Funds Hoodwinked: Peter Schiff's Editorial in the New York Post
(extracts from the article)
This week, the Obama Administration failed to push through a reorganization plan for Chrysler that would have, among other things, used government bailout money to give the United Auto Workers a majority stake in the company.
Reacting to the setback, President Obama took aim at the few Chrysler bondholders (including hedge funds and private investors) who had scuttled the plan. He described these “holdouts” as unwilling to make the sacrifices that the company, the workers, the pensioners, and the taxpayers had been prepared to make for the good of the country. Ironically, the “greedy” group that Obama holds responsible for killing the auto industry is the only force capable of saving it.
Singling out hedge funds as the bad guys will not be politically controversial. The accusation falls comfortably into the Administration’s view that unfettered capitalists on Wall Street and poor planning by short-sighted CEO’s are responsible for our problems. These ideas, echoed in Congress, the media, and on Main Street, completely ignore how government intervention incentivized the bad behavior and brought down our economy.
The investors’ reluctance to cave in sends Chrysler to bankruptcy court. Normally, this process would be the best means to reallocate Chrysler’s assets in a way that benefits our economy. But Obama made clear that this will be no ordinary bankruptcy. The guiding hand of Washington had already formulated its far-sighted plan to save Chrysler, and this proceeding is meant to strong arm those won’t cooperate. As a result, expect a cram-down rather than a negotiation. The sanctity of the bondholder’s investment contracts will crumble under the political weight of Obama’s vision. to read the rest please click here
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