About Those 'Speculators' . . . - WSJ.com.
This article clearly highlights the issues surrounding the government "engineering" of the Chrysler bankruptcy packaging. The UAW was "protected" despite being a minority investor (via its pension fund) and senior creditors were burdened with more significant losses. This work-out clearly contravened bankruptcy law and will set a very negative precedent. As noted in the article, the Indiana State Police Pension Fund, Indiana Teachers Pension Fund and a state construction fund all suffered significant losses despite being "senior" debt-holders. The response from the State Treasurer, who has fiduciary responsibility to the plan and to its participants, is to refuse to invest in any secured debt of "manufacturing companies, or those insurance companies who have or will be receiving bailout funds" because "the risk is too great for any prudent investor to accept". When the federal government contravenes the rule of law in the capital markets to favor a constituent the law of unintended consequences does apply. Equality of outcome does not apply to the capital markets. They are, should be and hopefully always will be, zero sum.
This article clearly highlights the issues surrounding the government "engineering" of the Chrysler bankruptcy packaging. The UAW was "protected" despite being a minority investor (via its pension fund) and senior creditors were burdened with more significant losses. This work-out clearly contravened bankruptcy law and will set a very negative precedent. As noted in the article, the Indiana State Police Pension Fund, Indiana Teachers Pension Fund and a state construction fund all suffered significant losses despite being "senior" debt-holders. The response from the State Treasurer, who has fiduciary responsibility to the plan and to its participants, is to refuse to invest in any secured debt of "manufacturing companies, or those insurance companies who have or will be receiving bailout funds" because "the risk is too great for any prudent investor to accept". When the federal government contravenes the rule of law in the capital markets to favor a constituent the law of unintended consequences does apply. Equality of outcome does not apply to the capital markets. They are, should be and hopefully always will be, zero sum.
