Eric the Red

Finally, someone has stopped the madness. Ruth Bader Ginsberg has halted the sale of Chrysler to Fiat. Hopefully, the taxpayer will not be left holding the bag as the bankruptcy court and appeals court think we should.

News flash: bankruptcy is NOT about preserving the operations of a company. It never was. Bankruptcy is about the secured creditors getting the maximum return on their assets. If that means the operation continues, then so be it. Otherwise, the assets are sold so that the secured creditors get their money back.

The implications of trashing the interests of the secured parties are massive. First, this undermines the rule of law. Bankruptcy law has always placed the interests of the secured parties ahead of all others. This ensures that businesses can get financing they critically need since the lenders are first in line to recover their funds.

Second, lack of security will discourage investment in businesses that critically need it. Who will want to lend money if the contracts that protect that loan can be tossed at the whim of the executive branch? Its simple: no one.

Overall, the Obama administration has been turning this country into a banana republic. It started with the bullying of retirement funds over the chrysler case, the appointment of various “czars” with little to no congressional oversight and attempts to ram legislation through with little or no debate. Lets hope that SCOTUS will stand firm.