When our president, sworn to uphold the constitution, behaves like a common thug, bullying and threatening private parties to a dispute to give up their rights under the law under threat of being destroyed, then I think we have as a country crossed yet another line on the path away from the rule of law.
Attorney Tom Lauria, who represents some of the Chrysler creditors, reported the threats on WJR radio host Frank Beckmann’s radio show in Detroit. His clients bought bonds that, in exchange for a low rate of return, gave them the security of having first lien rights. This means that in bankruptcy, they are to be paid 100 percent before any junior creditors receive a penny. That’s what bankruptcy law provides, and it was with this understanding that they purchased the bonds in the first place.
Lauria told Beckmann that these bondholders had already agreed to accept half of what they’re entitled to under bankruptcy laws even though the have no obligation to do so, but the government offered them a deal that would pay them 29 cents on the dollar, while junior creditors would receive 10 - 20 billion dollars.
Cutting their demands in half wasn’t enough of a concession for President Obama, who equated the bondholders’ belief that the bankruptcy laws should mean what they say with a desire for an "unjustified taxpayer-funded bailout."
Lauria said that one of his clients gave up the fight after being "directly threatened by the White House, and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight."
Lauria explains why the rest of us should be concerned about use of the vast power of the federal government to coerce concessions in a dispute over contractual rights:
I think everybody in this country should be concerned about the fact that the president of the United States, the executive office is using its power to try to abrogate that contractual right. If the president will attack that contractual right, what right will it not attack?
. . .
when you make a deal it’s supposed to be honored, and if it’s not honored you’re supposed to be able to get protection in court and what is happening here, through the force of the United States government, and that’s what’s disturbing about this, I mean, private parties have disputes all the time, but for the United States government to step in, the executive office of the United States government, who under the constitution is charged with enforcing the laws, to step in and try to in effect break the laws, I think we should all be concerned about that. That is a constitutional issue.
And that, succinctly, is exactly why the government should not be taking over private enterprise. Once it does that, it acquires interests directly adverse to private parties. Apparently, the temptation to abuse its vast powers in pursuit of those interests becomes irresistible.
For the rest of us watching this drama unfold, whether still shell shocked from watching 401(k) balances shrink, or standing on the sidelines wondering whether to invest in this economy in any way,it give us one more reason to be leery.
Cross-posted at Truth v. The Machine
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