Tag Archives: Socialism

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Barack Obama outlaws capitalism: threatens Chrysler’s non-TARP creditors

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UPDATE: More details about this story and related stories of government intervention and wealth redistribution are here.

UPDATE: Welcome visitors from 4Simpsons! Thanks for the link!

This bombshell comes to me from my favorite commenter ECM.

Newsbusters is reporting that the White House is making threats to Chrysler’s creditors. Obama is living that these creditors allowed Chrysler to go bankrupt, because he would prefer to throw your money at his auto union worker constituents. What does it mean when the President of the United States threatens and coerces private investors?

  • Private property is abolished
  • The free market is abolished
  • The rule of law is abolished
  • The Constitution has been abolished
  • Private contracts are abolished
  • Capitalism is abolished

It means that socialism has come to the United States, just as the rest of the world is abandoning a failed system.We are now the equivalent of Zimbabwe and North Korea! Our run of liberty and prosperity is now OVER.

The source of the story is a radio interview conducted between 760 WJR’s radio host Frank Beckmann and Tom Lauria, the attorney representing Chrysler’s non-TARP creditors. I am reproducing the full transcript, because you need to read the whole thing, especially what I’ve bolded.

Beckmann: So what’s the matter with your vulture clients who are so greedy and selfish. Why won’t they go along with this?

Lauria: Well, they bought a contract that says that they get paid before anyone else does by Chrysler. And they have been told by the government who is in complete control of Chrysler, oddly enough, that despite their contractual right, they do not get paid before everyone else.

So they are standing on their rights, standing on the law, trying to defend in effect what is the Constitution of the United States, to make sure that they get what they’re entitled to for their investors.

Beckmann: Tom, let me make the argument against you in another way. We’ve heard the President say this, “I wouldn’t want to stand on their side.” Ron Gettelfinger says “Everyone else has made concessions. These people won’t; they’re greedy.” Why not take a concession that is being asked of everybody else and is being accepted by everybody else, including other hedge funds that had bought some of these bonds in Chrysler?

Lauria: Well that’s a great question, because let me tell you it’s no fun standing on this side of the fence opposing the President of the United States. In fact, let me just say, people have asked me who I represent, and that’s a moving target.

I can tell you for sure that I represent one less investor today than I represented yesterday. One of my clients was directly threatened by the White House, and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight. That’s how hard it is to stand on this side of the fence.

Beckmann: Was that Perella Weinberg?

Lauria: That was Perella Weinberg.

Beckmann: All right.

Lauria: Now let me just tell you, to be clear, that we do not oppose the rehabilitation of Chrysler. We think it is vitally important that a company like Chrysler be protected to the extent that it can be within the framework of the law. I want to also say that we do not oppose the government backstopping or supporting the pensioneers and retirees and workers of Chrysler.

I actually think that in a troubled economic time like we’re in, that is an appropriate role for the government to perform. What we do oppose, however, is the abuse of the bankruptcy law to coerce first-lien lenders subsidize the rehabilitation of Chrysler or the backstop of the obligations to the pensioneers and retirees beyond what they will do voluntarily.

And just to be clear, these clients of mine have agreed to compromise 50% of their first-lien position to help support the rehabilitation of Chrysler — Contrary to what the President said yesterday in his new conference that “these people will not give to support the effort,” they have agreed to compromise 50% of what they’re owed to support the rehabilitation of Chrysler, despite the fact that they’re under no obligation whatsoever to do so.

That is what we stand for, and that is what we’re going to go to court to fight for.

Beckmann: OK, so they have offered to take 50 cents on the dollar. What are they being offered in return, and how does that compare to what other stakeholders, say the UAW, are going to be receiving?

Lauria: Here’s the troubling circumstance here. My clients bought a position in the Chrysler capital structure that entitles them to be paid “first dollars out.” That is, they’re to be paid 100 cents of what they’re owed before any junior creditors get a penny.

The government has offerend them 29 cents on the dollar, in the context of a restructuring of Chrysler that will send over $10 billion of value to junior claims. And when I say $10 (billion), that’s a floor. As we’re continuing to review the papers that Chrysler has filed in the bankruptcy court, that number may actually be more like $20 billion. So in other words, my clients, who are contractually entitled to 100 cents on the dollar, are being asked to take 29 cents on the dollar, while junior creditors are being offered somewhere between $10-$20 billion of value in the Chrysler rehabilitation.

Now I ask your listeners, what would they do if they were in our position?

