Chrysler Holdouts

The Times Dealbook Blog has a post here in regard to the issues raised by government involvement with some of the creditors of Chrysler. Unfortunately, it does not appear to be correct in almost any of its points. Sure, the secured creditors are entitled to the full value of their security. It is clear that these claims are not fully secured, so they aren't entitled to the full value of their claims. If they wanted to foreclose they could have started to already. Do they want factory land in Michigan? Only if they can sell it for more than they were offered in the negotiations, which I think in this case is clearly not going to result in a hefty recovery. Also, these people are vultures, speculators or whatever negative term you want to use to describe them. Those pejoratives have no impact on their rights under the law. They purchased their claims fairly on the market and have a right to collect them, the morality of it is irrelevant.

That point, however, brings us to the reason why the commenter was so wrongheaded in his comments. They also bought the debt of a highly political situation, and the court has no reason to void the voting rights of other creditors just because they are taking a position influenced by the government, which of course is also a creditor. No aspect of the Bankruptcy Code requires creditors to act to directly maximize recovery of the other creditors, rather they are taking their best interest to heart and not fighting the government, seems rational to me (and if not, so what? Maybe bank shareholders will disagree, but that would be handled in a Delaware court not this forum). Finally, since when do courts not handle politically charged issues? Many cases are politically charged and the courts need to handle them fairly despite the politics, which is the meaning of an independent judiciary, not one that rules against the government just to avoid serving the public interest.