BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

[dummass]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

This may be an oversimplification of the facts and I invite any criticism by the forum.

My question is this: if under the law secured bonds have a claim on assets of a corporation, is it not similar to a secured mortgage against real property?

If a person stops paying the mortgage on their home, declares bankruptcy and defaults on the mortgage, then sidesteps the bankruptcy laws, and gives the property to his brother, why wouldn't the Courts be involved?

If the above were allowed to happen, who would ever want to loan money against real property?

So, how should it be different for secured bond holders? Shouldn't they be given priority to the assets of a corporation? If not protected by the rule of law, no one in their right mind would ever buy corporate bonds!

[ThePythonicCow]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

You are wrong. The precedent was set by Gonzalez.

So ... what happened was that the Supreme Court decision did not set a precedent, but rather let a lower court case stand as the new precedent, right?

So, technically, what Munger said about the Supreme Court decision not setting a precedent is correct, right?

In sum, I concur with your outrage on this case, but was just nitpicking on your labeling Munger's statement wrong. ;)

[dummass]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

I have experience with the US legal system. A precedent can only be established through the ordeal of a case.

All the guys on cell-block D have experience with the US legal system, too. Do they speak with legal authority?

[BadJuju]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

All the guys on cell-block D have experience with the US legal system, too. Do they speak with legal authority?

I think you need to research what legal precedent is. :p It cannot be set without a case being reviewed.

[mcgurme]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

ADD:

THIS WAS A FULL COURT ORDER, NOT JUST GINSBURG.

There were not enough Justices in the poll to uphold the appeal or consider hearing the case.

Our Constitution just died.

Good thing there's lots of reality TV on to keep the sheeple occupied.

Please show us which article or amendment of the constitution says anything about preserving rich corporate shareholder wealth during time of crisis? I am at a loss to find that particular clause.

[Munger]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

You are wrong. The precedent was set by Gonzalez. The Supreme Courts inaction let that precedent stand. I have extensive experience in bankruptcy litigation as the holder of secured debt. Every creditors commitee will be arguing chrysler and the fact that a priority unsecured lender got more in a confirmation plan then a secured creditor. Just imagine trying to liquidate any entity that has a public sector sponsor supporting the unsecured. This is in total alignment with the Obama administrations policy of showing empathy in judicail hearings. This is a sea change and the attorneys I know and have had successful litigations with are pulling their hair out. As an investor I cannot value secured debt any more to make an investment decision because the only way to value your exit strategy is the liquidation value. You figure your worst case liquidation value and you subtract your litigation expense and other factors to determine the amout you are going to pay for the secured claim. If you now know that you can be cramed down and a confirmation plan can be approved over your objections you have no abiltiy to value the investment at the purchase. This has many effects first and formost the value of these claims will be discounted further at purchase (larger writedowns for the issuing banks) and two less liquidity in the distressed market as players who get burn't will likley not play again. This is my opinion based upon my experience.

You have no idea what you are talking about. A decision of the lower court has no precedential value. NONE. Your lawyers can argue it, and they will, but it means nothing to the court. "Look at what this judge over here who's decisions have no binding effect on you did..."

Now, if you said that the 2nd circuit's decision has precedential effect for courts in the 2nd circuit, you would be correct. That happened weeks ago though.

I will say it one more time for the hyperbolaters: the Supreme Court declining to hear a case has ZERO NONE NADA ZILCHO meaning. None. Nothing. They did not "let the precedent of the lower court stand." The lower court has no precedent; and they did not examine the decision of the lower court.

When they make a decision that has precendential value, SCOTUS will walk through the facts and the law and say, "The decision STANDS." They did not say that. They declined to hear this case. As they do thousands upon thousands of times every year. This is not some technicality - this is how it works.

Let me explain, for instance, why there can be no precedent from this decision.

Typically, a lower court will make a decision; if there is an appeal, the appellate court will review.

If they appeal the appellate court's decision, the Supreme Court may decide to hear it. This is important - they do not have to hear the case.

If they do, SCOTUS will analyze the facts and apply the law. Later, when a new case comes to light, attorneys from each side will examine the facts of the case in the higher court's former ruling for similarities and differences. The attorneys who like the way the SCOTUS ruled will argue that the facts are essentially the same and that any differences are unimportant. The attorneys who don't like SCOTUS' ruling will argue that the differences are everything, and that the difference mean the court must rule in their favor.

