Indiana fights back against Obama 'taking' from state retirees

George Will:

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State governments, too, are expected to accept Washington's whims, but plucky Indiana is being obdurate. Gov. Mitch Daniels, alarmed by what he calls the Obama administration's "shock-and-awe statism," is supporting state Treasurer Richard Mourdock's objection to the administration's treatment of Chrysler's creditors, which include the pension funds for Indiana's retired teachers and state police officers and a state construction fund. Together they own $42.5 million of Chrysler's $6.9 billion (supposedly) secured debt.

Compliant, because dependent, banks bowed to the administration's demand that they accept less than settled bankruptcy law would have given them as secured creditors. Next, the president denounced as "speculators" remaining secured creditors, who then folded and accepted less on the dollar than an unsecured creditor -- the United Auto Workers union -- is getting. This raw taking of property from secured investors penalized those "speculators" -- retired Indiana teachers and state police officers who, Mourdock says, are being "ripped off by the federal government."

He is asking a court to declare that the Obama administration's actions have violated "more than 100 years of established law by redefining 'secured creditors' to mean something less" and that the actions violate the Fifth Amendment protection against the seizure of private property. Furthermore, he says, the government is guilty of "misuse" of the Troubled Assets Relief Program, which gives the Treasury authority only to aid financial institutions, not industrial companies.

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It takes a certain amount of either willful ignorance or arrogance to call innocent state retirees "speculators" while reward UAW retirees who were responsible for the auto mess. If justice is still available in Obama's America these retirees should win.

In the pre Obama world it would require a signed subordination agreement to put unsecured creditors ahead of secured creditors. Because of what Obama has done there is already a premium being paid by unionized companies who are going into the debt market. This higher price for borrowing will be added to their higher cost of labor making them less competitive overall.