[Chat] Chrysler dies,hedge funds get nothing and yet?

[Moscatt at aol.com]

I'd say Go  Obama
Hedge funds become the villains in Chrysler's ongoing  saga
_Lita  Epstein_ (http://www.dailyfinance.com/bloggers/lita-epstein/) 
May 1st 2009 at 8:30AM
Text SizeA_A_ (javascript:void(0)) _A_ (javascript:void(0)) 

Filed under: _Company News_ 
(http://www.dailyfinance.com/category/company-news/) , _Investing_ (http://www.dailyfinance.com/category/investing/)  
President Obama _clearly  blamed hedge funds_ 
(http://www.washingtonpost.com/wp-dyn/content/article/2009/04/30/AR2009043004141.html)  for the collapse 
of the Chrysler deal, which ultimately  forced the company into bankruptcy 
Thursday. Hedge funds hold about $1 billion  of the automaker's debt, which 
they bought at deep discounts from other  investors who wanted out.

In his speech Thursday, Obama said, "In  particular, a group of investment 
firms and hedge funds decided to hold out for  the prospect of an 
unjustified taxpayer-funded bailout. They were hoping that  everybody else would make 
sacrifices, and they would have to make none. Some  demanded twice the 
return that other lenders were getting. I don't stand with  them."

As DailyFinance's Peter Cohan wrote yesterday, "Perhaps they  bought 
General Motors (_GM_ 
(http://finance.aol.com/quotes/general-motors-corporation/gm/nys) )  and Chrysler debt in the _open  market at 15 cents on the dollar_ 
(http://www.dailyfinance.com/2009/04/30/hedge-fund-honchos-slash-us-auto-indust
rys-throat/)  and are now holding out for, say, an extra  billion -- 
letting them triple their investment instead of merely doubling  it."

In defense of the hedge funds, one of their attorneys, Ron Geffner,  told 
the Washington Post, "I stand with  the fact that we live in a capitalist 
society where companies who don't modify  their business plans and stay current 
die and go by the wayside." 

That  may be true, but if Chrysler dies, the hedge funds get nothing for 
their  investment. So where's the logic in this statement? Does he mean the 
hedge funds  will stand on principal and let Chrysler die, rather than get at 
least something  for their investment?

Some hedge funds tried for a softer approach at  defending their position. 
A group of firms that would not identify themselves  put out a statement 
that said the government "unfairly asked our fund  shareholders to make 
financial sacrifices greater than those being made by"  other creditors. They are 
holding back, hoping that the bankruptcy court will  award them more as it 
discharges the debt.

Sarah Anderson, director of  the Global Economy Project at the Institute 
for Policy Studies, summed it up  well for the Post, "It seems rather  
short-sighted to risk having the auto sector collapse so that they can get a few  
more cents on the dollar for their investors."

While hedge funds try to  make those few extra cents on the dollar, 
thousands of workers face the prospect  of additional layoffs and the car industry 
moves just one step closer to  collapse. Where do you stand on this one?


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