In this episode--we might call it "Fiat government"--we saw not merely the use of political power to reward allies, but also a new willingness to stop at nothing, not even the rule of law, to dictate private-sector outcomes. In its determination to bail out its buddies, the administration bulldozed centuries of unambiguous, black letter law safeguarding the rights of secured creditors. In order to hand over so much value to the union, the government simply announced its intention to disregard all those old-fashioned rules and, in effect, confiscate the property of creditors whose claims on Chrysle should have come first and to give that property to union and other allies . . .
After private investors capitulated under this pressure, Indiana remained the sole holdout. Among the losers in, as we Hoosiers termed it, the "Chrysler cramdown" were two pension funds that serve our retired teachers and state workers. Those pension funds had invested $19 million in Chrysler and, under the administration's plan, were going to be fleeced about $6 million they would otherwise have gotten in a traditional bankruptcy. Coincidentally, I was sitting at a table of highly impressive people, all more erudite than I, discussing the very topic of the Obama blitzkrieg--as I recall, I had just tossed out the phrase "shock and awe statism"--when the time for a decision came.
What Gov. Daniels described happened next is sure to infuriate Sen. Lugar and his number one cheerleader in the press gallery, Brian Howey. Daniels recounts receiving a phone call from Richard Mourdock advising him that the "deadline for filing a lawsuit to stop the cramdown was just hours away." Daniels discusses the downside of challenging the federal government, including attacks from political adversaries. Yet, he saw a bigger issue at stake here. "My main concern was the loss to our pensioners, but the last point was important, too," he pondered. "What would happen to credit markets if lenders who previously through their investments were safe even if something went wrong now had to consider the chance that politicians might step in and give their principal to some politically favored party, leaving them with the table scraps?". Completely obliterating the criticism that has been heaped upon Mourdock over this issue, Daniels writes:
Mourdock and I, as trustees of the pension plans, decided that submission was just not an acceptable course. We authorized the lawsuit and, with the help of cut rates from attorneys incensed about the principles being violated, pursued it even after the courts allowed the cramdown to go through.
Indiana's retirees never got their $6 million back, but our resistance was not totally fruitless. A fascinating bit of legal history was made months later, when, almost surreptitiously, the U.S. Supreme Court in December 14, 2009, announced that the Chrysler case would be accorded no precedential value. The rights of secured creditors were secure once more.
In the lower court that first declared it would not be bound by the Chrysler case, the judge likened Indiana's efforts to "the little man in Tiananmen Square when the tanks rolled in." The tyranny here was more benign, but the government's disdain for law was pronounced nonetheless . . .
Chew on that, Brian. I didn't recall Gov. Daniels' support of Mourdock's legal fight being so strong at the time it was being fought, but I'm glad to see him recount the story as he does in his book. Sen. Lugar, I assume, would have preferred if he had left that bit of history out of his book.
