Thanks to your big-eared-buddy in the White House, your union friends will be getting another windfall from Chrysler. You should be elated.
For the record, however, here's another slant on that rip-off.
Why Obama's Chrysler Meddling is beyond DUMB
Courtesy of The Wall Street Journal
Chrysler and the Rule of Law
The Founders put the contracts clause in the Constitution for a reason.
By TODD J. ZYWICKI
The rule of law, not of men -- an ideal tracing back to the ancient Greeks and well-known to our Founding Fathers -- is the animating principle of the American experiment. While the rest of the world in 1787 was governed by the whims of kings and dukes, the U.S. Constitution was established to circumscribe arbitrary government power. It would do so by establishing clear rules, equally applied to the powerful and the weak.
Fleecing lenders to pay off politically powerful interests, or governmental threats to reputation and business from a failure to toe a political line? We might expect this behavior from a Hugo Chávez. But it would never happen here, right?
The close relationship between the rule of law and the enforceability of contracts, especially credit contracts, was well understood by the Framers of the U.S. Constitution. A primary reason they wanted it was the desire to escape the economic chaos spawned by debtor-friendly state laws during the period of the Articles of Confederation. Hence the Contracts Clause of Article V of the Constitution, which prohibited states from interfering with the obligation to pay debts. Hence also the Bankruptcy Clause of Article I, Section 8, which delegated to the federal government the sole authority to enact "uniform laws on the subject of bankruptcies."
The Obama administration's behavior in the Chrysler bankruptcy is a profound challenge to the rule of law. Secured creditors -- entitled to first priority payment under the "absolute priority rule" -- have been browbeaten by an American president into accepting only 30 cents on the dollar of their claims. Meanwhile, the United Auto Workers union, holding junior creditor claims, will get about 50 cents on the dollar.
The absolute priority rule is a linchpin of bankruptcy law. By preserving the substantive property and contract rights of creditors, it ensures that bankruptcy is used primarily as a procedural mechanism for the efficient resolution of financial distress. Chapter 11 promotes economic efficiency by reorganizing viable but financially distressed firms, i.e., firms that are worth more alive than dead.
Violating absolute priority undermines this commitment by introducing questions of redistribution into the process. It enables the rights of senior creditors to be plundered in order to benefit the rights of junior creditors.
The U.S. government also wants to rush through what amounts to a sham sale of all of Chrysler's assets to Fiat. While speedy bankruptcy sales are not unheard of, they are usually reserved for situations involving a wasting or perishable asset (think of a truck of oranges) where delay might be fatal to the asset's, or in this case the company's, value. That's hardly the case with Chrysler. But in a Chapter 11 reorganization, creditors have the right to vote to approve or reject the plan. The Obama administration's asset-sale plan implements a de facto reorganization but denies to creditors the opportunity to vote on it.
]By stepping over the bright line between the rule of law and the arbitrary behavior of men, President Obama may have created a thousand new failing businesses. That is, businesses that might have received financing before but that now will not, since lenders face the potential of future government confiscation. In other words, Mr. Obama may have helped save the jobs of thousands of union workers whose dues, in part, engineered his election. But what about the untold number of job losses in the future caused by trampling the sanctity of contracts today?
The value of the rule of law is not merely a matter of economic efficiency. It also provides a bulwark against arbitrary governmental action taken at the behest of politically influential interests at the expense of the politically unpopular. The government's threats and bare-knuckle tactics set an ominous precedent for the treatment of those considered insufficiently responsive to its desires. Certainly, holdout Chrysler creditors report that they felt little confidence that the White House would stop at informal strong-arming.
Chrysler -- or more accurately, its unionized workers -- may be helped in the short run.
But we need to ask how eager lenders will be to offer new credit to General Motors knowing that the value of their investment could be diminished or destroyed by government to enrich a politically favored union. We also need to ask how eager hedge funds will be to participate in the government's Public-Private Investment Program to purchase banks' troubled assets.
And what if the next time it is a politically unpopular business -- such as a pharmaceutical company -- that's on the brink? Might the government force it to surrender a patent to get the White House's agreement to get financing for the bankruptcy plan?
Mr. Zywicki is a professor of law at George Mason University and the author of a book on consumer bankruptcy and consumer lending, forthcoming from Yale University Press.This is an act of fascist stupidity. Why is Obama's actions any different from what Chavez does? Obama supporters?
I remind you:
Halliburton moved to Dubai
Weatherford moved to Geneva
TransOcean Drilling moved to Geneva
Noble Drilling moved to Geneva
Foster-Wheeler moved to Geneva
This encompasses about a million high level jobs. Management, Financial, Technical, Engineering, and Operation. The Americans in these Executive and Engineering positions moved with the companies. They can hire the "pick & shovel" workers overseas.
These are savvy companies who assessed correctly the costs that would be shifted to their businesses by the Democrats, starting with the Democrat take-over in Congress in 2006, and culminating with the apparent selection of Obama before the Democratic Convention about May of 2008.
If the Rule of Law does not reassert itself and revert the changes by Obama and the Democrats to GM, Chrysler AND the Banks, you will see the Exodus of the bulk of Americas top corporations AND Executives to more business friendly environments.
When it comes to union payback by Obama, there is no such thing as rule of law or the constitution and forget about doing what's right...
You say you have a valid contract?...not anymore...you say you are a first position bond holder?...move to the back of the line please...this guy is Chavez with bigger ears...where is the outrage by the dems for this lawbreaker?...a thief is a thief regardless of party...