Hedge funds want to be left alone…..

In his How the World Works column for Salon.com Andrew Leonard, while explaining why the Obama administration found it so difficult to save Chrysler in the way it wanted,  has a good rant about hedge funds and their failure to play any part in helping to save the US economy.

 The main grief the holdout lenders appear to have is that, according to bankruptcy law and tradition, they believe that the Chrysler debt that they purchased (often at a discount, long after it was clear that the company was in deep trouble) has rights that are superior to some of the “junior” parties involved. The government, they believe, is stumbling into a Hugo Chavez role, running roughshod over everyone in its way. First — a take it or leave it deal for Wall Street hedge funds. Next nationalization of Citigroup! And then finally, everyone who works on Wall Street gets forced to wear a dunce cap and kick-me sign……

…. These are smart people, we have been led to believe. Do they not understand the mood in the country? Do they not get, that to many people, the Obama administration has been too soft on Wall Street. How can they not understand that there are times to bitch and moan, and times to just take your punishment, and now is the time for the latter.

What he doesn’t say is that these people know only too well that if they willingly make concessions now, people will no longer find them as attractive an investment as they used to and that as a result they will never be able to go back to business as usual after the crisis is over. If they can tell potential investors after the crisis that all the concessions they made during it were forced on them by others, then their credibility remains intact, and when the crisis is over they can get back to business as usual.

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