“Bills of attainder, ex-post-facto laws, and laws impairing the obligation of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation. The two former are expressly prohibited by the declarations prefixed to some of the State constitutions, and all of them are prohibited by the spirit and scope of these fundamental charters. Our own experience has taught us, nevertheless, that additional fences against these dangers ought not to be omitted. Very properly, therefore, have the convention added this constitutional bulwark in favor of personal security and private rights; and I am much deceived if they have not, in so doing, as faithfully consulted the genuine sentiments as the undoubted interests of their constituents.
The sober people of America are weary of the fluctuating policy which has directed the public councils. They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less informed part of the community. They have seen, too, that one legislative interference is but the first link of a long chain of repetitions, every subsequent interference being naturally produced by the effects of the preceding. They very rightly infer, therefore, that some thorough reform is wanting, which will banish speculations on public measures, inspire a general prudence and industry, and give a regular course to the business of society.”
James Madison, “Restrictions on the Authority of Several States”, Federalist Papers # 44 (25 January 1788), para break added.
http://www.foundingfathers.info/federalistpapers/fedindex.htm
James Madison (1751 – 1836) was the fourth President of the United States (1809–1817), and one of the Founding Fathers of the United States. He is considered to be the "Father of the Constitution", and wrote over a third of the Federalist Papers, still the most influential commentary on the Constitution.
In an example of crude crony capitalism the Obama Administration has moved to give the auto firm Chrysler to its political supporters in the auto workers union. Needless to say, this is not an easy task, given the sad state of the industry and this firm in particular. Because the owners of Chrysler, Cerberus Capital Management, was too smart to put its own cash into the business, the government had to pump tens of billions of dollars just to keep the company alive so that it could “save” it once it figured out how to do so at the expense of others. It would appear it found a management team for the company in the form of an Italian car company, Fiat, to whom the government is initially giving 20 per cent of the American firm to an in return for nothing accept access to small car technology. No doubt this is being done because the government intends to dictate Chrysler’s future output mix to ensure the company produces only “green” autos. So much for the idea of free enterprise and the Administration statement it doesn’t want to run companies. It is reported that more than half the company will go to the union, although the UAW says they will sell their stake in the firm to fund a trust for retiree health care costs.
It is the hedge funds, pension funds, mutual funds, and individuals who have purchased equity in Chrysler and hold its bonds who the Administration expects to take the financial hit. They are being offered pennies on the dollar in negotiations they describe as “a farce”. Some of the creditors say they were taken aback by the hardball tactics employed to force them to agree with the Administration’s plans to restructure the car company. Many of the creditors claim the demands of the Administration undercut their rights under the law and want to resstructure Chrysler through normal bankruptcy. The President seeks to avoid this procedure and insists on implementing his own plan. Because some creditors have disagreed, he has called them “unpatriotic” and worse. Indeed, some lawyers for the creditors have charged the Obama Administration with threatening them and using unrelated TARP payments as leverage in the negotiations.
It is difficult to see the lawless treatment of the Chrysler's creditors by the Obama Administration as anything other than gangster government of the kind we see in third-world dictatorships. The Administration is using the power of the government to advance the interests of its political allies and its own social and political agenda. This is not right.
But it is precisely the kind of abuse of governmental power Madison warned about. It is destructive of the rule of law and erodes the foundations of stability on which a free and vibrant economy rests. One can only hope that a bankruptcy court and an independent judiciary can treat all parties involved in a needed restructuring of America’s automobile industry in a fair and equitable manner.
Thanks to Don Boudreaux of Cafe Hayek and his friend Lyle for the Madison quote.
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