When you think about the U.S. Supreme Court, you think of landmark cases that decide hot-button issues like ending segregation in schools, validation of gun ownership rights or deciding whether eminent domain cases were validated by the law. But sometimes the Supreme Court is making decision that will not only affect your pocketbook, but your retirement.
The Chrysler Case
When Chrysler bondholders were pressured this past week to settle for pennies on the dollar by the presidential administration, the bondholders, some teachers and police officers whose pension funds included Chrysler bonds, brought the case before the U.S. Supreme Court.
The legal reason for bringing the Chrysler case before the U.S. Supreme Court was that not liquidating a company and giving bondholders first dibs on assets violates normal bankruptcy law.
The presidential administration argued that the U.S. Supreme Court has no rights to curtail TARP funds. Supreme Court Justice Ruth Bader Ginsburg initially issued a stay on the case, allowing the possibility of a trial. However, she folded and the bankruptcy went on with bondholders getting their pittance. (Check out Top 6 U.S. Government Financial Bailouts for more.)
The Rest of Us
What does this case mean to those who didn't own bonds in Chrysler? If you have bonds in any company that accepted TARP funds from the government, you could suffer the same fate. But it also means that you and other bondholders do have the right to a trial.
The U.S. government was set up over 200 years ago with three branches to provide a system of checks and balances. While so far this administration is able to usurp action from the judicial branch, future administration may not be able to get past the judicial branch.
How to Prepare
Go through your investment portfolio – including your 401K – and look for companies that took TARP money. Make investment decisions based on how you feel about your rights under the law, and call your congressman to express how you feel about government spending, no matter where you are in the the political spectrum. Your actions may make the difference between a cushy retirement and taking a part-time job when you're 70.
For more information on government intervention in private industry read, Liquidity And Toxicity: Will TARP Fix The Financial System?, The Whens And Whys Of Fed Intervention and What Fuels The National Debt?