In President Obama’s auto morality tale there are good guys and there are bad guys. The good guys are those who do his bidding. And the bad guys are those who don’t.
Well, one of those bad guys, whom the president took to the airwaves and condemned as “speculators” when they resisted the crummy terms they were being offered as part of Chrysler’s bankruptcy, turns out to be the Indiana pension fund whose members include not some Wall Street fat cats sitting in their plush offices punching trades on their 40″ computer screens — but state troopers and teachers many of whom are at the brink of having their life’s savings wiped out.
After suffering rounds of losses in the lower courts, these “speculators” finally scored a minor victory in the Supreme Court yesterday. The administration urged the court to throw out their appeal on grounds that anything less would jeopardize the June 15 sale of Chrysler to Fiat and risk turning everyone concerned into pumpkins! But Ruth Bader Ginsburg – the court’s most liberal justice who had to make the initial call – didn’t buy it and has stayed the sale pending further notice.
This doesn’t mean yet that Ginsburg will actually hear the case or, better yet, get the full court to hear it. But it does indicate that she doesn’t think that the administration’s case is a slam dunk — and is at least somewhat disturbed by the rule of law issues that the evil “speculators” are raising.
The Indiana fund is making two arguments, one weak, one strong, in my opinion, in its lawsuit.
The weak argument is that the administration does not have the statutory authority to use TARP (Troubled Asset Relief Program) funding to bankroll the bankruptcy of a non-financial company. But the law is actually quite vague and broad on what it considers to be a financial institution. It states that the TARP money can be used for “any institution, including, but not limited to, (emphasis added) any bank, savings association, credit union, security broker or dealer or insurance company….”
Their stronger argument is the rule of law argument. Standing bankruptcy law stipulates a clear hierarchy of lenders under which secured lenders – meaning those whose debt is backed by actual company assets – are supposed to be paid ahead of unsecured lenders whose claims on the company are not backed by assets. The pension and health care obligations of the company to the UAW are essentially unsecured liabilities. But the Obama administration turned this law upside down, handing the UAW, who contributed millions to his campaign war-chest, nearly 60 cents on the dollar and secured lenders such as the Indiana fund a mere 29 cents. There is a word in ordinary parlance for this kind of property transfer: Theft.
One small – exceedingly small – ray of hope that Indiana will get justice is that in 1952 the Supreme Court rejected Harry S. Truman’s attempt to seize steel mills during the Korean War as unconstitutional. If a property grab was not justified when the issue was national security, it is hard to see how it could be justified as a payoff to a political constituency. But stranger things have happened.
My recent appearance on the Glen Beck show discussing this issue here.