Dolphin wrote:What Obama is presenting is illegal and IF allowed will re write the Law's for Bankruptcy
Quote, NAT.
It isn't the absolute value or percentage recovery that is at issue here.
The issue is this: do secured creditors get more than unsecured creditors in a BK situation? The law is quite clear on this: Yes. Secured creditors are senior to unsecured creditors, ie, they're first in line to make a claim on the remaining cash, and they're first in line to make claims on liquidated value.
The Obama administration wanted to stand the law on its ear and tell the secured creditors that they were going to receive substantially less recovery than the UAW workers were By law, the UAW (and their pension plan) are on the tier of unsecured creditors. The Obama administration wanted to stiff the secured creditors into taking 29%, giving the UAW 50%+. Sorry, that's just not right under the law.
The funds managing the secured credit are under other fiduciary and legal responsibilities to press for the best recovery they can for their investors. Do the secured creditors have a reasonable belief that they can recover more money for their investors by going into BK than from the Obama plan? Yes, any competent BK lawyer would say so (and many are saying so). So the secured creditors that were not government-owned by virtue of having taken TARP money from the Treasury are pursuing a course of action that is not only legal, it is required by the law.
This buttresses my point of last fall that we should have not bailed out the auto companies. We should have shoved them into court with a pre-pack and gotten to this point, right where we are now, but back in December when the companies still had some operating cash.
All the money we taxpayers have thrown into these two companies until now has been as good as burned in a bonfire. This whole excercise has been a fruitless one of propping up the UAW to this point - and in the end, here's the fact: a whole lot of people are going to be laid off. Period, end of discussion. People have to cop the clue that much of the auto industry's sales until now have been propped up with easy credit for the consumer. That's over and done. The 16+ million unit/year market is going to be a 10 million unit/year market. There's no way around that, for anyone - not GM, not Toyota, not Honda, not Ford, not Chrysler. The sales numbers released yesterday prove my point. The sales numbers released from the German/European auto companies prove my point.
A whole lot of dealers have to be shut down, a whole lot of manufacturing capacity has to be shut down, a whole lot of employees in the entire auto industry will have to be laid off. Everything before this week was an avoidance of the realization of these facts. The UAW needs to wake up, smell the coffee and realize that they're gone, they're done, the US auto market has shrunk by about 40% and that the halcyon days of the early 1970's are not coming back.
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