Never Bet Against the House

I posted the other day on the topic of the Supreme Court temporarily postponing the Fiat / Chrysler merger to review the application for a stay by a group of Indiana state pension funds. My expectations were that the ruling in this case would be based on the rule of law, rather than the politics of the moment. We have our answer now. Yesterday the Supreme court announced that it would not allow the stay because the Indiana pension funds did not meet an appropriate standard for the stay to be reviewed, thereby clearing the way for the merger.

Full ruling here:
http://online.wsj.com/public/resources/documents/chrysler_percuriam0609.pdf

My read of this is essentially the Supreme Court punted on making any ruling whatsoever, since the statement linked to above noted that the Court was not issuing a legal opinion that could be extended to any other case, thereby obviating its dangerous extension to other bankruptcy filings. All this in the spirit of the 'greater good' argument espoused by the government.

A few key quotes:

"A denial of a stay is not a decision on the merits of the underlying legal issues."

"A stay is not a matter of right, even if irreparable injury might otherwise result."

A stay "is instead an exercise of judicial discretion, and the 'party requesting the stay bears the burden of showing that the circumstances justify the exercise of that discretion.'"

"Our assessment of the stay factors here is based on the record and proceedings in this case alone."

Our government has done an admirable job in protecting its citizens from further shocks to the economy since taking office. I'm just not sure that its view of the 'greater good' for the economy is actually that. Stepping into market corrections to disrupt the natural order of capitalism and economic cycles may have some unfortunate long-term unintended consequences.

In my view, the biggest risk facing our economy is a never-ending whack-a-mole game where every action to stave off further economic declines produces yet another, equally problematic outcome requiring additional unprecedented government intervention. What was once unprecedented then becomes standard and expected. And, economic incentives and investor risk tolerances adjust accordingly. That would be an unfortunate scenario.

Which brings me to a key tenet in gambling - never bet against the house. With gambling, though, it's clear what the rules are. If the rules continue to be ever-changing as they seem to be with this government, I would expect that principle to apply with even more certitude.