GM plan could drive bond market crazy

General Motors bondholders have to accept a parsimonious offer to exchange their loans for stock and warrants. But there is no escaping the long-term damage that has been inflicted on credit markets by the Barack Obama administration's attempts to reward the United Auto Workers, one of the US president's strongest supporters in the last election, while trampling decades of legal precedent regarding owners of corporate debt.

In the Chrysler bankruptcy arranged by the government in April, bondholders also got short shrift, while the union, which might have received little or nothing in a normal bankruptcy, was awarded 55 percent of the company.

What's my interest in this? I head a nonprofit group that encourages developing nations to adopt policies that will lead to prosperity - starting with transparency and the rule of law - and hold up America as a model. Yet in its high-handed dealings with Chrysler and GM, the Obama administration reminds me of an irresponsible third-world regime, skirting the law and handing economic prizes to political cronies.