Don't Trust Anyone Who Doesn't Understand Section 1129

Will121 says in comments:

"Regarding the errors at the start of the piece I'll just mention that when this guy blogged about finance, I'd pointed out that he often had no clue about what he was talking about. Now that he's mentioning someone in your profession, you've come to the same realization."

Will121 is referring to my previous post, in which I pointed out that the first sentence of Brad DeLong's recent piece contains two glaring (and so far uncorrected) errors.

Fair enough. It is clear that DeLong often indulges his temptation to write about things he doesn't know anything about (ironically, a very Posnerian tendency). For instance, is he under the impression that Carbozo Cardozo was a good judge? Or is he being ironic? [Carbozo joke stolen from a law school professor]

Either way, lesson learned. Big grain of salt going forward.

And an even bigger grain of salt for Felix Salmon, who defended the GM 363 sale with this logic:

"As far as I can make out, the main legitimate complaint of the GM bondholders is that they’re getting paid out less than other unsecured creditors (specifically the UAW) with whom they’re pari passu. But I don’t think there’s a legal right anywhere for all pari passu creditors to receive exactly the same treatment. If you owe money on four different credit cards, there’s no law saying you have to pay them all the same proportion of the total amount outstanding."

Sigh. As is often the case, this is a complicated issue, and if one were inclined to be charitable, one could support a version of this argument. There are all kinds of situations in bankruptcy in which claims with identical priority are treated differently.

But this does not mean that a debtor can crudely pay some unsecured claims more than others. It's awfully hard to embrace the idea that, for instance, you could pick and choose which credit card debts you were going to pay off in bankruptcy and which you weren't. Or confirm a plan of reorganization providing for the payment in full of your trade debt but leaving a pittance for your unsecured notes. Again, there are ways of achieving these outcomes, but they involve mechanisms that serve other bankruptcy purposes. They are exceptions to the general principle of equality of recovery among claims of identical priority.

I could go on, but it's not that interesting - the point here is that once you catch someone confidently misstating the way things work, it's awfully hard to trust him again. So maybe I shouldn't really trust anyone until I have read something he wrote about bankruptcy.