Friday, Feb. 10, 2012 | 2:01 a.m.
In response to Ken Hamm’s Feb. 5 letter “Bailout should be seen as a good thing,” extolling the virtues of the auto company bailouts, he neglects to address the fundamental legal precedent set by the bailouts.
When both Chrysler and GM entered bankruptcy, they were “fast tracked” through the process. The fast track shredded existing bankruptcy law and permitted the companies to make quick exits.
Under normal bankruptcy proceedings, secured creditors are at the head of the line in negotiating any settlements and a bankruptcy exit. In the auto bankruptcies, secured creditors were completely ignored and their property rights squashed. They got nothing.
This has set a dangerous precedent where the federal government can take a favored constituency and flout the law. Individual property rights can be ignored. The rule of law is one of the pillars that make our American society and economy stable. Ignoring existing laws tells investors that if you are
not a favorite of the administration, you best invest your capital elsewhere because it’s not safe here.
I’m pleased that these American companies are doing well but their trip through bankruptcy was politically motivated to favor the United Auto Workers over secured creditors, contrary to all existing laws.