Austin Hill
Sunday, May 10, 2009
Does President Obama want the U.S. economy to decline further? Or is he just simply naïve about what is required to make the economy grow, and about the differences between “good“ and “bad“ economic policy? I’ve pondered these questions several times since January 20th, not only in the column I write here for this publication, but on talk radio, and in columns published elsewhere. And in light of the President’s behavior within the past ten days, the questions are worth reviewing again.
Back in February and March I began stating - - in writing and on talk radio - - that this President has no intention or desire to grow the U.S. economy, but rather, wishes only to grow U.S. dependency. In my remarks, I defined “U.S. dependency” to mean a dependency on government welfare by U.S. citizens, and, ultimately, a dependency of our entire nation on China and other nations abroad.
“That’s ridiculous” I would hear in response, “why would any U.S. President want to weaken the country?” “Because in the American liberal mindset, economics is a zero-sum game” I would explain. “Other nations are economically weak, because America has become the world’s economic superpower. Weakening America economically - - even just a little bit - - will allow other nations to be a little bit stronger, or so goes the theory, and if Obama can achieve this, he will have made the entire world a more ‘fair’ place.”
It all sounds so absurd and sinister, doesn’t it? “Settle down” I was told back in March by a friend who is a mergers and acquisitions lawyer in Boston. “It’s not like he’s a closet socialist, Austin, he’s just a bit naïve about business and finance. But he’ll figure it out, and we’ll be fine.”
Okay. Let’s consider the possibility that President Obama is, simply, “a little naïve.” So was it this presumed “naivety” that led him to defy U.S. bankruptcy law, and insert himself in between a corporation and its secured creditors?
According to such law, a company in bankruptcy must pay its debts to its “secured creditors” before it pays its unsecured creditors. Not only that, in most cases, secured creditors can demand to be paid in full.
In the case of Chrysler, several of the institutions to which it owes money are banks that accepted government bail-out funds last year and earlier this year. Those banks are now enslaved to whatever President Obama and the U.S. Treasury Department tell them to do. So when Obama tells, say, “bank X” to “accept twenty-eight cents on the dollar as payment of the debt Chrysler owes you,” well, those banks are obliged to obey Obama, whether or not it makes financial sense to do so, and whether or not bankruptcy law allows that bank to demand more.
But the private sector economy got in the way of Obama’s plans to save the world, because some of Chrysler’s secured creditors are hedge funds, that, unlike the “bailed-out banks,“ are NOT under Obama’s control. Several of the hedge fund managers involved in the situation did what they are permitted to do under bankruptcy law, and demanded more than the meager “pennies on the dollar” loan repayment that President Obama was ordering them to accept.
And this is when dear leader Obama moved in to “tirade mode.” Lashing out at the hedge fund “hold outs,” he succumbed to name-calling and insults, claiming that the “greedy” hedge fund managers were standing in the way of saving Chrysler.
Was it his naivety that prevented him from seeing the obvious - - that the hedge funds, and those Americans who had invested their personal money in those funds - - were the very thing that has kept Chrysler afloat in the first place? And is he so naïve to think that he will, to use his terms, “get credit flowing in America again,” while using his office to ruthlessly steamroll over the top of contracts, accounting rules, legal precedents, and law itself? Does he really think that he will “save” the U.S. economy and get banks lending again and get people with money to invest in new businesses and begin producing new employment opportunities, by denying legal rights to investors?
President Obama has now demonstrated to the world’s investors that rules and laws don’t matter - - his personal and political preferences are what matter, and he will get his way, even if investors are denied their rights and damaged in the process.
If Obama’s objectve is to weaken the U.S., so as to make a “more fair world,” he’s well on his way to achieving that goal. Yet if Obama actually wants something other than a weaker U.S., then his naivety is something America cannot afford.
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