Supreme Court right to delay Chrysler-Fiat deal
With all that's on the line for American business, the nation's highest court is providing a welcome delay.
(breakingviews.com) -- The railroading of secured lenders by the White House in Chrysler's reorganization raised troubling questions about the rights of U.S. creditors. That the highest court in the land has now signaled a willingness to consider the merits of arguments made by those opposed to the deal is good for capitalism -- not to mention democracy.
To be clear, the Supreme Court has not sided with the Indiana's state treasurer's contention that the subjugation of secured Chrysler creditors was illegal. Rather the court has delayed the transfer of Chrysler's assets to Italy's Fiat until the bench can decide whether it should hear Indiana's case.
But given the importance of the situation, this is a welcome delay. At stake is more than just whether Fiat starts making Alfa Romeos in Ohio this month or next. By putting the United Auto Workers' rights above those of secured lenders -- and in the process seemingly upsetting years of established bankruptcy law -- the government risked creating uncertainty about the rule of law, and perhaps discouraging those willing to put capital at risk in America.
The government may in fact have a reasonable case to make that the rapid restructuring of Chrysler and the apparently generous allocation of spoils to the union is for the greater economic good. The quick-fix version of Chapter 11 may get the company back in the business of manufacturing vehicles without the prospect of striking workers.
But because the biggest Chrysler creditors, who caved to the White House's plan, were recipients of more than $50 billion of bailout funds, their rubber-stamping of the restructuring plan hatched by Obama's auto task force had the potential to undermine faith in due process.
The Supreme Court was intended to act as an un-politicized check on the powers of the executive branch of government. So whatever the outcome, that the Supremes are taking a little more time to decide whether this case merits a full hearing is good not only for confidence in American business, but also for democracy.