Hedge Funds Tell Obama to Stick It

[Toro]

Good for them. Obama has gone over the line. Creditors for Chrysler have every right to fight for their investors. I hope they win.

Plans for a quick sale of Chrysler to a new company majority-owned by a union-aligned trust is "patently illegal" and will be fought in bankruptcy court, one of the holders of the automaker's secured debt said on Thursday.

"We don't succumb to pressure and don't agree to unfair and illegal payment schemes," said George J. Schultze, the managing member of Schultze Asset Management. "We're not conflicted by TARP money or active stress tests."

Chrysler secured creditor to fight illegal plan | Reuters

The responses of hedge fund managers [regarding Chrysler] have been, appropriately, outrage, but generally have been anonymous for fear of going on the record against a powerful President (an exception, though still in the form of a “group letter”, was the superb note from “The Committee of Chrysler Non-TARP Lenders” some of the points of which I echo here, and a relatively few firms, like Oppenheimer, that have publicly defended themselves). Furthermore, one by one the managers and banks are said to be caving to the President’s wishes out of justifiable fear. ...

Here's a shock. When hedge funds, pension funds, mutual funds, and individuals, including very sweet grandmothers, lend their money they expect to get it back. However, they know, or should know, they take the risk of not being paid back. But if such a bad event happens it usually does not result in a complete loss. A firm in bankruptcy still has assets. It’s not always a pretty process. Bankruptcy court is about figuring out how to most fairly divvy up the remaining assets based on who is owed what and whose contracts come first. The process already has built-in partial protections for employees and pensions, and can set lenders' contracts aside in order to help the company survive, all of which are the rules of the game lenders know before they lend. But, without this recovery process nobody would lend to risky borrowers. Essentially, lenders accept less than shareholders (means bonds return less than stocks) in good times only because they get more than shareholders in bad times.

The above is how it works in America, or how it’s supposed to work. The President and his team sought to avoid having Chrysler go through this process, proposing their own plan for re-organizing the company and partially paying off Chrysler’s creditors. Some bond holders thought this plan unfair. Specifically, they thought it unfairly favored the United Auto Workers, and unfairly paid bondholders less than they would get in bankruptcy court. So, they said no to the plan and decided, as is their right, to take their chances in the bankruptcy process. But, as his quotes above show, the President thought they were being unpatriotic or worse.
The President's attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to "sacrifice" some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power.

Let’s also mention only in passing the irony of this same President begging hedge funds to borrow more to purchase other troubled securities. That he expects them to do so when he has already shown what happens if they ask for their money to be repaid fairly would be amusing if not so dangerous. That hedge funds might not participate in these programs because of fear of getting sucked into some toxic demagoguery that ends in arbitrary punishment for trying to work with the Treasury is distressing. Some useful programs, like those designed to help finance consumer loans, won't work because of this irresponsible hectoring.

Hedge Funds Outraged At Obama Bullying But Also Cowering In Fear

The heavy-handedness of the administration and the Democrat Congress is discouraging investment firms from participating in their alphabet soup of programs designed to unfreeze the credit markets for reasons such as this nonsense above.

 

[RodISHI]

People will not want to invest their money if this is what the government is going to do to investors.

 

[manu1959]

People will not want to invest their money if this is what the government is going to do to investors.

invest....you act like you will have a choice.....the took your future tax money and gave 15 billion to gm...they promptly posted a 6 billion dollar loss.....now they will fille bk and the government will take the assets as they will argue they are the prime creditor and will tell eveyone else to stick it.....so if you had any money in these hedge funds....and if you have a 401k you do you will watch that fall...

watch....

 

[Iriemon]

People will not want to invest their money if this is what the government is going to do to investors.

invest....you act like you will have a choice.....the took your future tax money and gave 15 billion to gm...they promptly posted a 6 billion dollar loss.....now they will fille bk and the government will take the assets as they will argue they are the prime creditor and will tell eveyone else to stick it.....so if you had any money in these hedge funds....and if you have a 401k you do you will watch that fall...

watch....

Damn, I didn't have the $1 million minimum to invest in the hedge fund, but fortunately my 401k has been doing a lot better in recent weeks.

 

[manu1959]

People will not want to invest their money if this is what the government is going to do to investors.

invest....you act like you will have a choice.....the took your future tax money and gave 15 billion to gm...they promptly posted a 6 billion dollar loss.....now they will fille bk and the government will take the assets as they will argue they are the prime creditor and will tell eveyone else to stick it.....so if you had any money in these hedge funds....and if you have a 401k you do you will watch that fall...

watch....

