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Name: Kenneth Hanson
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Obama And Congress Ignore Rule Of Law, Make Everything Worse

Posted by Kenneth Hanson on Friday, March 20, 2009 4:39:49 PM

Charles Krauthammer has a terrific ability to get to the heart of the matter, and he has done so again regarding the AIG bonus flap.

Barney Frank has now introduced a bill that would allow Congress to cancel or change any legal contract or agreement they desire for firms that have received taxpayer money.  So now Barney Frank and Nancy Pelosi and Obama will be the ultimate and final arbitrators, changing or canceling legal contracts just because they want to - Hugo Chavez style?  

What about Lockheed Martin?  They are paid by the government to make the F-22, the F-35 and all sorts of military hardware.  But those darn planes sure are expensive.  Under the 'Barney Frank Contract Abrogation Bill' maybe Obama will just tell Lockheed Martin that the government is going to arbitrarily change the contract for procuring the F-22, and that Lockheed Martin still has to deliver the fighters, but will only be paid half as much.  Oh, and those rich aerospace design engineers, they cannot be paid any more than a G-12.  The executive that oversees one of the world’s most complex supply-chains, G-14, and no bonus.

All of this just makes the recovery slower and more difficult.  The Democrats keep going back and retroactively making new demands and conditions of the banks that received TARP funds.  Why wouldn't a bank refuse the funds or give the money back as fast as possible when the government continues to act in a arbitrary and capricious manner.  The result is that the extra capital will be drained from the financial system.  The only ones that will take or keep the money are those that are in such bad shape, like Citigroup, that they can’t help the economy anyway.  The healthy banks that have the ability to take the TARP capital and lever it up into expanded loans won’t do so.  This whole thing is a counterproductive farce.

And as I recently wrote on this blog, the supposed Obama/Geithner private/public partnership to soak up toxic assets from the financial system is probably DOA.  What private company would go anywhere near the government when they will be subjected to every sort of compensation restrictions, and open themselves up to Nancy and Barney retroactively changing the deal to put endless conditions on them? 

It is like the scene in "Star Wars - The Empire Strikes Back" when Lando gives up Han Solo to Darth Vader with the agreement that Lando will keep Chewie and Princess Leia.  When Vader changes the deal so that the empire will take Chewie and Leia prisoner, and Lando protests, Darth Vader growls, “Pray that I don’t change it further.”

From today’s Washington Post editorial:

The Obama administration reportedly intends in the next week or two to announce the details of a "private-public partnership" to buy troubled assets from ailing banks. The participation of private hedge funds, investment banks and other firms will be key to the plan's success. But what executive in his right mind will enter into a deal if he or she believes the rules can be changed six months or one year down the road purely on the basis of polls and politicians' fears? 

Michael Gerson in today’s Washington Post writes:

What sane money manager would want to partner with a government that blames others for its mistakes, urges the violation of inconvenient contracts and threatens to tax benefits retroactively? One Wall Street expert told me, "Even if people trust the president, they don't trust Congress." This kind of trust and confidence is essential to the next stage of our economic recovery. It is also being actively undermined by the incompetence and hypocrisy of the government itself.

From today's Wall Street Journal op-ed page:

It was not long ago that Mr. Obama assailed the Bush administration for its dangerous expansion of executive power during a complex crisis. The Obama administration's antics around the AIG bonuses suggest a similar effort to use political power to contort the law. But rather than doing so for reasons of national security, this administration is doing so to pander to an angry public. When the Obama administration and Congress flex this kind of muscle, they attach a new political-risk component to all contracts negotiated in the shadow of the bailout.

That risk may scare potential investors away from bailout recipients because they cannot trust our government's will in the face of public outrage. It destroys our moral high ground the next time Mr. Obama wants to criticize a foreign country for ignoring the rule of law by nationalizing private assets or repudiating international debt. It will certainly make Mr. Obama's task much more difficult when he tries to sell the public on his administration's ability to manage the rest of the bailout, and when he tries to sell private firms on the public-private partnership that will be needed to make the recovery work. 

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