It seems the decision to totally disregard creditors during the Chrysler debacle, which gave the politically connected UAW an owership stake but left debt holders holding the bag, is having consequences for bankruptcies in other industries.
This a great excerpt from the article regarding the potential bankruptcy of an NHL hockey team in the Wall Street Journal:
"Should the judge approve that move and allow the Coyotes to be sold quickly, as Chrysler was, it could put some creditors out in the cold, leaving the NHL and other investors without the kind of input typically afforded by bankruptcy law.
"Bankruptcy and financial professionals said such scenarios, if successful, could make investors demand higher interest rates on debt amid uncertainty over how they might fare should the firm encounter financial difficulties. "The concern is that you have thousands of lenders, hedge funds, insurance companies who model their investments on rules and laws," said Stephen Lerner, a lawyer for a committee of Chrysler dealers. "How do these folks make investment decisions when they're faced with bankruptcy courts that appear to disregard the rules?"
Indeed. When a President, his administration, and judges disregard rules about something as basic and well established in legal precedent as banruptcy proceedings, it has profound consequences. The justification we've heard from President Obama for doing what is expedient is that we are in a crisis and need to bend on some of our principles. But it is precisely when there is a crisis, when you are put to the test, that you have to stand most firmly on principles and uphold the rule of law. If you can't do it when it's hard, what good is it? To do away with principles and the decades of U.S. legal precedent that protects investors in a corporate bonds, while rewarding politically influential union supporters with a major ownership stake, is horrendous. Why would you invest in corporate bonds like this from now on? Would you buy Ford bonds? What about GM again knowing that if things go south you probably won't get much of your money back?
This is a far cry from Obama's campaign platitudes that he would restore integrity and usher in a new era of hope that things will now be different that Obama espoused during his campaign. To disregard a well established body of laws that have been built up over decades is to damage the very rule of law that is so essential for any great nation to stand. One can argue that these sorts of things are even worse than politics as usual. It's one thing to screw up a policy. But now they're interfering and screwing up basic business operations?