I have predicted it a number of times vis a vis Chrysler, including back in February:
It is criminal that this [restructuring plan] is going to Congress, not a bankruptcy judge. This is a conspiracy of management (looking to hold onto their jobs and equity), equity holders, and employees to usurp value from the senior debt holders, who would normally be first in line in a bankruptcy.
there is a clear set of winners and losers in a bankruptcy "” and there is enough case law on it that all the players at GM know it and they know into which category they fall. Those who are lower down the food chain are hoping that putting the restructuring in Obama's hands rather than those of the bankruptcy process will improve their outcomes.
Oh, gee, you say, the Anointed One would not be so crass as to used this way, would he? From Megan McArdle
The government is trying to play hardball with the Chrysler creditors, asking them to accept 15 cents on the dollar when they're likely to get more in a liquidation. That's not a haircut; it's more like what they do to you the first day of boot camp.