The Volokh Conspiracy - Securd Creditors in GM v. Chrysler:

As I understand the situation, as things stand now, secured creditors in the GM bankruptcy case are slated to get paid in full on their claims. In Chrysler they got about 30 cents on the dollar.

Does anyone know why secured creditors are getting paid in full in one but not the other? Whatever the legal theory in Chrysler (which is not exactly clear), it seems like it would be valid in GM. Whatever the policy or bankruptcy reason for refusing to pay secured creditors in full in Chrysler, it seems the same in GM.

One possible explanation is that the Obama Administration decided as a prudential matter that it went too far in Chrysler and that to do Chrysler again would spook investors too much. A second explanation is that, as I understand it, a much higher percentage of the debt in Chrysler was secured, so it was a bigger liability, so worth pushing more. A third possibility is that the Administration simply thought they could get away with it easier in Chrysler--that the urgency of the case made it less likely that judges would intervene to stop the sale. Fourth, it is possible that there is some different in how the law would process the two cases, but I have not read any distinction. Fifth, perhaps there is some key factual difference that I have overlooked or misunderstood.

Anyway, I'm genuinely asking here--has the Administration provided any explanation for the difference in treatment in the two cases or does any reader have any explanation? This is a question I've been asked a couple of times by reporters now and I haven't really been able to figure out a good answer. AT this point my hunch is that it is a combination of prudential reasons--even if the Administration could do it again it doesn't want to, it isn't as important, and it is less likely that they would get away with it without a more difficult challenge--rather than that there is some difference in the law or economics of the two cases.

	[Todd Zywicki, June 17, 2009 at 9:41am] Trackbacks Securd Creditors in GM v. Chrysler: As I understand the situation, as things stand now, secured creditors in the GM bankruptcy case are slated to get paid in full on their claims. In Chrysler they got about 30 cents on the dollar. Does anyone know why secured creditors are getting paid in full in one but not the other? Whatever the legal theory in Chrysler (which is not exactly clear), it seems like it would be valid in GM. Whatever the policy or bankruptcy reason for refusing to pay secured creditors in full in Chrysler, it seems the same in GM. One possible explanation is that the Obama Administration decided as a prudential matter that it went too far in Chrysler and that to do Chrysler again would spook investors too much. A second explanation is that, as I understand it, a much higher percentage of the debt in Chrysler was secured, so it was a bigger liability, so worth pushing more. A third possibility is that the Administration simply thought they could get away with it easier in Chrysler--that the urgency of the case made it less likely that judges would intervene to stop the sale. Fourth, it is possible that there is some different in how the law would process the two cases, but I have not read any distinction. Fifth, perhaps there is some key factual difference that I have overlooked or misunderstood. Anyway, I'm genuinely asking here--has the Administration provided any explanation for the difference in treatment in the two cases or does any reader have any explanation? This is a question I've been asked a couple of times by reporters now and I haven't really been able to figure out a good answer. AT this point my hunch is that it is a combination of prudential reasons--even if the Administration could do it again it doesn't want to, it isn't as important, and it is less likely that they would get away with it without a more difficult challenge--rather than that there is some difference in the law or economics of the two cases.