Some laws are made to be broken. Jaywalking in NYC is no big deal. Pouring blood on draft records was a common non-violent Vietnam War Era protest. You’ll hardly hear any complaints about “crimes” like these.
Steal someone’s private property, however, and you’ve not only committed a crime but you’ve thumbed your nose at the very foundation of our country.
This is exactly what President Obama sought to do in “managing” a Chrysler bankruptcy. When he didn’t get his way he shamelessly attacked private property rights in what can only be viewed as painfully transparent populist grandstanding. Obama’s plan called for various stakeholders to make concessions. Nothing wrong with that. Management, white collar employees, the UAW, banks, bondholders – all were expected to take a hair cut. Shared sacrifice for the common good. Sounds reasonable.
The flaw in the plan is that Obama’s view of sharing is a bit distorted. Let’s take a look at how he wanted to treat creditors.
The UAW, a junior unsecured creditor, was asked to make sacrifices in exchange for 55% equity in a recapitalized Chrysler. Senior secured creditors such as banks and bondholders were asked to take $0.25 – $0.30 for every $1 owed without receiving any equity in return.
This plan is upside down. The US has strict contract laws making clear junior unsecured creditors have no right to receive anything unless and until senior secured creditors are paid in full. Obama as an attorney should know this.
With such an unappetizing plan offered as the only plan most senior secured creditors said no to Obama’s deal. He knew he could get the big banks in line, however. They’d support his proposal as they’re staring down the barrel of a great big TARP gun. Unfortunately for him he couldn’t get bondholders in line. They have private property rights on their side. Obama knows this too. He took an oath to defend and uphold The Constitution and unless there have been unpublicized changes then Section 10 of Article I still reads, “No (government) shall…pass any law…impairing the obligation of contacts.”
Bondholders have every right to seek restitution. If they believe they can receive a better deal in a bankruptcy proceeding than in Obama’s “managed bankruptcy” they have every right to pursue their rational self-interest.
So what did Obama do? He vilified investors. He attacked their private property rights. He couldn’t usurp their rights so he sought to make bondholders a political sacrificial lamb. He railed against them. He called them vultures and speculators. He tried to embarrass them into compliance.
Why? All because he didn’t get his way. He claims to love America and Americans but clearly hates the ideals of fairness, freedom and private property. He seeks to bring about a perverse form of anarchy – not a society without government or law but a society without law because of government. Ayn Rand must be spinning in her grave!
It may only be Obama’s first 100 days but if his handling of Chrysler (likely to serve as a model for GM) is any indication then it’s 100 days too long. The solution? I believe Howard Beale (brilliantly played by Peter Finch in 1976’s “Network”) said it best: “I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window. Open it, and stick your head out, and yell, “I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!”