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May 20, 2009

Not So Fast! State of Indiana Objects to Rushed Chrysler Bankruptcy Sale
UPDATE: Well Nevermind, The Judge Has Already Denied the Objection!

A few weeks ago I wrote about the lawless attempt by the Obama administration and the unions to restructure Zombie Chrysler by means of a sham sale to "New Chrysler." The secured creditors' lawyers (White & Case) had a very short time to object to Zombie Chrysler's motion for sale and they did so in a very brief filing. The judge went forward anyway.

Now, however, White & Case is back with new creditors and a much more detailed objection. The new creditor? The State of Indiana on behalf of its State Police Pension Trust and its State Teachers’ Retirement Fund. The announcement is here.

As stated in the filings, the US Treasury Task Force is seeking to use the Chrysler bankruptcy to extinguish the property rights of the pension funds as secured lenders, violating the most fundamental tenets of creditor rights in disregard of widely recognized bankruptcy jurisprudence. The proposed restructuring of stakeholders’ rights seeks to make payments of billions of dollars to unsecured creditors, while paying the secured creditors only 29 cents on the dollar.

“As fiduciaries, we can’t allow our retired police officers and teachers to be ripped off by the federal government. The Indiana state funds suffered losses when the Obama administration overturned more than 100 years of established law by redefining ‘secured creditors’ to mean something less,” explained Treasurer Richard Mourdock. “The court filing is aimed not only at recouping those losses but also reasserting the rule of law and preventing the federal government from pursuing policies that strike at the heart of the capital system."

In case you were wondering, Indiana was a red state (before the most recent election). It's good to see they aren't taking this laying down.

The new objection repeats the allegations that Zombie Chrysler is attempting a sub rosa (that is, a secret or sham) reorganization outside the bankruptcy code and that it is an unconstitutional taking of property. It adds a new constitutional claim: that President Obama has exceeded his executive authority by interfering in the bankruptcy process. Lawyer-readers will recognize the Youngstown analysis in the objection. Finally, it asks for an independent trustee to be appointed because (allegedly) the Treasury Department has already seized control of the company and is making fast and loose with its assets.

The filing is available here. Unfortunately it's embedded in the website so you'll have to go over there to read it. I suggest that you do, if only because it does an excellent job of laying out the timeline of events which brought us to this stage. If I could just excerpt the whole thing, I definitely would.

President Bush was regularly villified for exceeding his executive authority in matters of war, where the president has a constitutionally explicit role. President Obama, by contrast, is mucking about in business and bankruptcy, which the Constitution explicitly grants to Congress. Congress has established the Bankruptcy Code to govern it. Obama's end-run around the Bankruptcy Code is lawless and unconstitutional.

WHOOPS UPDATE: Wow, that was fast and I'm sorry I missed this earlier. In less than 8 hours the Bankruptcy Judge rejected Indiana's filing by means of a judicial rule we've talked about quite a bit here at the HQ: standing. The judge holds that Indiana has not demonstrated that it is likely to succeed on the motion because they did not establish that they have standing. Let me emphasize: the judge is suggesting that the holders of Chryslers' secured debt do not have standing in Chrysler's bankruptcy proceedings. o_O

Thanks to commenter polvo.

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