Andrew Grossman, Heritage Foundation Senior Legal Analyst testified before the House Judiciary Committee yesterday at a hearing on Ramifications of Auto Industry Initiatives. Grossman made three points. 1. The Bush and Obama administrations have harmed the US auto industry by intervention meant to save it; 2. The Obama administration has abused its power to sidestep the rule of law, particularly bankruptcy law; and 3. These acts will prolong our current recession unless Congress reverses them.
Grossman's third point follows from the first two. If you mess with the stability of contract and property rights, nothing good can come of that.
Grossman said: "Lenders know how to deal with bankruptcy--it's a well understood risk of doing business. But the tough measures employed by the Obama Administration to cram down debt on behalf of the automakers were unprecedented and will naturally make lenders reluctant to do business with these companies, for fear they could suffer the same fate. . . . Impaired access to debt and capital will stymie future restructuring, investment, and growth, reducing the likelihood that either company will fully rebound and, beyond that, prosper."
And on and on in the downward spiral toward oblivion.
Friday, May 22, 2009
Rule of Law RIP
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1 comment:
I could not agree more with Mr. Grossman. When predictability is lost we are adrift in a sea of uncertainty which is not an environment in which individuals engage in the kind of risk taking behavior needed to push us to new entrepreneurial and innovative heights. One need only look back to the New Deal and all the tinkering the government did with the market to see that this kind of response does not work.
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