Beckmann: Now Tom Lauria, let me cite a New York Times piece, I believe this was yesterday’s New York Times. No, it’s today’s as a matter of fact. And it says about the creditors who are standing firm: “Many of them bought Chrysler debt for about 30 cents on the dollar.” So what they’re saying is, “Look, they got a discount to begin with. They’re getting a good deal here. If they bought it for 30 and they’re being offered 29, that’s a great deal, better percentagewise than anybody else got.”

Lauria: Well, what people need to understand, first of all, that that is only speculation. There are people who bought this debt at par in my group, there are people who bought this at 70 cents, there are people who bought it at other prices. But what people really need to understand is that the people who bought this debt are pensioneers, teachers’ credit unions, personal retiree accounts, retirement plans, college endowments. That’s who my clients act as fiduciaries for. And they make all kinds of investments. And as you can imagine in this economy, there are numerous of those investments that have gone bad.

This was an investment that people made based on their assessment of the assets of Chrysler, and the view that this was a very secure, very safe investment. And they bought a contract that said they would get a very low rate of return in exchange for that high level of security. So the argument about what they paid for their investment really is irrelevant.

The fact of the matter is they bought a contract that said “you’re first in line, and in exchange for that you’re going to get a very low rate of return.” And I think everybody in this country should be concerned about the fact that the President of the United States, the executive office, is using its power to try to abrogate that contractual right. If the President will attack that contractual right, what right will it not attack?

Beckmann: You made a comment to me before we went on the air about the significance of this case as it relates to the Constitution. I’d like you to explain that to my audience.

Lauria: Well, look, there are kind of two aspects to that. The first is the right to property and the right to contract are kind of sacronsanct in this country. I think everybody understands that when you make a deal it’s supposed to be honored, and if it’s not honored you’re supposed to be able to get protection in court. And what is happening here, through the force of the United States government, and that’s what’s disturbing about this — I mean, private parties have contract disputes all the time — but for the United States Government to step in, the Executive Office of the United States Government, who under the Constitution is charged with enforcing the laws to step in and try to in effect break the laws, I think we should all be concerned about that. That is a constitutional issue.

OK, number one. Number two, realize that our Constitution is premised on the notion that there is a balance between the three branches of government: the executive, the legislature, and the judiciary.

And what’s going to be happening, in fact I’m going to have to go here, because I’m heading down to the bankruptcy court to start taking on this battle, which is of epic proportions. But what is going on here is you’ve got the executive branch coming into the judicial branch. And I think it is really important for the Constitution of the United States that people understand that the judicial branch can stand independent and interpret and apply the laws as it’s required to do under the Constitution in the face of intense pressure from the Executive branch to do otherwise.

Beckmann: Tom Lauria, really appreciate it. Final question, will Oppenheimer Funds and Stairway Capital, your other two clients in this, are they committed to standing firm? I’ve got to believe they’re facing the same pressure Perella Weinberg did before it changed its mind and said “Okay, we’ll go along now.”

Lauria: Well they are today, but the Executive Office hasn’t called them yet and made threats to them. So, maybe by tomorrow I won’t have any clients, and maybe this fight will be over.

Click the link below to see more commentary from National Review, Wall Street Journal and Hot Air.

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Commentary

How socialism undermines family, community and the dignity of labor

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UPDATE: Welcome visitors from Free Canuckistan! Thanks for the link, Binks!

I saw this amazing post over on the Pugnacious Irishman, and I would highly recommend you take a look at it. Rich comments on an essay by Charles Murray on whether the United States should start implementing European-style social policies.

Here is Rich’s summary of the Murray article:

In the annual Irving Kristol Lecture given at the American Enterprise Institute Dinner, he argues that while such Europe-style policies might produce an economic benefit or two, they are ill conceived because they suck the meaning out of life.  They do this by enfeebling the institutions necessary for robust meaning in life: family, community, vocation, and faith.  Lastly, he argues that in the next few decades, science will provide ample evidence that such policies are ill conceived.

But how does European democratic socialism destroy human flourishing?

Murray writes:

To become a source of deep satisfaction, a human activity has to meet some stringent requirements. It has to have been important (we don’t get deep satisfaction from trivial things). You have to have put a lot of effort into it (hence the cliché “nothing worth having comes easily”). And you have to have been responsible for the consequences.

There aren’t many activities in life that can satisfy those three requirements…. Let me put it formally: If we ask what are the institutions through which human beings achieve deep satisfactions in life, the answer is that there are just four: family, community, vocation, and faith.

