Until earlier this month, this was a nation of laws, not of men, a nation where justice was blind, meaning we are all equal under the law.
That changed when President Barack Obama’s extortionate threats against the “holdout” Chrysler lenders caused them to accept the government’s 29 cents on the dollar offer for the money Chrysler owes them.
Obama publicly vilified these lenders, who had every legal, contractual, and moral right to hold out for a better return on the money they gave Chrysler. Behind the scenes, administration officials allegedly threatened to destroy the lenders by “unleashing the White House press corps” on them, according to Tom Lauria, an attorney representing the lenders.
If true—and there is little reason to doubt it, given the president’s public conduct—the president or his agents should face criminal charges. Nothing in the Constitution authorizes extortion by the president.
About 20 senior lenders had sought to block Chrysler’s plans to sell its best assets into a new company owned by the United Auto Workers, Italian automaker Fiat, and the federal government. Those lenders did not go along with much larger Chrysler lenders who accepted the government’s offer to recover just a small fraction of what Chrysler owes them. Their initial refusal forced Chrysler into bankruptcy.
“While many stakeholders made sacrifices and worked constructively, I have to tell you some did not,” Obama pronounced in announcing the Chrysler bankruptcy. “In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer bailout. They were hoping that everybody else would make sacrifices and they would have to make none.”
The president’s claim is beyond laughable. The holdout lenders have received no taxpayer bailout funds. The larger lenders who accepted the government’s demands, by contrast, have received hundreds of billions of dollars of taxpayer bailout funds and government guarantees to protect their assets.
The holdouts were first secured lenders, which means Chrysler promised they would be first in line to recover money from the company in the event of bankruptcy or liquidation. In exchange for that promise, the lenders agreed to accept lower returns than they ordinarily would have demanded.
These lenders had more than just the loan contract backing them. Many decades of bankruptcy law plus simple moral responsibility were on their side. The lenders had a duty—a duty—to recover as much money as they could for their investors, who include government and corporate pension funds, individual retirement account holders, and school endowments. They asked for nothing more than what Chrysler agreed to when it took their money.
But signed contracts, decades of legal precedent, and moral responsibility apparently mean nothing to our Constitutional scholar president, who has shown he views laws and contracts as obstacles to be overcome instead of responsibilities. In that respect Obama is following the lead of his predecessor, George W. Bush.
The laws have been shredded by a Republican and now a Democrat president. If presidents and their minions make up rules as they go along, we become a nation of men, not of laws. If they favor politically connected unions and multibillion-dollar firms over those with few or no political connections, regardless of what the law says, justice is no longer blind.
This should frighten anyone contemplating putting money into a company that could draw the government’s attention. That includes banks, insurance companies, auto companies, credit card firms, auto parts suppliers, and health care providers. Now that the president can declare contracts to be worth less than the paper they are written on, and can unleash the White House propaganda machine on anyone who gets in his way, we can be sure of only one thing: We can be sure of nothing.
([email protected]) is a research fellow at The Heartland Institute.