There's a Thief in Town

Creditors Learning Harsh Lessons

We all know that socialists do not give a fig for property rights. Those who advocate taxing and extorting property from citizens to pursue their reckless visions of utopia through the oppressive power of government are contemptible. Their prorogation of the commandment, Thou shalt not steal, is comprehensively unjust.

Those who suspend the application of the eighth commandment to governments, restricting its application to "private" ethics, may be legion but they are flat out wrong. If governments can murder they can also steal. Socialists proceed on the assumption and assertion that the State has a prior right to the ownership of all property. But the Law of God gives property ownership rights to those who have worked for it, earned it, produced it, bought it, or traded it via free contract. Those (including the organs of State) who take property by force--whether by fiat, tax, extortion, standover tactics, or debasing the currency are thieves, pure and simple.

In the forced nationalisation of Chrysler, one of the former Big Three US auto companies, President Obama deliberately overrode and ignored property rights. Worse, he used his bully pulpit to hector those bond holders who opposed his will, calling them self-serving, venal speculators.

All he did, however, was steal property from one group to bestow it upon others. In law, the secured creditors were supposed to have first claim upon Chrysler's assets. Obama ignored the law and flicked them off. Instead, he gave the company to the union of autoworkers. When Chrysler emerges from bankruptcy as intended it will be owned by a union healthcare trust, the US government and Italy’s Fiat.

Now some of the bondholders are taking the matter to the courts. Initially browbeaten into submission they have had another think. The Financial Times reports:

Chrysler, with backing from the US Treasury, had offered its secured creditors just under 6.9bn. Four big banks, holding the bulk of the claims, accepted the offer following political pressure from Washington.

However, the Indiana State Teachers’ Retirement Fund said on Wednesday that it had a fiduciary responsibility to its members to continue the fight. The fund stands to lose $4.6m under the current settlement proposal and has teamed up with Richard Mourdock, Indiana state treasurer, to try to recover those losses.

These terrible, venal speculators were actually Indiana teachers (amongst others) who had loaned Chrysler money in good faith. They had secured the lending. Obama rode roughshod over the property rights of teachers in Indiana in favour of the autoworkers union, to whom he has granted stock. He robbed Peter to pay Paul. The President has added a new title to his Office. Not only is he Commander-in-Chief, he has also made it the Office of Larcener-in-Chief.

In a court filing on Wednesday, the Indiana funds accused the government of adopting a strategy of “the ends justify the means”.

They also said the Treasury “has taken constructive possession of Chrysler and is requiring it to adopt a sale plan in bankruptcy that violates the most fundamental principles of creditor rights – that first-tier secured creditors have absolute priority”.

The Indiana funds say the current plan will strip their collateral into the new company, benefiting more junior creditors. The funds also allege that Tarp funds were meant to be funnelled only to financial institutions.

The end justifying the means is a hallmark of all socialist property ethics. Obama is no exception.

Meanwhile the lesson is being learned. Some pension funds and fiduciary financial institutions in the United States have been reported to have taken a decision not to invest any more in US government paper. In the light of the Chrysler scandal, they have decided that the US government is untrustworthy and deceptive: therefore, regardless of what the credit rating agencies say, the risks of lending money to the government are unacceptably high.

How long will it be before foreign governments or their captive sovereign investment funds draw similar conclusions, and stop funding the US deficit? China has already moved away from buying US debt--and for good reason. It has carefully watched Obama casually flick property rights and the rule of law aside and have drawn the obvious conclusions. No doubt lenders will now start demanding much higher interest rates to compensate them for the risk of lending to a government that has shown such scant regard for property rights and the laws of contract.

The Dallas Federal Reserve Bank Chairman, Richard Fisher said that on a recent trip to China he was asked over and over about the risk of the US Federal Reserve simply printing money to pay for the huge government debt into which the US is sliding. Printing money debases the currency. It is just another form of larceny. The Daily Telegraph reports:

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal

His recent trip to the Far East appears to have been a stark reminder that Asia's "Confucian" culture of right action does not look kindly on the insouciant policy of printing money by Anglo-Saxons.

But, let's get this straight. The reason there is a Larcener-in-Chief in the White House, together with lots of subaltern larceners in the Congress, is because society in general wants the State to steal. To solve its problems the populace authorizes the State to steal from some citizens and dispense to others (particularly to those in its employ.) As Fisher went on to argue, if you think the situation is bad, blame yourself.

"This situation is of your own creation. When you berate your representatives or senators or presidents for the mess we are in, you are really berating yourself. You elect them," he said.

One is reminded of the bumper sticker: "Don't steal! The Government doesn't like competition."