Archive for Thursday, May 14, 2009

Politically driven policy strains legality

May 14, 2009


— Anyone, said T.S. Eliot, could carve a goose, were it not for the bones. And anyone could govern as boldly as their whims decreed, were it not for the skeletal structure that keeps civil society civil — the rule of law. The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness.

In February, California’s Democratic-controlled Legislature, faced with a $42 billion budget deficit, trimmed $74 million (1.4 percent) from one of the state’s fastest growing programs, which provides care for low-income and incapacitated elderly and cost the state $5.42 billion last year. The Los Angeles Times reports that “loose oversight and bureaucratic inertia have allowed fraud to fester.”

But the Service Employees International Union collects nearly $5 million a month from 223,000 caregivers who are members. And the Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.

Such a federal ukase (the word derives from czarist Russia; how appropriate) to a state legislature is a sign of the administration’s dependency agenda — maximizing the number of people and institutions dependent on the federal government. For the first time, neither sales nor property nor income taxes are the largest source of money for state and local governments. The federal government is.

The SEIU says the cuts violate contracts negotiated with counties. California officials say the state required the contracts to contain clauses allowing pay to be reduced if state funding is.

Anyway, the Obama administration, judging by its cavalier disregard of contracts between Chrysler and some of the lenders it sought money from, thinks contracts are written on water. The administration proposes that Chrysler’s secured creditors get 28 cents per dollar on the $7 billion owed to them, but that the United Auto Workers union get 43 cents per dollar on its $11 billion in claims — and 55 percent of the company. This, even though the secured creditors’ contracts supposedly guaranteed them better standing than the union.

Among Chrysler’s lenders, some servile banks that are now dependent on the administration for capital infusions tugged their forelocks and agreed. Some hedge funds among Chrysler’s lenders who are not dependent were vilified by the president because they dared to resist his demand that they violate their fiduciary duties to their investors, who include individuals and institutional pension funds.

The Economist says the administration has “ridden roughshod over (creditors’) legitimate claims over the (automobile companies’) assets. ... Bankruptcies involve dividing a shrunken pie. But not all claims are equal: some lenders provide cheaper funds to firms in return for a more secure claim over the assets should things go wrong. They rank above other stakeholders, including shareholders and employees. This principle is now being trashed.” Tom Lauria, a lawyer representing hedge fund people trashed by the president as the cause of Chrysler’s bankruptcy, asked that his clients’ names not be published for fear of violence threatened in e-mails to them.

The Troubled Assets Relief Program, which has not yet been used for its supposed purpose (to purchase such assets from banks), has been the instrument of the administration’s adventure in the automobile industry. TARP’s $700 billion, like much of the supposed “stimulus” money, is a slush fund the executive branch can use as it pleases. This is as lawless as it would be for Congress to say to the IRS: We need $3.5 trillion to run the government next year, so raise it however you wish — from whomever, at whatever rates you think suitable. Don’t bother us with details.

This is not gross, unambiguous lawlessness of the Nixonian sort — burglaries, abuse of the IRS and FBI, etc. — but it is uncomfortably close to an abuse of power that perhaps gave Nixon ideas: When in 1962 the steel industry raised prices, President Kennedy had a tantrum and his administration leaked rumors that the IRS would conduct audits of steel executives, and sent FBI agents on predawn visits to the homes of journalists who covered the steel industry, ostensibly to further a legitimate investigation.

The Obama administration’s agenda of maximizing dependency involves political favoritism cloaked in the raiment of “economic planning” and “social justice” that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail. The administration’s central activity — the political allocation of wealth and opportunity — is not merely susceptible to corruption, it is corruption.

— George Will is a columnist for Washington Post Writers Group.


bearded_gnome 8 years, 11 months ago

you call it ukase,

I call it extortion.

this column is right on. Obama says he doesn't want to run the auto companies, but he fires the CEO's and boards, even is telling Chrysler how much to spend on advertising!

if obama were a white man, more people would feel free to scrutinize him more closely. but because of the euphoria about electing the first black man to become U.S. President, our mainstream media is anesthetized!

you know the SEIU called Obama and called in some chips on this one.

