Tuesday, June 9, 2009

Surprise from the Supreme Court

Judge Ginsburg yesterday issued a one-sentence order staying the sale of most of the assets of Chrysler to Fiat pending further order.

This surprised me. Fiat is entitled to walk away from the deal if it does not close by June 15, and I was under the impression that the federal courts in general would fade in the face of such a ticking clock, regardless of the merits of such contentions as might be brought to their attention by objecting parties.

The Obama administration wants this deal. Their solicitor general, Elena Kagan, had argued that blocking the sale would force Chrysler's liquidation. That seems to me the sort of ham-fisted our-way-or-the-highway argument that Truman's lawyers once used to try to justify the seizure of the steel mills.

At least part of my startled reaction to this decision is delight that we are seeing another such moment, of a Supreme Court willing to stand up to the Executive on a matter of principle. What is the principle?

The objecting parties are three Indiana pension funds, who object that the sales agreement everyone wants to push through rewards unsecured creditors ahead of secured creditors and that this is illegal. It also objects to the fact that the US Treasury is using bailout money for Chrysler as part of an effort to make the deal happen -- the bailout funds were authorized by Congress in order to keep the banking system going.

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