Senate Minority Leader Harry Reid’s attempt to give Las Vegas’ casino owners help in avoiding bankruptcy was left by the wayside in the omnibus spending bill that Congress agreed to Tuesday night and is slated to pass later this week.
The Reid rider had recently come under GOP scrutiny when a group of 20 House lawmakers warned the leadership to avoid attaching the rider as a Democratic sweetener to pass the $1.1 trillion spending package.
The group joined a number of legal scholars and economic experts in warning against inclusion of the rider, which would risk upsetting consumer protections for smaller creditors and bondholders by upending the Depression-era Trust Indenture Act. The law gives small creditors and investors the right to appeal abuses, or mismanagment of debt, by a larger firm, which in this case was Caesars.
Proponents of the rider said it would streamline the business restructuring process while saving jobs. But the true nature of the rider was to protect casino giant Caesars Entertainment Corp. from being dragged into bankruptcy court, rather than settle its large debt obligations on its own terms, while helping others reverse court rulings in their favor.
Those lobbying against the rider praised lawmakers’ judgment in scrapping Reid’s amendment, which they said would have had a devastating impact on the bond market and the millions of Americans who are invested in it, including those who rely on retirement funds and pensions.
“We applaud Congress’s decision not to amend the Trust Indenture Act via a rider to the federal omnibus bill, which would have overturned an investor protection law that is critical to a properly functioning U.S. bond market and the millions of Americans who invest in it,” said Andrew Milgram, managing partner at Marblegate Asset Management, which is a middle-market investment firm.
“The [Trust Indenture Act] has never played a more important role than it does today when the protection of investor rights, particularly those of minority investors, is so often overlooked by larger market participants who seek to maximize their own financial gain at any cost, without regard for equanimity or legality,” Milgram said.
Reid’s rider was “purely” a special interest amendment, affecting one or two interested parties who were looking to overturn court rulings in cases they had lost and winning “back hundreds of millions of dollars they had lost in those court cases,” said a spokesman for the investment firm. Marblegate won a case against another company that would have been reversed if Reid’s measure had gone into effect.