Godot 8 years, 11 months ago

"Judicial Watch released the following:

Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it forced the Obama administration to release documents about the October 13, 2008, Treasury Department meeting that coerced major banks to allow the government to take $250 billion equity stakes. Among the other news, the documents confirm former Treasury Secretary Hank Paulson told the CEOs of nine major banks that they had no choice but to allow the government to take equity stakes in their institutions. The documents show Obama Treasury Secretary Tim Geithner, FDIC Chairman Shelia Blair, and Fed Chairman Ben Bernanke co-hosted the meeting with Paulson.

President Obama's Treasury Department attempted to prevent the disclosure of these documents, refusing to respond to an FOIA request. Judicial watch sued.

On February 4th The Obama Administration claimed it had no documents related to the meeting, but was forced to recant and release them.

In other words, the President lied and tried to cover up the facts.

The Obama Administration also redacted Geithner's edits to some of the documents.

These documents show that the banks in question were literally forced to accept the interference of the government in the form of equity investment under the direct threat that their primary regulator (the OTS or OCC, as the case may be) would force them to do so if they refused. Both OTS and OCC are run by Treasury.

The outrage here is not just that these CEOs were forced (literally) to take the money. It is also that they were forced to, at the same time, accept whatever FUTURE restrictions on activity, including compensation, Treasury or Congress desired to impose.

In short the banks were forcibly nationalized without a prior finding of insolvency; this is blatantly unconstitutional as a "taking" without compensation."

K Denninger, May 14, 2009

Godot 8 years, 11 months ago

More from the same opinion piece:

" (regarding) the nascent bill to provide a "backstop" to state and local municipal bond issuance: I believe it is quite safe to say that the precise same sort of thuggery used with the banks will be employed with the States, if we do not stop it. After all, there is zero evidence that this changed with the Obama Administration; they in fact tried to prevent the release of the FOIA'd documents from Treasury, redacted an awful lot of the material, refused to provide Geithner's notes on the matter and further, have failed to act to restructure that odious "trust" document mentioned above. [the document, established by Paulson and Geithner, provides Federal Reserve Governors complete immunity from prosecution for their actions as "governors," and allows them to invest, secretly, without disclosure, in the institutions they are supposedly governing,]

We are no longer a nation of laws; this is a bigger scandal, by far, than Watergate and it is 100% bipartisan.

If we the people allow any of this to stand we can consider our nation's founding document to be nothing more than toilet paper.

We need a special prosecutor, we need indictments and impeachments, and we need them now."

Flap Doodle 8 years, 11 months ago

The unions and big-money people who greased Barry's way into the White House are getting their payback. Its the Chicago Way.

jafs 8 years, 11 months ago


Just another possible interpretation:

As their regulators, don't those agencies have the right to tell the banks what they need to do?

supertrampofkansas 8 years, 11 months ago


I guess I am having a little trouble understanding what you are saying gnome mainly because essentially beggars cannot be choosers and Chrysler here is the beggar. As I understand it, the government owns 80% of this company. If the government had not stepped in there would be no Chrysler. It is still a free economy and the federal government has no rights to hire or fire, or set compensation, for those companies that do not receive federal assistance. But if you go to Washington and ask for assistance like Chrysler did, how can they choose to exist they way they want to?

Besides Obama isn't the first president to try to step in and exert control over major industries. Harry Truman attempted to nationalize the steel industry and Ronald Reagan succeeded in busting the air traffic controllers' union to name a few.

So I guess from your viewpoint, Chrysler should have been allowed to fail?

jafs 8 years, 11 months ago

And, when it is obvious that private companies are in big trouble and the government steps in to help, doesn't it make sense for us (the government) to exert influence to improve their functioning?

After all, if the private sector was doing such a great job, we wouldn't be in this mess in the first place.

