From Pete's Western Rifle Shooters Association blog today comes some great links including We Don't Need No Steenkin' Rule of Law here and What's That Burning Smell? here.
Pete's comment on We Don't Need No Steenkin' Rule of Law:
Courtesy of Balko's The Agitator comes this piece explaining why the consequences of Obama's cramdown of Chrysler's secured creditors go far beyond the auto industry.
Read it all and then pass it on, please.
Only a fool would think that Chrysler's creditors will be the last to be looted.
I will have one short comment at the end.
The End of Capitalism as We Know It
Posted by Joshua Claybourn on 21 May 2009
Arguably the most fundamental, crucial element to a civil society is the rule of law. A corollary to this notion is that of contract rights - when two or more people enter into a valid agreement that they intend to be honored, the agreement should indeed be honored. In the U.S., contract law is sacrosanct and it would not be facetious to say that the entire world’s economy depends on America’s respect for its laws and contracts.
All contracts are important in some way, but credit contracts are particularly important to a functioning capitalist system. That’s why Article V of the U.S. Constitution prohibits states from interfering with the obligation to pay debts. And Article 1, Section 8 reinforces this point by delegating to the federal government the sole authority to enact “uniform laws on the subject of bankruptcies.”
Under these long standing bankruptcy laws - enacted and enforced by the federal government under the Constitution - a secured creditor is entitled to first priority under the “absolute priority rule.” Other nonsecured creditors have “junior” priority. The purpose of this rule should seem clear. When you offer credit to some one or some thing, and do so on the condition that it is secured by an asset, you should be first in line to collect before those providing credit without such security. Unfortunately President Obama’s actions throughout the Chrysler bankruptcy have trampled over these well worn bankruptcy laws, contract rights, and even the rule of law.
One of Chrysler’s secured creditors was the State of Indiana, or more particularly, pension funds administered by the state. But now that Chrysler has filed for bankruptcy, Indiana and other secured creditors are being forced to the back of the line so that unions can proceed to the front. For every dollar of secured creditors’ claims, they’re receiving only 30 cents. Compare that the the United Auto Workers union, an unsecured junior creditor, who will get 50 cents on the dollar.
Why? It’s not because any contract, agreement or bankruptcy law calls for it, but because the federal government decided it was politically convenient. Of course, we’ve become far too familiar with the government robbing Peter to pay Paul, but in this instance the government is violating the rule of law to do it. The arbitrary whims of Obama’s administration threaten the very foundation of capitalism.
Henceforth lenders will hesitate to provide credit, and eager entrepreneurs and businessmen will struggle to find it, because any credit can now apparently be confiscated by government greed regardless of the law or the existence of a binding contract. Simply put, the price of borrowing will now go up because lenders must account for a new risk - government intervention.
Obama has assisted the UAW in this instance, an entity which just so happened to be crucial to his election. But how many union workers in the future will be laid off - or never hired in the first place - because their employer couldn’t find credit or loans for expansion?
Thousands upon thousands of people are getting steamrolled by this outrageous affront to the credit system, but only Indiana has objected, and its efforts appear to be fruitless thus far. I fear that President Obama’s actions in the Chrysler bankruptcy signal the dawn of a new era in which powerful political interests trump capitalism and the sanctity of contracts. May God have mercy on us all.
MBV: NO! May God have mercy on THEM. When the American people finally wake up to this courtesy of the economic and societal collapse that it will engender there will be NO place these law breakers can hide that is far away enough or in as deep a hole enough that they will be safe from from the consequences of their actions.
I believe the mess we are in with contracts stems from the fact that the country has broken its covenant (contract) with God.
The Lord hates pride and the USA is being led by a Kenyan whose hubris and haughtiness is unbounded.
Is Josh Claybourn a contributor here?
Post a Comment