WSJ: Chrysler and the Rule of Law

Chrysler and the Rule of Law

The Founders put the contracts clause in the Constitution for a reason.

The Wall Street Journal

By TODD J. ZYWICKI -- 5/13/09

http://online.wsj.com/article/SB124217356836613091.html

This is too powerful and important to cut & paste. But, in deference to copyright I'll just excerpt. Please use the URL above to read the entire article. It's worth it. -- JRB

"The rule of law, not of men -- an ideal tracing back to the ancient Greeks and well-known to our Founding Fathers -- is the animating principle of the American experiment. While the rest of the world in 1787 was governed by the whims of kings and dukes, the U.S. Constitution was established to circumscribe arbitrary government power. It would do so by establishing clear rules, equally applied to the powerful and the weak. Fleecing lenders to pay off politically powerful interests, or governmental threats to reputation and business from a failure to toe a political line? We might expect this behavior from a Hugo Chávez. But it would never happen here, right? Until Chrysler.

...

The Obama administration's behavior in the Chrysler bankruptcy is a profound challenge to the rule of law. Secured creditors -- entitled to first priority payment under the "absolute priority rule" -- have been brow beaten by an American president into accepting only 30 cents on the dollar of their claims. Meanwhile, the United Auto Workers union, holding junior creditor claims, will get about 50 cents on the dollar. The absolute priority rule is a linchpin of bankruptcy law.

...

By stepping over the bright line between the rule of law and the arbitrary behavior of men, President Obama may have created a thousand new failing businesses."

We have, indeed, 'crossed the Rubicon'. All hail King Hussein!

JRB

5/13/09