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Rule of Law: Good for Retirees or Only Terrorists?

Posted By Rory Cooper On May 21, 2009 @ 5:44 pm In Ongoing Priorities | Comments Disabled

Today President Obama stood on the world stage and demanded that suspected terrorists be treated under the “rule of law [1].” In fact, he used the phrase “rule of law” eight times [2]. It is now time for him to use the phrase “rule of law” when it comes to Americans. In the next two weeks, the President will likely endorse a series of measures in his role as CEO of the car companies that may violate a number of U.S. contract laws, bankruptcy laws and financial rules and regulations.

The United States is a nation of laws [2], and we must abide by these rulings.

The President is quickly learning that running a car company isn’t easy, and neither is being responsible for the economic future of unemployed Americans. Since the President became chief executive of the Big Government Two many autoworkers, dealership employees [3], suppliers and others have lost thousands of jobs. And amidst these troubling economic times, the President is also potentially taking away the retirement futures of many of these workers. How? Many retirees in America are also GM and Chrysler bondholders.

legal confusion [2]

Let’s back up and explain what we’re talking about: A bond is simply an “IOU” [4] in which an investor loans money to a company in exchange for a predetermined interest rate. It has historically been a safer investment than stocks because your principle is generally guaranteed and if a company goes under, you are at the head of the line to get a return on that investment. Bondholders include pension funds, retired auto workers, non-profits, even your own grandparents. They also include workers in dealerships.

…in line with the rule of law [2].

So, say you are 54-year old retiree John Milne [5], and you bought GM bonds because you “live in a GM town, in a GM state, which helped influence [his] decision to invest in General Motors bonds.” With GM’s current problems, if they were to go into bankruptcy, John Milne would have certain protections as a bondholder, under the rule of law.

It has to do with the rule of law [2].

But not so fast. Unfortunately, GM’s bonds are different because they are investments in a company that is now controlled by big union bosses in the United Auto Workers and President Obama. The rule of law is apparently out the window. First, the UAW bosses need to be paid, and everyone else second. [6] In fact, many of the individual bondholders are in fact retired union workers. So the UAW and President Obama are actually conspiring against the workers that paid their dues, in more ways than one.

As the Wall Street Journal points out: “The funds paid a premium to buy ‘secured’ status, only to discover that they were politically outranked by the United Auto Workers in the White House hierarchy.

I ran for President promising transparency [2], and I meant what I said. That is why, whenever possible, we will make information available to the American people so that they can make informed judgments and hold us accountable.

The President is a man committed to transparency, so surely he negotiated these decisions in public and been forthright in describing the bondholders, right? Nope. On April 30, the President stood with his economic team and characterized bondholders as a greedy group of investment firms looking for “an unjustified taxpayer-funded bailout [7].” Well, frankly we don’t know what justifies a government bailout these days, but surely asking to be treated fairly under the laws of the United States can’t be unjust, can it? That day, a group of non-TARP lenders issued a statement [8] saying: “…the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.”

And if we refuse to deal with these issues today, then I guarantee you that they will be an albatross [2] around our efforts to combat terrorism in the future.

If President Obama dismantles our nation’s laws to satisfy the UAW, what comes next? Are we prepared for the economic albatross of the future? The State of Indiana has said it will no longer buy bonds issued by anyone who received federal bailout money, and who can blame them? Indiana Treasurer Richard Mourdock said: “In the Chrysler bankruptcy, however, secured creditors received $.29 on the dollar even as non-secured creditors received higher values and ended up with a 55% ownership of the new company, which is fundamentally wrong and a dangerous precedent [9] to the capital markets.”

The United States is a nation of laws [2], and we must abide by these rulings.

So what does this have to do with suspected terrorists? Today, the President stood in front of the founding documents of our democracy and demanded that the rule of law be followed in respect to suspected terrorists at Guantanamo Bay. He said: “And where terrorists offer only the injustice of disorder and destruction, America must demonstrate that our values and our institutions are more resilient…”

If a speech can be given by the President about the rights of suspected terrorists under the laws of our land, why can’t it also be given in defense of retired school teachers, auto workers, dealership mechanics, pension funds and the American men and women who once invested in General Motors out of loyalty and pride. So who comes first? The only people standing in the way of American bondholders and suspected terrorists receiving the same fair treatment under the rule of law is the UAW, President Obama’s biggest campaign contributor. If only individual bondholders had that kind of power.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/05/21/rule-of-law-good-for-retirees-or-only-terrorists/

URLs in this post:

[1] rule of law: http://www.heritage.org/index/rule-of-law

[2] eight times: http://dyn.politico.com/printstory.cfm?uuid=64B1A213-18FE-70B2-A8245086E1BF3698

[3] dealership employees: http://www.cnn.com/2009/LIVING/wayoflife/05/20/aa.dealer.closing.info/

[4] A bond is simply an “IOU”: http://beginnersinvest.about.com/cs/bondbasics/f/whatisabond.htm

[5] 54-year old retiree John Milne: http://www.freep.com/article/20090521/BUSINESS01/905210800/Small+GM+bondholder+holds+news+conference

[6] First, the UAW bosses need to be paid, and everyone else second.: http://www.salon.com/tech/htww/2009/04/30/obama_and_chrysler/

[7] an unjustified taxpayer-funded bailout: http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-on-the-Auto-Industry/

[8] issued a statement: http://blogs.wsj.com/deals/2009/04/30/statement-from-non-tarp-lenders-of-chrysler/

[9] a dangerous precedent: http://online.wsj.com/article/SB124286497706641485.html

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