The value of Chrysler had been destroyed quite some time ago, which is why smart investors have been divesting themselves of the company's shares for a few years now.  Several people were calling on both GM and Chrysler to declare bankruptcy last fall, when the market first collapsed.  That way, at least they would have had a chance of emerging from it as viable and competitive companies.  Instead, they both went to the government begging for bailout cash . . . apparently forgetting that government is at its most dangerous when our desire to have it help us blinds us to its power to screw us.  Now, Chrysler will once again be owned by a foreign company (the first time was when they were Daimler-Chrysler), and has lost any say in how they are run.  The unfortunate reality is that certain big businesses have become so accustomed to our national bailout addiction (which was in place well before last fall), that management at both GM and Chrysler just couldn't seem to see any way out other than the one that killed them.

The term "secured creditor" has a specific legal definition.  Without quoting Black's verbatim, the basic concept is that the creditor has a loan secured by some collateral that can be called in should the debtor default on the loan.  It's kind of like a bank loan for your car (or even the lease from the dealership); if you violate the terms of the agreement, then your car can be repossessed.  There's a whole industry out there for that very purpose.  In like manner a bank that holds a mortgage on your house has the right to foreclose on that house if you default on the terms of the mortgage repayment.

The Indiana State Police Pension Trust, the Indiana State Teachers Retirement Fund, and the Indiana Major Moves Construction Fund were secured creditors of Chrysler's assets.  In order to improve the value of the assets of their funds (to the benefit of those whom the funds are intended for), they invested some of that money in various companies, usually in the form of preferred stock.  Unlike common stock, which is what is normally discussed when talking about a company's stock price on the exchange, preferred stock tends to be a very stable investment vehicle.  First, dividends that are paid out from preferred stock aren't tied to market values, but rather to interest rates.  Second, preferred stockholders get priority distribution of assets in the event of a company's bankruptcy or liquidation.  (A rundown on Common Stock vs Preferred Stock is available here, if you want a quick primer.)

So the Pension Trust, Retirement Fund, and Construction Fund had invested some of their money into Chrysler.  The dividends from those preferred shares were used to cover pension liabilities for the Indiana State Troopers and Teachers, and to fund major road projects.  That's how the capital market (money looking to make money) works.  Perhaps it's a measure of consumer confidence that those funds had been invested with Chrysler for a long time.  Then again, according to all legal precedent (not to mention Generally Accepted Accounting Principles), those secured claims were supposed to receive a priority distribution in the event anything went wrong, so the trustees likely weren't overly concerned.  After all, not even the Most Holy Obama had the authority to override two centuries of legal precedent.

Then again . . .

Clearly Der Führer, himself a lawyer, doesn't seem to have much trouble jettisoning legal precedent and rule of law when said precedent and rule is inconveniently in the way of his objectives.  Nor does Governess Tinkerbell, herself a lawyer, have a problem acting as an accessory to that behavior.  The objectives, in this case, seem to be repayment of either political favors or campaign debts (promises).

Instead, the UAW and VEBA, warranty and dealer obligations, and trade obligations - all of which are, by definition, unsecured creditors - get their claims addressed first.  It's like the bankruptcy judge deciding that the bank holding your credit card or student loan will receive first pick of your assets instead of the bank holding your mortgage or car note.  It's completely bass-ackwards from the way the law is written.  Mortgages and car notes are secured claims, credit cards and student loans are not; secured claims (preferred stock) get first claim on liquidated assets that were used as collateral.  If anything, those funds should be the ones holding the 68% share of the reorganized Chrysler; but they didn't do any favors for That One during his coronation campaign.

"Political grandstanding" is hardly the case here.  The fund trustees, in performance of their fiduciary duties, secured legal representation and charged them with the defense of their clients' secured interests.  Lawyers have a duty to represent clients as best as they can within the law. That is not a negotiating point; that is a mandate for every lawyer everywhere.

But Granholm is at one with the President.  Obama referred to the bondholders who were holding for something more akin to their traditional priority as seeking a "subsidy."  Of course this was not true - they were out of pocket millions in money they had lent in good faith.  It is not even close to "greedy" to expect to get a fair return on your investment, as opposed to just rolling over and quietly taking the screwing the government wants you to take.

To people like Obama and Granholm, asking to be paid what you are owed is to demand a "subsidy," and representing your client as the law requires is the same as being "greedy."