Although I very much doubt that a bank holding a CDS is committing "fraud" by allowing that bank to fail, it is not because assets aren't destroyed in bankruptcy.

How so? What assets are destroyed? Typically, assets are sold off in a bankruptcy, and the cash on hand - assuming the company is liquidated - is divided (after the lawyers take their cut, of course), as I said, in the fariest way possible under the bankruptcy code. Yes, value is lost on intangible assets, but typically most of that loss has already occurred prior to the filing - otherwise, the company wouldn't be filing in the first place.

On the other hand, letting a company fail rather than taking a haircut on your loan so you can collect insurance is pretty douchey.

How so? If the creditors have a better chance at getting more of the money that they are owed from an insurance company than from the debtor itself, why shouldn't they pursue that course? Isn't that why the creditors buy these insurance policies in the first place?

I maintain that burning a house for insurance money is an inaccurate analogy here. What the creditors in this case are doing is more akin to someone who, knowing that foreclosure is immanent, simply stops making his house payments, and saves up his money for a security deposit on an apartment. In both cases, their is an imminent insolvency, as well as a system in place to deal with it, and both parties, in the face of that, are just making the wisest self-interested choices available to them.

Is it typical business practice for creditors to accept 15 to 22 cents on the dollar for what they are owed? Does refusing to accept that, and insisting instead on a 35 percent loss rather than an 80 percent loss, somehow represent a change in the creditors' standard business practice?

If it can be proved that the creditors knew ahead of time that Chrysler was going to default before the loans were made - and insured - then a case can be made for insurance fraud. Is there any evidence of this? Otherwise, I fail to see how the insured creditors are at all at fault here. Fifteen to twenty two cents on the dollar is probably what they can expect to see on their loans under a bankruptcy proceeding. Why shouldn't they cash in on the insurance that they bought?

I wouldn't call it "pushing their luck" to balk at accepting an 80% hit, especially when (a) they can probably expect that, or perhaps something better than that, from a bankruptcy plan, and (b) as you point out, the presumabley equally insolvent sellers of the Credit Default Swaps are not being made to take their hit on any of this.

In fact, wouldn't it be even more unjust if the insurance companies who sold the credit default swaps are both (a) propped up by TARP money and (b) shielded from paying out on those CDS claims because the holders of those claims accepted the Government/Detroit demand of a mere 15 to 22 cents on the dollar for what they are owed?

It is conceivable that the government might react badly to being put in this situation, and the result might be the creditors get less than they expected.

What would the government do? How would they react badly? By revoking the TARP money that they have already given the insurance companies who sold the banks the CDS's? By passing some kind of a law prohibiting the insurance companies from paying out what they are obliged to pay on the CDS's?

Even if they did, I fail to see how its not in the banks' self interest to demand more than 20 cents on the dollar for what they are owed. Regardless of what the government does or doesn't do, the "worst case scenario" is that the whole thing ends up in bankruptcy court - where the banks will probably not get any less than 20 cents on the dollar.

Until you mentioned it, I wasn't aware that I had mentioned "fairness" a lot here. I thought have been mostly speaking of self interest, mainly because, in a bankruptcy, you shouldn't expect anyone to pursue anything less than that.

However, I think in the context of a bankruptcy, fairness and pursuit of self interest are equivalent. The system was designed to work that way - everyone pursues their own self interest and utilizes their own leverage, and the result is a plan that nobody likes, but everyone can live with - in other words, the fairest outcome possible.

As far as the workers are concerned, their decades of service to the company were not uncompensated, as they did get paid an hourly wage for that service. Yes, they were promised a retirement benefit, and if they don't get it, it will be, in a sense, unfair. That's the nature of a bankruptcy - somebody promised a bunch of people more than they can deliver. As I said, the bankruptcy code is designed to utilize self interest to deliver of this situation the fairest result possible - not fairness itself, but the closest thing to fairness available.

...that that desire issues mostly from a patriarchal culture constantly shoving its heteronormative values down our throats and ... well, I'll back you up on that, actually. But for a lot of us, even feminists, it's still there and still powerful -- both the desire to get married and the desire to throw a big effin' party to celebrate."

So there you have it, folks. To the feminist, the personal is political.

.....except when its personal.