Bankruptcy scholars testifying yesterday before the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises refuted the implication that government involvement had disadvantaged investors during the 2001 Argentinian debt default and the 2009 bankruptcies of General Motors and Chrysler, Dow Jones Newswires reported yesterday. "Actions that are unfavorable to one set of investors are frequently favorable to another set, and in at least two of the episodes involved, the [Obama] administration's actions were favorable to many more investors than they were unfavorable," Prof. Adam Levitin of Georgetown University Law School said citing Argentina, General Motors and the recent federal-state mortgage settlement. Levitin called Chrysler's bankruptcy a "textbook affair" and pointed out that without the bankruptcy financing the government provided, the company would have liquidated and unsecured creditors, including bondholders, would have recovered nothing. Prof. Stephen Lubben of Seton Hall University Law School, took a similar stance in his remarks, warning that "investors may be using the Argentinean situation to make bad law." When Argentina defaulted on its debt, a group of bondholders decided to reject Argentina's debt restructuring, opting for liquidation as opposed to restructuring, he said, a choice that had potential risks and rewards.
Click below to view the prepared testimony from yesterday's hearing titled, "Investor Protection: The Need to Protect Investors from the Government."
http://financialservices.house.gov/Calendar/EventSingle.aspx?EventID=29…