…It is not necessary for any individual to make use of all four institutions, nor do I array them in a hierarchy. I merely assert that these four are all there are. The stuff of life–the elemental events surrounding birth, death, raising children, fulfilling one’s personal potential, dealing with adversity, intimate relationships–coping with life as it exists around us in all its richness–occurs within those four institutions.

Seen in this light, the goal of social policy is to ensure that those institutions are robust and vital. And that’s what’s wrong with the European model. It doesn’t do that. It enfeebles every single one of them.

And then comes Murray’s central thesis. Big government socialism, by taking responsibility away from individuals in the areas of importance and meaning, actually causes more problems than it solves. Murray calls this government involvement in these areas “taking the trouble out” of life.

Murray continues:

The problem is this: Every time the government takes some of the trouble out of performing the functions of family, community, vocation, and faith, it also strips those institutions of some of their vitality–it drains some of the life from them.

It’s inevitable. Families are not vital because the day-to-day tasks of raising children and being a good spouse are so much fun, but because the family has responsibility for doing important things that won’t get done unless the family does them. Communities are not vital because it’s so much fun to respond to our neighbors’ needs, but because the community has the responsibility for doing important things that won’t get done unless the community does them. Once that imperative has been met–family and community really do have the action–then an elaborate web of social norms, expectations, rewards, and punishments evolves over time that supports families and communities in performing their functions.

When the government says it will take some of the trouble out of doing the things that families and communities evolved to do, it inevitably takes some of the action away from families and communities, and the web frays, and eventually disintegrates.

…We have seen growing legions of children raised in unimaginably awful circumstances, not because of material poverty but because of dysfunctional families, and the collapse of functioning neighborhoods into Hobbesian all-against-all free-fire zones.

This next point is something I first read about in George Gilder’s book “Men and Marriage”. When the government steps in and takes away the responsibilities of a man, especially husband and father responsibilities, it destroys the male will to be a responsible contributor to society. If the welfare state awards money to women to raise children without the father, what honor is there in being a good man?

Earlier, I said that the sources of deep satisfactions are the same for janitors as for CEOs, and I also said that people needed to do important things with their lives. When the government takes the trouble out of being a spouse and parent, it doesn’t affect the sources of deep satisfaction for the CEO. Rather, it makes life difficult for the janitor. A man who is holding down a menial job and thereby supporting a wife and children is doing something authentically important with his life. He should take deep satisfaction from that, and be praised by his community for doing so. Think of all the phrases we used to have for it: “He is a man who pulls his own weight.” “He’s a good provider.”

If that same man lives under a system that says that the children of the woman he sleeps with will be taken care of whether or not he contributes, then that status goes away. I am not describing some theoretical outcome.

I am describing American neighborhoods where, once, working at a menial job to provide for his family made a man proud and gave him status in his community, and where now it doesn’t. I could give a half dozen other examples. Taking the trouble out of the stuff of life strips people–already has stripped people–of major ways in which human beings look back on their lives and say, “I made a difference.”

Murray’s article and Rich’s commentary continue, but for me this was the important point. When government distributes wealth, it gets involved in the decision-making of the most important areas of life: marriage, education, parenting, taxes, etc. Speaking as a man, when you take away choice and responsibility from me, you cannot expect me to engage in work or family or community in the same way I would if I were in charge.

By the way, I explained why European socialism leads to the decline of religion in a previous post.

Commentary

A brief introduction to the blind faith religion of Marxism

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The American Thinker has this post up explaining the blind faith of Marxism. (H/T Douglas Groothuis)

Marx thought that value was proportional to the labor spent in creating a product:

Marx claimed that all products contain value that is directly proportional to the amount of labor embodied within them. He was wrong. All the rest of Marxism is based entirely on this mistaken and falsifiable premise.

That’s clearly wrong. The price of products varies depending on supply and demand!

Marx thought that the free market would create monopolies:

Marxists claim that the operations of markets have a natural tendency to spawn monopolies. They call this “monopoly capitalism.” In reality, markets have a natural tendency to break up and undermine monopolies. Almost all monopolies under capitalism are those set up by governments stifling and interfering in the operations of markets.

That’s clearly wrong. Government regulation is needed to insulate monopolies from competition. And in capitalism, capitalists agree that government should take an active role in destroying monopolies and fostering competition, in order to give consumers choices. When consumers can choose, producers have to add value and reduce prices. Socialism, on the other hand, allows consumers one choice: the state-run firm.

Marx had no idea what incentives and laws were needed in order to foster conditions in which entrepreneurs would want to create wealth:

Marxists and socialists in general care a lot about the distribution of material wealth. But they have no idea how to bring about the creation of the material wealth that they wish to redistribute. They just assume it all gets produced all by itself. That is why people in communist regimes starve.

