The Chrysler Obama-Nation

Last week I explained why the Chrysler bailout was a "pre-test" for the bank Stress Tests. I was wrong. It's much worse than I thought.

Obama's shaft of bondholders to rescue a money-losing concern that won't make cars America wants or needs has set a precedent that will hurt a US institution far more important than the banking system.

Understand that I have been a fan of the Paulson-Bernanke emergency liquidity actions to stave off a banking collapse and deflationary depression. But, I might take that temporary economic ailment in place of what might be on the horizon.

What I am talking about is a full-frontal assault on freedom and property, the two crucial elements, protected by law, that made this country great because they were the fertile soil for ideas to grow. Without political and civil freedom and free-flowing capital in 18th century America (think natural resources and trade), natural human ingenuity could not have built what we have here.

What does this have to do with 21st century America and the 3 million auto industry jobs Obama is trying to save? Well, he just created a life-support system for a company that is not healthy for America--not for the UAW workers, not for the parts manufacturers, not for the economy or the environment. And he broke the rules of a free society built on capitalism to do it by telling lenders that they are bad people for wanting the money back that they loaned a risk-taking entrepreneur.

This is a move that could have devastating consequences for the American traditions of freedom, capital, and innovation. To imagine what I am talking about, consider the following natural alternative to the unnatural auto bailout: (and if you are objecting right now with "What about the bank bailouts?" trust me for another few minutes and hopefully I can show you how this is worse.)

Let's say we just followed the system of laws that protect freedom, property, and capital markets and that bankruptcy courts could distribute the proceeds of a failed business to its rightful stakeholders. Yes, millions out of work for months, maybe years. But, what also happens is that secured lenders who didn't get cash would collect the property and other assets guaranteeing their debt and they would liquidate them. And then you know what could happen?

Up through the cracks, entrepreneurs with ideas would crawl, full of inspiration and courage and foolish pride to think they could create a better car and a better car company. Let's say that one of those people is you. You would try to buy those idle auto-making assets with borrowed money and lots more ideas, courage, and foolish pride. And then you would hire idle auto workers who would rather work for you than a crippled, government-subsidized Chrysler or GM on life-support.

America at its best, doing what it has done better than any experiment with freedom and capital anywhere.

Kevin Cook, ONN.tv

 |  |