America, You Asked For It!

Political News and Commentary from the Right

Auto Bailout Includes Kelo-Style Unconstitutional Takings

posted on The Foundry

A key provision of proposed legislation to bailout the General Motors and Chrysler, which say they are on the brink of insolvency, may be an unconstitutional taking of private property. The Takings Clause of the Constitution has been the subject of considerable public interest since the Supreme Court’s Kelo decision involving the taking of a private residence for the benefit of a pharmaceutical manufacturer.

To protect taxpayers, the legislation requires that government loans to the automakers be given priority over all other debt held by the companies. In general, when a business becomes insolvent, debts with higher priority are paid first and are more likely to be repaid.

But General Motors and Chrysler already carry significant loads of “senior” debt with priority over other claims, and it is a standard feature of such debt agreements that borrows cannot subordinate this senior debt—that is, as a condition of the loan, the borrower agrees not take on additional debt that has a higher priority and would therefore imperil the senior debt.

But that’s precisely what the bailout bill purports to do.

…(Read full article)


December 10, 2008 - Posted by | Bailout | , , , , ,

1 Comment »

  1. Every time I tell a liberal friend about the socialist nature of the bailouts and other big government spending programs they like to remind me that socialism requires government control of the means of production.

    Isn’t that what Congress is demanding for their bailout money? Control over the American auto industry?

    It’s a constant slide to the right.

    Comment by Perri Nelson | December 10, 2008 | Reply

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