”

Three of Chrysler’s secured creditors are mounting a fresh attempt to thwart the carmaker’s Chapter 11 reorganisation on the grounds that it violates their legal rights and the US government’s authority under the Troubled asset relief program.

The three – all Indiana state pension funds – are among a group of 46 creditors that had appeared to back away this month from efforts to derail the process under which a “new” Chrysler would emerge from bankruptcy protection by July 1. The new entity would be owned by a union healthcare trust, the US government and Italy’s Fiat.

www.ft.com...

Chrysler, with backing from the US Treasury, had offered its secured creditors just under 30 cents on the dollar to settle claims totalling $6.9bn. Four big banks, holding the bulk of the claims, accepted the offer following political pressure from Washington.

However, the Indiana State Teachers’ Retirement Fund said on Wednesday that it had a fiduciary responsibility to its members to continue the fight. The fund stands to lose $4.6m under the current settlement proposal and has teamed up with Richard Mourdock, Indiana state treasurer, to try to recover those losses.

The latest objections could galvanize other lenders to renew their challenge. “I fully support their motion and believe a number of lenders (including us) will ultimately join their group,” said George Schultze of Schultze Asset Management, one of the creditors that had abandoned an earlier legal fight.

In a court filing on Wednesday, the Indiana funds accused the government of adopting a strategy of “the ends justify the means”. They also said the Treasury “has taken constructive possession of Chrysler and is requiring it to adopt a sale plan in bankruptcy that violates the most fundamental principles of creditor rights – that first-tier secured creditors have absolute priority”.

The Indiana funds say the current plan will benefit more junior creditors, and that Tarp funds were meant to be funneled only to financial institutions.

“Whatever powers the Treasury department may have under Tarp,” the funds said, “it does not have the power to control the entire restructuring of a company to the detriment of the company’s secured creditors and for the benefit of other interest groups so that certain broader policy and political objectives may be achieved.”

Realted story:
"About Those 'Speculators' . . . Pension funds also got whacked by Uncle Sam"
online.wsj.com...

jw

Good thread, this strikes an eerie similarity to the line in Frost/Nixon that is something along the lines of "what I'm saying is if the president does it, it's not illegal." or however it went. When Obama made the statement "the only thing standing between you and the pitchforks is my administration. Chicago politics at it's best, lol. If it were any other time in history this would not be allowed to go on. Funny how people can work their whole lives and invest everything they have to make sure they can retire without worry, then everything get's flushed right down the toilet so we can "bailout" the failing aspects of this country.

reply to post by Jnewell33
According to this line of thought, the interest of the UAW and SEIU outweigh the Constitution and rule of law.

I am not a defender of unions, but the police, firefighters and teachers who invested in a "guaranteed contract" investment get my sympathy.

No one will take a stake in any company that may receive federal "attention" anymore.

Note that Chrysler has no 'debtor in possession' financing except for the U.S. taxpayer. Our "word" and our contracts now have no value in the world's financial marketplace.

Thanks, Barack.

jw