The group of Non TARP Chrysler lenders that President Obama ostracized last week as merchants of greed have decided to fight back against the government’s thug tactics and demand that a long tradition of bankruptcy law be the determining standard. George J. Schultze, the managing member of Schultze Asset Management, one of the targets of the president’s wrath, made the following comments today:
“We don’t succumb to pressure and don’t agree to unfair and illegal payment schemes… “We’re not conflicted by TARP money or active stress tests.”
….”I’m not clear the sale will be completed because it’s patently illegal,” said Schultze, who is a bankruptcy attorney.
“It’s an investment and one reason we went into it was because we expected normal laws to be upheld, normal bankruptcy laws that were developed and refined over decades, and we didn’t expect a change in the priority scheme to be thrust upon us.”
He said upsetting the order of repayment would potentially discourage lending.
“People who make loans to companies in corporate America will think twice about secured loans due to the risk that junior creditors might leap frog them if things don’t work out. It puts a cloud on capital markets and the riskiest companies that need capital will no longer be able to get capital.”
“What’s holding it up and making it a sticky process is that junior creditors are being paid ahead of senior creditors,” he said. “Junior creditors who are politically on the same side as the Obama administration.”(emphasis mine)
It’s nice to see someone stand up to the bullying tactics that are at work in this bankruptcy. This is a vitally important matter that touches on issues such as the separation of powers, the rule of law and the worst sort of cronyism. The Obama administration’s actions in the Chrysler bankruptcy are turning upside down fundamental tenets of liberty and property rights established by decades of judicial review. If the Chrysler non TARP creditors prevail it may mark the beginning of the end of the gross overreach of federal power perpetrated by the Obama administration in many segments of the private sector.