The Lawless President

Candidate Barack Obama promised “change,” but few suspected one of the biggest changes would be an unparalleled attack on the rule of law orchestrated from the Oval Office. It is, to say the least, an ironic turn of events for a president who fancies himself a constitutional scholar and who rode into office excoriating George W. Bush for “shredding” the rule of law.

We saw this on full display last week as Obama disingenuously promised a “quick” bankruptcy of Chrysler and vilified the car company’s creditors as “speculators.” As a Financial Times columnist explained:

For once, the law is unambiguous: senior secured creditors should be paid before junior unsecured creditors and employees (the words “senior” and “junior” are a bit of a give-away on this point). By turning legal wisdom on its head — and vilifying investors that opposed the move — the administration is signaling the principle is no longer sacred.

While that, in itself, will not cause a massive capital flight away from the U.S., it will have some serious repercussions.

Fund managers and hedge funds are already reluctant to participate in the authorities’ plans to rid banks of toxic assets for fear of government retribution on pay. The Chrysler “cram-down” of lenders is hardly going to fill them with confidence.  …

The government has a real problem here. Call it the “paradox of the official bailer-outer”: the authorities’ position as rescuer-in-chief forces them to take an active role in the private sector, yet their goals (saving jobs, getting re-elected etc) conflict with the smooth running of the very markets they are trying to preserve.

This, of course, is not the only instance in which the administration and its allies have tried to eviscerate property rights. The AIG bonus debacle was a shabby display of government-by-mob rule. While the president later thought the better of it, his first reaction was to gin up some anger against the AIG executives who had a legal right to their bonuses — and whose contract rights had been protected (they thought) by congressional action instigated at the behest of Treasury Secretary Tim Geithner. So much for the sanctity of contracts.

But there are limits to what even congressional Democrats will tolerate. Last week, with the help of the newest Democrat Arlen Specter, the Senate defeated the president’s “cram down” mortgage proposal, which was at the heart of his mortgage relief plan. The president thought it a grand idea to allow judges to rewrite mortgages; Congress had other ideas. Still, liberal Democrats seethed over lenders’ insistence that the sanctity of contracts be preserved. Sen. Chuck Schumer railed, “They’re being almost lemming-like, for their immediate, short-term interests.”

And beyond these specific actions the president wants to empower his treasury secretary to maraud through the economy and close down firms which are deemed to be failing and could pose a systemic risk to the economy. The property rights of secured creditors? Of shareholders or of workers with employment contracts? Pish posh. Such old thinking.

Never before have we seen such untrammeled disregard both for property rights and existing legal mechanisms. Congress has the power of the purse, but the bailouts are now funded largely through the Fed. Bankruptcy courts are the means of voluntarily liquidating or reorganizing faltering firms, but Obama wants the government to unilaterally make those decisions. And on it goes.

All of this is justified in the name of addressing the economic crisis, but the implication is clear and long-reaching. Property owners, investors, contracting parties, and anyone relying on the impartial operation of the rule of law are at risk.

But the lawlessness is not limited to the financial world. So too in the national security realm we see the administration itching to disregard the law. The Obama team is on the verge of releasing Guantanamo detainees, and specifically the Uighurs who were trained in terror camps in Afghanistan. Federal law deems individuals who received terror training to be “inadmissible” to the U.S. Nevertheless, the administration seem bent on doing just this — perhaps on some theory that the president can do whatever he darn pleases. It is an approach that surely candidate Obama would have decried.

But, that it seems, is now par for the course. Obama wants to enact wholesale changes in the fabric of American society, vastly expand the power of the federal government, and run all of this out of the White House. And if employment contracts, bankruptcy and immigration laws, and property rights get run over in the process, well that is the price one pays for “change.” For those who see the law as a bulwark against government abuse and a check against an imperial executive now is a moment of truth. Once the rule of law is lost it is hard to recover — and the implications for Americans’ prosperity, freedom, and security will be serious and long lasting.