That Pesky Rule of Law
That pesky “Rule of Law” seems to be holding up the sale of Chrysler to Fiat, with an unusual stay of the sale issued by the Supreme Court on behalf of Indiana investors. I went on a tirade against the intervention in the auto companies on my family’s private email list, much to my embarrassment. I’m usually much more level headed, but I just couldn’t see how ignoring the protections of the law for bonded debt holders could possibly hold up without a challenge. Mark A. Calabria at Cato@Liberty reports on the State of Indiana’s objections:
As discussed in today’s Washington Post, these pension funds believe their rights were infringed by the Administration’s placing of junior creditors in a preferred situation to senior creditors. It doesn’t take Ms. Manners to remind us that cutting in line, whether in traffic, at the grocery store, or in a bankruptcy, is plain rude. To have the government re-order the line for you is even worse.
Calabria goes on to make the point that investors need to be able to rely on the rule of law in order to continue their investment activities. Who will buy corporate bonds if the government can, by small-f fiat, decide to change the law?
Heritage.org’s Blog makes the point that the temporary stay granted by Justice Ginsburg is very unusual, in that stays are usually for things like death penalty cases.
The Second Circuit already affirmed the far-reaching powers of the Executive Branch granted it by the TARP legislation, giving it unprecedented power to seize private property without any recourse:
Under the Second Circuit’s ruling, the government is free to seize private property to further its agenda. In effect, it left no limits to the federal government’s power under the TARP statute, because no party would have the ability to challenge any action that the government claims was related to the TARP. If the Supreme Court allows that ruling to stand, it will have a major impact on the economy and, in particular, on companies big enough to be bailed out by the government. Like so many of the Bush and Obama Administration’s economic interventions, this bailout could backfire by unsettling investors and raising the cost of capital to all businesses.
From The Heritage Foundation’s The Foundry blog.
The attempt to ignore the rule of law and socialize the auto companies may fail. We can only hope that the court ignores the crisis mentality of the Executive and Legislative branch, and gives serious thought to the idea that the rule of law should apply.