In this case, the Supreme Court did not even examine the merits. No later attorney can cite the facts and how the Supreme Court applied the law to those facts because they were never mentioned.

[dummass]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

Yes, but the Appellate Court's decision can be used as precedent, no? I don't think anyone here is claiming that the SCOTUS has made precedent, by not hearing the case. Insofar as the SCOTUS is concerned, they are only interested in making decisions on relevant Constitutional matters.

[c1ue]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

I think the point that ex-governor Ventura made on Cheney Jr.'s show is the relevant one - video posted in Rant N Rave (Metalman?):

Miss Cheney was trying to say that if the government said it was ok, then it must be ok.

Mr. Jesse Ventura responded that torture was torture. That if the US is a government of law, then it should follow its own laws. That if waterboarding was torture in Vietnam, why then is it acceptable practice in fighting terrorism in extra-national American facilities?

The so called pragmatism of Obama would so much more easy to take if it were not so unequally applied.

I still fail to see why Chrysler should be rescued, the bond holders screwed, and Chrysler's LBO/private equity rescued via a extra-legal sale - ditto GM - when the big banks were not treated equally.

To me this isn't pragmatism, this is corruption of the highest degree.

[Munger]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

Yes, but the Appellate Court's decision can be used as precedent, no? I don't think anyone here is claiming that the SCOTUS has made precedent, by not hearing the case. Insofar as the SCOTUS is concerned, they are only interested in making decisions on relevant Constitutional matters.

The appellate court's decision can be cited as precedent in the 2nd circuit, correct. I have not read the opinion; my guess, based on the conservative history of the 2nd circuit, is that it is pretty narrow. And yes, I think people were arguing that SCOTUS' decision to not make a ruling in this matter was somehow precedent - thus the title of the thread "Chrylser and America dies Supreme Court Rejects Bondholders."

[dummass]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

Thank you, Munger, for the clarification. You appear to be the most technically knowledgeable contributor on this subject. I haven't studied this stuff since law school and that was some time ago.

I will agree, there is a lot of confusion on this subject. The title of the thread probably didn't help.

[Slimprofits]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

Pragmatism as it relates to the Obama administration is a campaign style buzzword that the msm has picked up on and run with.

[cobben]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

"I do get agree with your point that by the supreme court not ruling a binding precedent was not set on the lower courts but case law was made and a pervasive precedent was set which will be used and argued in the Bankruptcy Court as well as the second circut as you pointed out and will have weight with the judge's in that jurisdiction and others until a higher court rules on the issue. As my comments were strictly commenting on the protection of secured creditors rights in bankruptcy court I beileve the term precedent was correct."

This is a major change in praxis which if it is not disallowed will at a bare minimum result in the devaluation of all existing secured debt against unsecured debt (are you listening, hedge fund vultures?), with major implications for the whole fixed income market as all sorts of position readjustments will ensue at all levels.

One can only assume that this was the primary intention of the Obama guvm'nt as it goes way beyond the Chrysler case.

The worst case results in an accelerating aversion to all US-based investments as the rule of law is percieved to be further corrupted.

[Mango]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

Does the Obama Administration telling the Supreme Court to "stay out of it" strike anyone else as more than a little strange?

Not at all, it's a very simple jurisdictional argument that is made in many courts all the time.

Pay close attention to Munger Fan. He knows what he's talking about.

[Roughneck]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

Voting participation actually went up in 2008 over recent years

Yeah ACORN saw to that.

While a "legal" precedent may not have been set, the fact the government can give an unsecured debt holder(the UAW) with political connections consideration over a secured debt holder in violation of established bankruptcy rules should be very troubling to those interested in the rule of law and contracts.I'm sure a wise latino women would come to the same conclusion.

[Slimprofits]

Re: BRKG NEWS 6/9 1924: Chrylser and America dies Supreme Court Rejects Bondholders

This will destroy the corporate bond market

Like I said, the corporate bond market has not and will not die as a result of the Chrysler deal.

http://www.reuters.com/article/marke...N08ORP20090616

HIGH-GRADE BOND SALES EXPECTED FOR WEEK OF 6/15/2009

Two of the companies on that list, have workforces that are partially unionized.