Damn, I didn't have the $1 million minimum to invest in the hedge fund, but fortunately my 401k has been doing a lot better in recent weeks.

yours could be in there.....i would guess if most people are properly invested in us markets, us bonds, foreign markets and imerging markets you would have seen growth....mine went up 15k in the first quarter.......pity it lost 30% last year.....oh well i have a couple of decades to rebuild.....two decades ago i had zero....

 

[RodISHI]

People will not want to invest their money if this is what the government is going to do to investors.

invest....you act like you will have a choice.....the took your future tax money and gave 15 billion to gm...they promptly posted a 6 billion dollar loss.....now they will fille bk and the government will take the assets as they will argue they are the prime creditor and will tell eveyone else to stick it.....so if you had any money in these hedge funds....and if you have a 401k you do you will watch that fall...

watch....

I have no idea what my financial future holds. I never invested the stock market, hedge funds or a 401k. I spent my earnings on houses and land, Rod spent his on heavy equipment. We were both wipe out through fraud by WF bank and some other heavy hitters in the mining industry.

Actually it is not my personal worry at this point in life. I have resolved to be poor for the duration rather than give in to forced into a partnership with corrupt entities. I do have a concern for my grandchildren and their freedoms though. It bothers me that our government is willing to help steal personal freedom via fraud and force on the premises that they are doing what is best for the multitudes. I do not believe stealing from one to give to another is right in any fashion. Bailing out these corrupt, crooked, slimey banks because they are to big to fail was a farce that has awakened many people to the corruption and collusion that has been perpetrated on the American public. The GM bailout is no better. To add to that now it appears that the government is willing to highjack freedom and liberties even more so than they already have.

I know our net worth, personal property, real property and civil rights meant diddly squat to many out there. Even many on here who have assumed I was merely a whiner. Apparently others will now have that same feeling as we have had. I doubt they will have law enforcement threatening them while it is all going down though. Their homes, vehicles, cuboards, personal household effects and freezer contents are probably safe from being raided, stolen and vandelized. They are just going to lose some cash/paper assets in the deal.

My future taxes.. That is a laugh and a half. It goes back to the saying I had years ago when I bid and won my first contract. A few years later after getting over being blacklisted I had a man ask me, "Aren't you the least bit scared of these guys?" I told him the same thing I tell you. Nothing from nothing is nothing. I have nothing to lose here. Shoot it is even better now than back then. I no longer have two little mouths to feed.

I do wish those bond holders the best. I'll tell them what I have heard many times over the last six years, "Good luck".

 

[Iriemon]

People will not want to invest their money if this is what the government is going to do to investors.

invest....you act like you will have a choice.....the took your future tax money and gave 15 billion to gm...they promptly posted a 6 billion dollar loss.....now they will fille bk and the government will take the assets as they will argue they are the prime creditor and will tell eveyone else to stick it.....so if you had any money in these hedge funds....and if you have a 401k you do you will watch that fall...

watch....

I have no idea what my financial future holds. I never invested the stock market, hedge funds or a 401k. I spent my earnings on houses and land, Rod spent his on heavy equipment. We were both wipe out through fraud by WF bank and some other heavy hitters in the mining industry.

Actually it is not my personal worry at this point in life. I have resolved to be poor for the duration rather than give in to forced into a partnership with corrupt entities. I do have a concern for my grandchildren and their freedoms though. It bothers me that our government is willing to help steal personal freedom via fraud and force on the premises that they are doing what is best for the multitudes. I do not believe stealing from one to give to another is right in any fashion. Bailing out these corrupt, crooked, slimey banks because they are to big to fail was a farce that has awakened many people to the corruption and collusion that has been perpetrated on the American public. The GM bailout is no better. To add to that now it appears that the government is willing to highjack freedom and liberties even more so than they already have.

I know our net worth, personal property, real property and civil rights meant diddly squat to many out there. Even many on here who have assumed I was merely a whiner. Apparently others will now have that same feeling as we have had. I doubt they will have law enforcement threatening them while it is all going down though. Their homes, vehicles, cuboards, personal household effects and freezer contents are probably safe from being raided, stolen and vandelized. They are just going to lose some cash/paper assets in the deal.

My future taxes.. That is a laugh and a half. It goes back to the saying I had years ago when I bid and won my first contract. A few years later after getting over being blacklisted I had a man ask me, "Aren't you the least bit scared of these guys?" I told him the same thing I tell you. Nothing from nothing is nothing. I have nothing to lose here. Shoot it is even better now than back then. I no longer have two little mouths to feed.

I do wish those bond holders the best. I'll tell them what I have heard many times over the last six years, "Good luck".

Sorry for your misfortune.

I'm not so sure I share your sympathies for the bondholders. My guess is they know their bonds would be worth little in a Chrysler liquidation, and are betting that the Govt will not let that happen so they are trying to leverage themselves to get a bigger piece of the bailout as a windfall profit -- even at the cost of American jobs going down.