Godot 8 years, 11 months ago

Investigation, indictments, impeachment - all are in order.

Shane Garrett 8 years, 11 months ago

Wow, i guess one reads this story and responds with either alarm, big government takeover, or with acceptance, Dom Obama knows best. We the people know nothing. The history of economics is false. Everyone should accept the reasoning that elected officals have more information then the people they represent, therefore the representitive should make all decisions based on his higher intellect. Government run business is best. Look to communist countries for examples.

temperance 8 years, 11 months ago

“Everyone should accept the reasoning that elected officals [sic] have more information then [sic] the people they represent, therefore the representitive [sic] should make all decisions based on his higher intellect.”

Does anyone else appreciate the delicious irony of this sentence?

jmadison 8 years, 11 months ago

Constitutional law professor B. Obama does not believe in the sanctity of contract law. Another president who believes in the rule of man rather than the rule of law.

Scott Drummond 8 years, 11 months ago

"The government tell business how to conduct business?


Happens all the time. We (our government) tell businesses not to pollute, not to discriminate on illegal basis', not to engage in collusion, to follow this or that regulation, etc..... It's called protecting the public interest, and I, for one, am happy to have the government do it.

jafs 8 years, 11 months ago


Because the private sector was doing such a bang-up job?

And, remember, a majority of us voted for a change in administration and a change in policy. Part of that change was obviously more government involvement/oversight/regulation of the private sector.

Big picture - the administration is doing pretty much what they said they would, and what we voted them in to do.

Flap Doodle 8 years, 11 months ago

"Big picture - the administration is doing pretty much what they said they would, and what we voted them in to do."

Like this? "WASHINGTON -- The Obama administration is weighing plans to detain some terror suspects on U.S. soil -- indefinitely and without trial -- as part of a plan to retool military commission trials that were conducted for prisoners held in Guantanamo Bay, Cuba. The proposal being floated with members of Congress is another indication of President Barack Obama's struggles to establish his counter-terrorism policies, balancing security concerns against attempts to alter Bush-administration practices he has harshly criticized."

That's hopenchange for you.

MyName 8 years, 11 months ago

Okay, this is the dumbest thing I've seen yet from Will. The Bush administration set up an illegal program to torture thousands of people (including Americans), and Will is babbling about the rule of law because some Chrysler debtors might get screwed over in Bankruptcy court. Is this guy even connected with reality here?

But just to tackle his pointless little screed, has Will ever considered the fact that, at least in the case of bankruptcy there is a legitimate excuse to set aside some of the finer details of the contract? I mean it's the worst economic downturn since the 30s. In my opinion, you'll take what you can get out of the mess and you'll be grateful for it!

temperance 8 years, 11 months ago

Pilgrim: “Not the same as telling the business how to be a business.”
How? Imposing pollution, hiring, and other regulations are precisely “telling a business how to be a business.” Since we (our government) now own many of these businesses, why shouldn’t we intervene (especially when they’ve messed up and now have their hand out)? You can’t support the bailout of Chrysler on the one hand and cry “socialism!” on the other. As supertrampofkansas puts it, beggars can’t be choosers and Chrysler is the beggar here. Like jafs says, “if the private sector was doing such a great job, we wouldn't be in this mess in the first place.” Free market capitalism failed. Milton Friedman and his groupies were wrong. That’s just empirical reality.

“You are, without a doubt, a confessed socialist.”
I feel like it’s 1955. Are you making a list? If scott3460 and I are confessed socialists, does that suddenly render our facts and opinions out of bounds? And did you call Bush a socialist when he passed TARP?

temperance 8 years, 11 months ago

me: If scott3460 and I are confessed socialists, does that suddenly render our facts and opinions out of bounds? pilgrim: Pretty much.

Oh, sorry. I didn't mean for my facts to get in the way of your sloganeering. Carry on . . .

