Obama: The Rule of Law and the Chrysler Debacle

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Table of Contents

Introduction
Theory of the rule of law
Logistics of the rule of law
Chrysler bankruptcy
Obama’s Action
Conclusion
Works Cited

Introduction

The Rule of law is also well known as Supremacy of law and it establishes the fact that nobody should be considered above the law of a particular nation. Although its definition varies among different countries and their legal customs, rule of law is a universally accepted legal maxim and defines a state of order where the events must conform to the respective laws. Decisions need to be taken by enforcing generally acknowledged laws and principles, free from any interference of discretion. The purpose of this legal maxim is to act as a protection against arbitrary government powers. Rule of law safeguards us from mob rule and also from totalitarian leaders and is thus, hostile to both anarchy and dictatorship.

Theory of the rule of law

Theoretically, the rule of law, as such, does not say anything about the fairness of laws but only mentions how legal systems should function. As a result, rule of law can even exist in undemocratic nations and in those countries where human rights are not respected, which has been the case with a number of modern dictatorships. Thus, although rule of law is among the essential conditions for a democracy to exist, it alone is not an adequate condition. Its major role is to preserve, protect and defend the basic rights and assets of individuals and businesses all over the world from the abusive and arbitrary use of political power. (Hutchinson, 116)

Logistics of the rule of law

Logically, the rule of law is based on the concept that truth and thus, law itself has been established on basic principles which we can discover but cannot create of our own will. We can describe it as an official political system through which the government is restrained. This is done by the promotion of several liberties and creation of certainty and order on how to run a country. One of the principles, which is among the crucial applications of this maxim, is that legally political authority can be exercised in line with the publicly written and disclosed laws that have been adopted and imposed keeping in mind several traditional procedural steps. Rule of law acts as a basis for not only order but also for our liberty since it regards the citizens of a nation as equals. It allows individuals and nations to organize themselves, prepare for the future and dissolve disputes in an intellectual manner. (Neumann, 124)

The Founding Fathers were responsible for including the rule of law into the US Constitution in order to confine the powers of arbitrary governance. Its clear principles applied to both the weak and the powerful, equally and have been so until now in the Chrysler bankruptcy where current President Barack Obama ignored the rule of law, since his government ignored their contracts with the investors. The US Constitution was framed by people who understood that a close relation existed between the enforcing of contracts, mainly credit contracts, and rule of law.

Chrysler bankruptcy

This was also done to stop state laws that were debtor friendly from spawning an economic chaos. There are two clauses in the US Constitution favoring the rule of law. The Contract Clause prohibits the states from intervening on the responsibilities to pay the respective debts. The Bankruptcy Clause authorizes the US federal government with the sole responsibility for ordaining uniform laws regarding the issues of bankruptcy. (Hutchinson, 54-55)

During the Chrysler bankruptcy, the behavior of Barack Obama’s government was found to deeply challenge the existence of the rule of law. The secured creditors who are actually qualified to first receive the priority payments by the Absolute Priority Rule have been oppressed by the President and made to accept a mere 30 cents on the dollar for their respective claims, while, the union of the United Auto Workers got around 50 cents on the dollar, although they only held junior creditor claims. This Absolute Priority rule acts as the backbone of the Bankruptcy Clause since it preserves the contract rights and essential properties of the creditors. (Harshaw, 1, 4)

It also guarantees that bankruptcy is mainly used like a procedural mechanism and nothing else while resolving any financial distress. President Barack Obama violated this priority rule thus, undermining its commitment as a number of questions regarding redistribution will be introduced in the process, as a result of this. He indirectly plundered the rights of many of the senior creditors so that the rights enjoyed by the junior creditors could be benefited.

Obama’s Action

Also, the US government wants to speedily sham sale most of the assets of Chrysler which only takes place when the assets are perishable or the value of the company is at risk. But this is not so with Chrysler. When the question of reorganization comes up, it is up to the creditors to vote either in favor of the plan or to reject it. Although, President Barack Obama’s government has an asset sale plan implementing a real organization, but still, in reality, he is denying the creditors the chance to vote for it.

Through his actions regarding the Chrysler bankruptcy, President Barack Obama has stepped over the line separating impulsive conduct of human beings and the order of the rule of law. In doing so he might have caused thousands of new businesses to fail since these businesses which received financing earlier may not be as lucky in the future. Lenders may be afraid of having to face a confiscation by the US government someday. Thus, even though President Barack Obama helped to save the jobs of several union workers he may have also caused numerous job cuts among the people in the near future since he trampled the purity of the contracts in the present. (Barone, 1, 3)

Conclusion

The rule of Law is not simple significant for the citizens as a means for economic effectiveness but it also endows us with a safeguard against any arbitrary governance or political action. (Hutchinson, 225) But the way President Barack Obama’s government allegedly threatened the bondholders is completely unprecedented. And although the union workers, who are also supporters of President Barack Obama, may have been helped for a short term, the question of how eager money lenders would be in the future to lend credit to other companies, like General Motor, arises, knowing that their value and savings may be completely discredited or diminished by the administration in order to enhance the condition of government friendly unions. Also, President Barack Obama’s outlook regarding the rule of law becomes apparent from his words when he said that justice cannot be merely taken as some legal theory which is abstract rather it should take in consideration of the people in order to rule in favor of the right ones and not preside according to some rule of law.

Works Cited

Barone, Michael. “White House puts UAW ahead of property rights.” Washington Examiner . 2009: A2.

Harshaw, Tobin. “Chrysler Surgery, Post-Op.” The New York Times. 2009: A3.

Hutchinson, Allan. The Rule of Law: Ideal Or Ideology. New York: Carswell, 2008.

Neumann, Michael. The rule of law: politicizing ethics. London: Ashgate, 2002.

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