Is the Chrysler Bankruptcy Deal Constitutional?
That's the question three Indiana state pension and construction funds want the Supreme Court to decide. As The Washington Post reports:
The Indiana funds contend that the sale of most of Chrysler's assets to a new company -- to be jointly owned by Fiat, the United Auto Workers union and the U.S. and Canadian governments -- breaches numerous laws. For one, they argue, the process tramples on the funds' rights as senior lenders to Chrysler because they would recover less than junior lenders. The Indiana funds hold about $42 million of the $6.9 billion in secured loans. Under the agreement hammered out by the Obama administration with most of the first-lien lenders, the group would recover about $2 billion, or 29 cents on the dollar.
The funds also contend that the quick bankruptcy proceedings pursued by Chrysler and the Obama administration -- a federal bankruptcy judge approved the sale 32 days after the automaker filed for one of the largest bankruptcies in U.S. history -- did not comply with bankruptcy law. The Indiana funds are also arguing that the Treasury illegally used money from the federal Troubled Assets Relief Program, meant for financial institutions, to prop up Chrysler.
And as the Legal Times' Tony Mauro notes, this is a tricky one for the Court:
Taken together, the challenges have hurdles including standing to overcome, and the Supreme Court may not want to stand in the way of an arrangement devised by the political branches that its supporters say will save thousands of jobs. But the applications also point out that if the high court does not intervene now, a deal that raises major questions relating to bankruptcy law and the power of the executive branch will go unreviewed, and the questions unanswered.
