Supreme Court Green-Lights Chrysler Sale

Published August 1, 2009

The sale of automaker Chrysler was delayed but not derailed in June, as the U.S. Supreme Court declined to hear a challenge to the constitutionality of the sale.

The Court’s June 9 decision did not rule on the merits of claims by Indiana State Treasurer Richard Mourdock, who objected on behalf of state pension funds that had invested in Chrysler bonds.

Judges on the Second Circuit U.S. Court of Appeals had stayed the federal government-engineered bankruptcy sale of most Chrysler assets to Italian automaker Fiat. Fiat will own about 20 percent of the company, with the possibility of owning up to 35 percent.

The Obama administration had publicly vilified Chrysler bondholders who objected to accepting 29 cents for every dollar the company owed them. As senior secured lenders, they should have been entitled to a far larger return. Most lifted their objections under the intense White House pressure.

Indiana held firm, however.

“Hoosier retirees and taxpayers are being deprived of millions of dollars in their funds while a foreign corporation receives a windfall at no cost; this is not equitable,” Mourdock said in a press statement.

Mourdock also argued the government’s use of Troubled Asset Relief Program (TARP) money to help Chrysler is illegal.

“The TARP statutes clearly provide federal bailout money for ‘financial institutions.’ Chrysler is not a financial institution, and therefore the use of federal TARP funds to leverage its sale to the government’s preferred unsecured creditors is illegal. I cannot stand by while the federal government treats our state police officers, teachers, and taxpayers in such a manner.”

— Steve Stanek