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06-08-09, 08:09 PM #1
U.S. says TARP issue out of Court’s reach
The Obama Administration argued Monday that no court, including the Supreme Court, has the authority to hear a challenge by Indiana benefit plans to the role the U.S. Treasury played in the Chrysler rescue, including the use of “bailout” (TARP) funds. The Indiana debt holders, U.S. Solicitor General Elena Kagan wrote, simply have no right to raise that issue, thus putting it out of the reach of the courts.
The government’s brief opposing a plea to delay the Chrysler sale can be downloaded here. The main case at the Court is Indiana State Police Pension Trust, et al., v. Chrysler LLC (application 08A1096). (The other filings in the Chrysler proceeding before the Court, and this blog’s weekend coverage, can be found at this link.)
All of the legal filings expected in the Chrysler case are now before Justice Ruth Bader Ginsburg, as Circuit Justice, and thus she or the full Court could now act on the three applications to postpone the sale of most of the auto company’s assets to a new company representing a combination with Fiat, the Italian auto company.
Ginsburg or the full Court probably will act by mid-afternoon, since there is a 4 p.m. deadline set by the Second Circuit Court. After that, the plan can go forward, unless the Supreme Court decides otherwise. A federal bankruptcy judge and the Second Circuit have approved the deal. The Circuit Court is expected to issue one or more opinions Monday explaining its decision. The Supreme Court, however, does not have to wait for that in order to act.
Although arguing that the courts may not rule on the validity of Treasury’s decision to shore up a new Chrysler company with funds from the Troubled Assets Relief Program, the Solicitor General did argue that those funds may go to a troubled auto company, and not just to banks or other regular financial institutions, and the Indiana benefit funds had contended.
“The Treasury has determined that TARP funds may be used to purchase assets from automobile companies when necesssary to prevent those companies’ failure or major disruption from disrupting the stability of the Nation’s economy and financial markets.”
Chrysler had received $4 billion in TARP funds before filing for bankruptcy. The new company will receive more and, in return, the U.S. government will become a part owner of NewChrysler, the surviving company.
In arguing that the Indiana benefit funds do not have “standing” to challenge Treasury’s use of “bailout” money to rescue Chrysler, the Solicitor General noted that the bankruptcy judge had found that those debt holders cannot show any injury to their interests from the sale deal and, even if they might experience some injury, it cannot be traced to the Treasury’s role.
The debt holders’ “challenge to the use of TARP funds is not properly before the Court because (as both courts below appear to have concluded) [the funds] lack standing to raise it,” the government brief said.
The funds, it added, cannot show that four Justices will vote to hear their challenge on the TARP issue, which involves an issue of how to interpret the federal economic recovery law — an issue that neither the bankruptcy court nor the Second Circuit ruled upon because of the funds’ lack of standing If that is so, Kagan wrote, “no federal court has jurisdiction to decide the merits of the challenge.” Moreover, she said, the law is only eight months old, and has not been interpreted by any federal court, so that, too, would indicate it is not ready for the Supreme Court’s attention.
The Indiana debt holders “are left with the contention that this Court should grant review because the Chrysler bankruptcy is of national importance. As an economic matter, that is true, and blocking the transaction would undoubtedly have grave consequences,” the brief said.
Unless the Supreme Court is prepared to grant full review of the Chrysler deal and decided it on the merits by June 15 (a cutoff date set by Fiat), Kagan said, entry of a stay order “could itself have the effect of preventing the sale from going forward.”
Only two outcomes are now possible, the brief added. “Either the sale will go forward, in which case NewChrysler will be able to restart the production lines — or Chrysler will be liquidated.” The funds’ attempt to block the deal would force that liquidation, “a step whose economic consequences would be so severe that two national governments [the U.S. and Canada] have committed unprecedented resources to prevent it.”
The Solicitor General did not respond directly to the stay applications by consumer groups (08A1099) and by a woman who has an asbestos tort claim pending against Chrysler (08A1100).
06-08-09, 10:36 PM #2
Ginsberg issued a stay on the sale, so the Obama administration's argument apparently wasn't very persuasive.I'm your huckleberry...
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06-09-09, 06:17 PM #3
It's not surprising that the Obama administration doesn't believe in checks and balances..."never bring paws to a gunfight" - Jenna
06-09-09, 09:22 PM #4
Did y'all hear that the damn UNION (an unsecured creditor) was put ahead of the line, ahead of secured creditors like the various retirement plans pushing the lawsuit?
If this isn't a blantant payoff to the UAW because they voted overwhelmingly for Obama and contributed to his campaign, I don't know what is. What really gripes me is that the slimeballs will probably get away with it.
When all these bailouts are said and done, I think fraud will surface that dwarfs the fraud that killed Enron and Worldcom - But sadly, it will be too late to do much about it.
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06-09-09, 09:53 PM #5The Reason People Hate Cops & Causer of WarSupporting Member Lvl 2
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Same way that they're crying foul over the Republicans trying to delay the confirmation process on Sotomayer... kind of like they did for the last eight years of federal judicial appointments.Voting against incumbents until we get a Congress that does its job.
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06-10-09, 08:47 AM #6
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