Capitalism rocks! W00t! Ayn Rand for President!

notajayhawk 8 years, 11 months ago

Just as a point of curiosity -

isn't ANY "policy" something that's "politically driven?"

bronze (Anonymous) says…

"oh, by the way Corporate Taxes provided only about 7.4% of the IRS revenue in 2006. is that fair? or the result of lobbyists in action on behalf of that 1%?"

That 7.4% represents 25% of their profits, however, twice the percentage the average individual taxpayer pays on their income.

temperance 8 years, 11 months ago

Facts? What “facts?” We could start with the need for the state to buy Chrysler in order to prevent it from collapsing, and then we could move onto a broader exploration of the failure of deregulation policies during the last eight years. I'd add that our infant morality rate is double the size of Finland, Sweden, and Denmark (socialists!)-- and trails behind Cuba (socialists! socialists!).

But you can let your labels and slogans do your arguing and thinking for you -- I won't stop you.

Better Dead than Red!! U-S-A!! U-S-A!! U-S-A!!

notajayhawk 8 years, 11 months ago


Not to mention, I wonder how many crack babies there are in Finland.

KansasVoter 8 years, 11 months ago

George Will needs to STFU. He had absolutely no problem with george w. bush's lawbreaking, but all of a sudden he has a problem with Obama "straining" the law. I don't like a lot of things that Obama is doing, but people like Will who said nothing about bush's lawbreaking can't say anything about anything that Obama does. People like that have demonstrated that they're just partisan hacks.

notajayhawk 8 years, 11 months ago

KansasVoter (Anonymous) says…

"George Will needs to STFU. He had absolutely no problem with george w. bush's lawbreaking,"

Lawrence liberal, circa 2008: "Why can't you guys ever respond to criticism of the president without resorting to 'Yeah, but Clinton...'?"

Lawrence liberal, circa 2009: "Yeah, but Bush..."

jaywalker 8 years, 11 months ago

"You can’t support the bailout of Chrysler on the one hand and cry “socialism!” on the other."

Correct me if I'm wrong, but I don't think anyone has supported the bailouts of any of these companies.

"Free market capitalism failed. Milton Friedman and his groupies were wrong. That’s just empirical reality."

That's easily the dumbest thing anyone has posted on these boards today. Free market capitalism failed? Because the U.S. automakers managed over their skis and bent over to unions which drove the labor cost to $79/hour to build a truck? Free market capitalism has pulled countries around the globe out of Third World status and built this country, still the greatest 'idea' in the world, into the leading global power. Sorry, but the lack of foresight by auto industry CEO's and their ensuing paralysis to act when the economy burst (which happens to every economy from time to time) does not mean capitalism has failed. What are they teaching at KU these days?

bearded_gnome 8 years, 11 months ago

supertramp: ronald reagan and the PATCO bad example, condition of their employment, stated in their contract, was that they could not strike. they violated their contract. plus, wasn't private industry.

harry truman and the steel industry? you really wanna bring that up??? that's an argument against what Mr. Obama is trying to pull with the auto manufacturers!

yes, the government should've let chrysler go through ordinary bankrupsy. furthermore, Obama's cronies and political tools the union thugs are primarily to blame for the failure of chrysler.

note: when the state of california tried to save money and cut money going to SEIU union members, they pulled on Obama's bell and got him to extort the state of california out of saving that money.

jafs, there's a huge difference between regulations, and telling a business how to operate. telling a business they have to merge with another. obama has no experience in auto manufacturing, and his "car czar" has his own pay-play scandal.

"Myname" claims that GWB tortured, and tortured americans.

oh, reeeeeeeeeealy? show one. further, waterboarding didn't leave lasting harm and was doctor monitored. plus your nancy pelosi's own lawyer says she was informed of the use of waterboarding in 2002. you might not want to be bringing up so-called "torture" as most americans favor enhanced interrogation techniques that save americans' lives. and four former heads of CIA say it did just that.

silly for throwing that little red herring in here, weren't you Myname. silly fool.

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