<p><a href="http://finance.yahoo.com/tech-ticker/article/241837/Hedge-Fund-Leader-Blasts-Obama-for-%22Bullying%22-and-%22Abuse-of-Power%22?tickers=^dji,^gspc,GM,ARM,DAN,GT,XLF?sec=topStories&pos=9&asset=&ccode=">Hedge Fund Leader Blasts Obama for "Bullying" and "Abuse of Power"<br> </a></p> <p><span style="font-family: Arial;">Cliff Asness, whose firm manages some $20 billion of assets, has written an open letter blasting President Obama for his attack on the hedge fund industry in the wake of the <a href="http://finance.yahoo.com/tech-ticker/article/yftt_239942/UAW-Gets-the-Goldmine-Did-Chrysler-Creditors-Get-the-Shaft?tickers=BAC,JPM,C,XLF,GM">Chrysler bankruptcy</a>. </span></p> <p><span style="font-family: Arial;">As you'll recall, hedge funds, which hold approximately $1 billion in Chrysler bonds, refused the government's offer to take approximately thirty cents on the dollar. Obama accused hedge funds of holding out "for the prospect of an unjustified taxpayer-funded bailout."</span></p> <p><span style="font-family: Arial;">These comments have enraged many in the industry but few have spoken out publicly. Asness, whose firm doesn't hold Chrysler bonds, says the industry is genuinely afraid in the face of Obama's power. Stating that he himself is "fearful writing this," Asness still pulls no punches:</span></p> <ul> <li><span style="font-family: Arial;">"Let’s be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients’ money to share in the “sacrifice”, <strong>they are stealing</strong>."</span></li> <li><span style="font-family: Arial;">"The President screaming that the hedge funds are looking for an unjustified taxpayer-funded bailout is the <strong>big lie writ large</strong>. Find me a hedge fund that has been bailed out. Find me a hedge fund, even a failed one, that has asked for one. In fact, it was only because hedge funds have not taken government funds that they could <strong>stand up to this bullying</strong>. The TARP recipients had no choice but to go along."<br> </span></li> <li><span style="font-family: Arial;">"<strong>The President's attempted diktat</strong> 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? <strong>Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power."</strong></span></li> </ul> <span style="font-family: Arial;">Henry discusses the controversy with hedge fund manager Jeff Matthews, of Ram Partners. (He's also author of the popular blog <a href="http://jeffmatthewsisnotmakingthisup.blogspot.com/">Jeff Matthews Is Not Making This Up</a>.) Matthews says it's no surprise that Obama would favor unions over hedge funds and that there's no use in crying foul in the court of public opinion. But, says Matthews, expect the Administration's tactics to be challenged where they should be: the court of law.</span> <p><span style="font-family: Arial;">Here's the full text of Asness's letter, via Zero Hedge <a title="blocked::http://zerohedge.blogspot.com/" href="http://zerohedge.blogspot.com/">http://zerohedge.blogspot.com/</a></span></p> <p> </p> <p>He's right. </p>
He's absolutely right and it's high time that someone shouts that the emperor has no clothes on! Obama is being even more brazen in his shake down of the GM bondholders....saying that they should only get 10% of the equity, while the government and the UAW get 90% of the equity. I forget the actual breakdown, but the bondholders have something like 2x the amount of secured debt on GM compared to the government's loan and obligations to the UAW. Yet, because of the Obama squeeze, the UAW will end up controlling GM rather than GM's largest collection of creditors - the bondholders. This constitutes total socialist theft from the rightful asset holders (the bondholders). And to make matters worse, many of the largest corporate bondholders will be perfectly happy to see GM go into bankruptcy because they hold CDS's backed by AIG (which in turn is also backed by our good ol' government). Meanwhile, any mom and pop individual bondholders who put their retirement savings into GM bonds will be screwed. That's Obama socialism for you (he's gotta repay those union bosses for their support)!
The fact is, if it weren't for the gov bailout, GM would've been BK by now. Bondholders would've gotten even less. Second, the question of bondholders vs UAW is...what kind of debt or obligations is the UAW holding? It appears the BK courts will favor the UAW over bondholders. SO...the order is... 1. UAW 2. US government 3. bondholders Don't like it??? Who told you to lend money to GM??? Oh, you thought you were being smart by investing in high-yield securities! Obama was right. These hedgefunds bought GM debt CHEAP, betting that they might be bailed out and given free money. Fuck the greedy hedge funds!!!
Sure, he's right, but Mr. Assness would have needed to write that same letter to a McCain administration, if the election would have went the other way. Obama's mistake was opening his big mouth and singling out the hedge funds. Yes, it's ugly if investors bought junk bonds thinking it was worth the risk since they just KNEW the government would pay them off, but the whole damn situation is ugly. Nobody is wearing white to this wedding.
True. But as any of us with a brain realize, when it comes to wealth, power and Wall St., a political label means very little. Partisan politics blinds most Americans with the scraps that fall of the table, while the real agenda remains virtually unchanged whether a Republican or a Democrat is in office. Or perhaps you don't affiliate yourself with either party and you're just pointing out something that you consider a mistake (and would have done the exact same thing with McCain) and not just rooting for the home team?
I call bullshit. Fuck the greedy UAW is my response. They're he ones (along with round-heeled managers over the years) led to their business being ruined. If two parties hold the same contract in their hands, it's the same contract. It doesn't matter if it's a little frail old widow or a fund that thought the contract was mis-priced based on the contract and applicable laws. People lent money to GM in full faith of our contract law environment. Our fuckhead in office is rapidly trampling all consistency in our contract law environment, so it will be much harder to borrow in the future. If your contract can be torn up at any time and all the assets handed over to labor, are you going to be more or less willing to lend? Had GM gone BKPT late last year, and there was an orderly (and legal!!) proceeding, the bondholders would have been way better off than now. Now they'll ram all the assets through a 363 sale, and do it so fast that no other bidders can raise $. Bondholders and creditors will have to compete for some pathetic little fund of 363 sales proceeds, $30B plus of taxpayer bailout money will be immediately down the toilet, and then all the billions of DIP money will likely go down the toilet as well... Write your paper about it, and your news station. They're not picking this up. I don't know why.
Its fairly predictable how big capital will react to the trampling of contract law - it will go elsewhere in search of a better environment.