Wrong again!

Marx believed that capitalism was bad for workers.

Marxists claim that workers are oppressed in capitalist societies. Workers in communist societies always try to sneak out into capitalist societies. No one in South Korea is trying to sneak into North Korea. The Berlin Wall was not built to keep West Germans from sneaking into East Germany’s collective farms. Cubans in Florida do not steal boats to seek asylum in Cuban collective farms.

Why is it bad to encourage people to take risks, start their own companies and hire workers? Isn’t it better for for workers to have a choice of employer, so that they can leave if their working conditions or remuneration are unacceptable? How do people leave their employer in Marxism? Oh yeah – by firing squad or by jumping the wall.

But what about companies? Aren’t they all owned by greedy, colluding capitalists?

Marxists claim that capitalists do not work and that workers do not own capital. That is why they comprise “social classes.” But nearly all capitalists work, often in work days with very long hours. Meanwhile, a huge portion of capital is held by workers themselves through their pension funds and other institutional investment intermediaries.

…Marxists claim that businesses are owned by a small closed clique of capitalists. Actually, most businesses are “public,” meaning they are owned by shareholders and anyone at all can be a shareholder in them.

But isn’t capitalism opposed to democracy?

Marxists claim that capitalism cannot be democratic. But every single democratic society on earth is predominantly capitalist. Not a single communist regime was ever democratic. Communists take power via military coups and military conquest, not via elections.

But isn’t violence used against people in order to preserve capitalism?

Marxists claim that capitalists use violence to protect their perquisites and privileges. In truth, Marxists in power use violence to protect their perquisites and privileges. They use violence to suppress opposition wherever they manage to seize power, including violence against opposition groups of workers. It is conservatively estimated that 100 million people were killed by Marxism and by Marxists in the twentieth century.

But aren’t workers less well off in capitalist economies?

Marxists think that only things matter in economics, meaning tangible products, and so services do not. They believe that big products are more important than small products, big industries being more important than small industries. They also believe that consumer goods are superfluous and should not be produced much. All those ideas are why the quality of life and the standard of living are so miserable under communist regimes. In wealthy countries, small- and medium-size enterprises are the main engines for producing wealth.

But aren’t people poorer and less free in capitalist economies?

Marxists claim that under Marxism everyone receives according to his needs and contributes according to his capabilities. In reality, under Marxism everyone receives according to whatever the entrenched party apparatchiks decide their needs are, usually sub-sustenance levels of consumption, and the same people decide what are your abilities, generally assumed to be your ability to work endlessly at whatever you are told to do without getting paid much. To put this differently, in the absence of positive incentives, no one is capable of doing anything and everyone’s needs are infinite.

But isn’t a centrally-planned economy with fixed prices better than a free market capitalist economy?

Marxists think that “experts” can tell what needs to be produced. They cannot. That is why Marxist experts produce starvation. In some cases Marxist starvation has produced cannibalism. There is not a single Marxist scholar or expert on earth who could produce a pencil by himself.

But letting people earn money based on what they do leads to lower productivity, right?

Marxists believe that economic incentives do not matter. That is why they think there is no need to pay people more for working hard or exerting effort. It is enough to appeal to their “class interests.” That is why people starve under communism.

But in a Marxist economy, everyone is equal, right?

Marxists pretend to be in favor of the working class collectively owning all property. In reality Marxists always steal the property of members of the working class and turn it over to well-paid party apparatchiks.

But in capitalist economies, when two parties freely agree to exchange items of value for money, one of them is oppressing the other, right?

Marxists believe that in every voluntary transaction, one side wins and the other loses, and so it is impossible for two sides to profit from it. That is why they think you should be told what to buy and how much you should pay for it.

But capitalists go all around the world imposing their free market ideology through military force, right?

Marxists claim that capitalist countries engage in imperialism. But since World War II the largest empires of imperialist conquest were those headed by Marxist regimes.

Marxists believe that there are no real conflicts of interest between the workers living in different countries and speaking different languages or coming from different cultures. That is without a doubt the very stupidest idea of all coming from Marxism. In any case, that is why Marxism is generally spread only via military conquest.

This article is one to e-mail to all your friends who voted for the Marxist Obama. Obama’s Marxism was well known to everyone who took the time to read his books, and to read about his past actions and policies. Now we are going to be governed by someone who knows less about economics than Al Gore knows about climate science.

Maybe one day Obama will release his grades, so we can finally find out which of them is smarter.