Obama Points to New Villain in Chrysler Bankruptcy: Hedge Funds
The president singles out a group of hedge funds and investment firms for rejecting a deal
When President Barack Obama framed Chrysler's decision to file for bankruptcy as the most rational, painless route for the automaker yesterday, he also made it clear that it was the only option left. He went on to blame those who held out for "an unjustified taxpayer-funded bailout": the group of hedge funds and investment firms that refused a deal offered by the Treasury Department.
Now, managers of those firms are angry. "Aren't you entitled to reject a deal?" Bulldog Investors' manager Phil Goldstein asked the Wall Street Journal. But with the public angry at Wall Street and with many frustrated that the taxpayer-propped Chrysler will have to go to bankruptcy court, it may take more than protestations for hedge-fund managers to clear their names.
The negotiations that could have kept Chrysler out of court were derailed by talks with creditors that altogether hold $6.9 billion in the automaker's debt. Although four large banks that hold 70 percent of that debt—Goldman Sachs, Citigroup, JPMorgan, and Morgan Stanley—agreed to accept Treasury's offer of 33 cents on the dollar for the loans, a group of about 20 hedge funds, holding about $1 billion of the debt, rejected the deal.
In his remarks yesterday, the president drew a sharp contrast between the "shared sacrifice" made by other players, from the American taxpayer to the Canadian government, to keep Chrysler afloat, and the firms that "failed to accept reasonable offers to settle on their debt." Because of that refusal, the government would support Chrysler's use of the bankruptcy code "to clear away remaining obligations," he said. In a parting slap, Obama added, "They were hoping that everybody else would make sacrifices, and they would have to make none . . . I don't stand with them."
Now, what the creditors will get back on their investments will be left up to the bankruptcy court. And that might not be good news for hedge-fund managers.
Reader Comments
they saved us
chrysler saved us return the favor
Persistant Greed? Doesn't the rule of law count for anything?
Just because our President the "Media" and have painted these hedge fund managers as greedy, money hungry villains does not mean that their legal contract, that entitles them to be paid in full before all other creditors, is not valid. No matter what we think of these "greedy" "monsters" when they invested, they protected there shareholders with a contract that guaranteed the value of their investment in return for a modest rate of interest. Neither the President, the Congress, nor the Judiciary has the right to nullify a legal contract and dictate terms to any citizen of this county. At least that's not what they taught in school way back in '81!
The stewards of these funds have a responsibility to their investors, who by the way might be you and me. The funds are made up of money invested by teachers credit unions, pensioners, retirement plans, personal retirement accounts, college endowments, etc.
These fund managers have a legal right and fiduciary responsibility to protect there investors. Just as the White House has a responsibility to protect the rule of law, not to try to skirt it through personal attacks and smear tactics. President Obama has taken an oath to "protect and preserve the Constitution" so that a contract will be worth more than the paper it is written on and the law protects us all, no matter how "horribly greedy" we are.
Hedge Funds create NOTHING!
Hedge Funds create nothing but money gained through speculation. For years Chrysler has built automobiles that carried people to school, got them to work, teenagers had first loves in. Three dimensional durable goods designed by Engineers and built by craftsmen.
I WW2 the Chrysler plants built machines of war which helped our nation assit the Allies and untimatly prevail. The Hedge Funds are nothing but gambling houses to enrich a select few. You few, you Hedge Fund Managers, take note. Be happy with what you have gained and now are allowed to keep because of the TARP bailout. We the American people will not allow it a second time, got it! Good for President Obama!
WARNING:
DO NOT ENRAGE THE AMERICAN PEOPLE THROUGH YOUR PERSISTANT GREED!
advertisement
