Since Chrysler has entered bankruptcy, instead of letting the legal process takes its normal course, the Obama team is threatening and intimidating legitimate creditors and bond holders who are owed hundreds of millions of dollars.
They want the creditors to either take pennies on the dollar or forfeit their position altogether. To not "go along" could mean IRS audits, SEC investigations.
Capitalism is under its most intense attack ever under the Obama administration. There is no precedent like this in U.S. history.
This is not jawboning, but direct interference with the judicial process while misusing government resources.
This raises huge Constitutional red flags.
Ann Woolner writes for Bloomberg:
The plan would overturn basic rules of bankruptcy by setting up a sort-of sale to sidestep pesky legal requirements. It would bulldoze well-established rights of secured creditors, property rights the U.S. Constitution guarantees.
So if U.S. Bankruptcy Judge Arthur Gonzalez follows the law, the Chrysler rescue plan dies. If he blinks and approves it, secured creditors everywhere should feel a shiver of unease, and quick sales of insolvent companies to avoid court scrutiny would multiply.
The other option is a settlement, and that might well be where this is headed.
I hate to say it, but the dissident Chrysler lenders are right, the ones President Barack Obama described as greedy hedge funds selfishly blocking Chrysler's survival.
The president's fist-waving looks a lot like the posturing lawyers use to scare an adversary into surrender, never mind the law. In fact, several are giving up the cause.
Michael Barone sees the same dangers:
Think carefully about what's happening here. The White House, presumably car czar Steven Rattner and deputy Ron Bloom, is seeking to transfer the property of one group of people to another group that is politically favored. In the process it is setting aside basic property rights in favor of rewarding the United Auto Workers for the support the union has given the Democratic Party. The only possible limit on the White House's power is the bankruptcy judge, who might not go along.
Michigan politicians of both parties joined Obama in denouncing the holdout bondholders. They point to the sad plight of UAW retirees not getting full payment of the health-care benefits the union negotiated with Chrysler. But the plight of the beneficiaries of the pension funds represented by the bondholders is sad, too. Ordinarily you would expect these claims to be weighed and determined by the rule of law. But not apparently in this administration.
Obama's attitude toward the rule of law is apparent in the words he used to describe what he is looking for in a nominee to replace Justice David Souter. He wants "someone who understands justice is not just about some abstract legal theory," he said, but someone who has "empathy." In other words, judges should decide cases so that the right people win, not according to the rule of law.
It is not just conservatives who ought to be up in arms over this. When we lose the rule of law, we lose everything, and become the subjects of a tyrant. Woolner warns the left:
If the argument that Chrysler's welfare is so critical to the national interest that longstanding laws can be ignored, what's next?
Some future president will find a way to justify blatantly illegal conduct. Such as torture.