The Rule of Law and Liberal Hypocrisy

This past week, President Obama cut a deal to save General Motors that cast aside the existing contracts between the company and the companies bondholding creditors. Normally these moves could only take place in a rightly constituted bankruptcy court. However, in the current economic environment, we have obviously suspended the rule of law in an effort to return political favors to labor unions while hiding behind the stalking horse of saving the economy.

While unions were given concessions for their investment stake in the company at a dollar-to-dollar basis, including preferred stock paying a 9% dividend, bondholders were told to accept equity stakes at ten-cents-on-the-dollar or get nothing. This level of government intervention into capital market contracts is growing almost by the day as the current administration, with no business experience, plays with taxpayer money to make politically driven decisions about whom to save in the recessionary economy.

As The Wall Street Journal reported today,

Even after nine months of extraordinary government intervention, the scope and complexity of the General Motors Corp. rescue present a thicket of conflicts unlike any seen before in Washington.

The federal government is likely within weeks to emerge as the principal owner of a storied U.S. corporation whose factories and products touch the lives of tens of millions of Americans. It will simultaneously serve as the company's regulator, tax collector, customer, pension backstop and lender.

The Obama administration is making up the rules as they go. The only hope to keep the federal government from continuing to become increasingly entrenched in the affairs of private enterprise is for state pension funds and other large institutional creditors to stand up and say enough of the Obama administration running roughshod over creditors’ rights.
At this point we have put significant taxpayer funds into dying business models. Why should the taxpayer expect anything different when we continue to see the Washington attitude of “it’s our money to use as we see fit, and we’ll do what it takes to maintain power.” The Obama administration seems to have added the sentiment, “So whatcha gonna do about it; we’re in charge now.”