Friday, May 01, 2009

The Chrysler Deal

Handing over the reins of Chrysler to the UAW would not bother me much except for two things.
The first is that this is not honest stewardship. If Chrysler really were a private corporation with the standard constraints and responsibilities such companies face, it would be entertaining to watch the UAW try to figure out how to balance the very difficult trade-offs such companies face. But nobody in his right mind can possibly believe that, in this Obama administration, the UAW will be allowed to fail in this task. In the end the US and Canadian taxpayers will continue to backstop the generous pension and health benefits of the UAW, benefits few of those taxpayers share in. (I admit I am looking forward to the ridiculous cars likely to come out of these companies as Obama pushes his favored solutions.)
The second is the profound rewriting of bankruptcy laws involved in getting here. Obama continues to ride roughshod over the rule of law to achieve his personal political goals and reward his cronies. It is a very bad precedent, and one he establishes more daily. The screwing of the secured creditors in this case, by comparison with what a standard bankruptcy proceeding would enforce, bespeaks a notion of the law as a tool to serve the purposes of the executive whim. This from a guy who supposedly taught constitutional law!
John Hinderaker rightly calls this Banana Republic Capitalism, and makes a key observation here, quoting the Wall Street Journal:
If the current plan is pushed through, then good luck to any unionized firm trying to raise secured debt on decent terms in the future.

Except of course for the fact that Obama feels free to put arbitrary pressure on financial institutions these days.
Heaven knows where this will lead, as fearless leader keeps saying he has no wish to be in any of these businesses, and interferes in profound and unprecedented ways.


At 6:41 AM, Blogger EclectEcon said...

This is a very disappointing, even frightening, situation that many of us feared a year ago. You say it all so well.


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