That is correct. However, tell that to the GM senior bondholders who should have been paid first when the O regime came in. Contracts can and have been broken. Frequently, via bankruptcy -- occasionally, by a court.
” However, tell that to the GM senior bondholders who should have been paid first when the O regime came in. Contracts can and have been broken. Frequently, via bankruptcy — occasionally, by a court.”
In the GM case the government made the union pensioners whole but failed to fully back the management pensioners. In private industry in the 1980’s, many of the leveraged buyout deals by people such as Milken were partially financed by pension funds which were cleaned out by the Wall Street private equity firms who then took the companies through bankruptcy allowing them to pocket the pension money and offload the pension obligations on the government insurance fund. After these sham bankruptcies the firms were recapitalized. Employees with of these companies having pensions above the maximum insurable by the government were stiffed. A prime example is the senior pilots of the airlines who collectively lost millions in benefits while the attorneys, consulting firms, and investment bankers walked away with millions if not billions in fees.
This theft of pensions to benefit Wall Street speculators was done with the approval of the courts, the Justice Department, and the knowledge (i.e. acquiescence and approval) of politicians in both political parties. Plus, the speculators received special tax loss carry forwards on the paper losses of the bankrupt companies and once the companies started recording earnings after bankruptcy and the tax breaks the private equity owners were taxed at capital gains rates, not corporate tax rates (i.e. carried interest). I totally lost any respect for private equity firms and Wall Street during this period. It was criminal.