The Demagoguery Moves to GM

From a reader, via Bloomberg

GM's offer is "grossly unfair to the point of abusive," Glenn Reynolds, chief executive officer of CreditSights Inc. in New York, wrote in a report this week. "Politics remains an overriding factor in the equation and has been decidedly unfriendly to the interest of bondholders in a contest with the disproportionately outsized power of organized labor and other Washington-heavy constituencies and interest groups."...

"The attack on institutional investors by the administration in this process is a very strange approach and borders on demagoguery," CreditSights' Reynolds wrote in the report. "The bondholders are being painted into a corner and will have no chance but to stand and fight. You can call them names as long as they get treated fairly. Offer them virtually nothing and then call them names? Now that's just cold."

And here is Cliff Asness, a hedge fund manager not involved with Chrysler:

  • "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", they are stealing."
  • "The President screaming that the hedge funds are looking for an unjustified taxpayer-funded bailout is the big lie writ large. 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 stand up to this bullying. The TARP recipients had no choice but to go along."
  • "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."


  1. James H:

    Haven't the GM bondholders learned anything from the Chrysler BK? SHHHH! Don't speak, lest you lose everything. The Masterful One will decide who should get the proceeds. The secured lenders should say "thank you, mr. emperor, for your gracious generocity" when they are given $0.05 on the dollar, or they may get zero.

    Can the constituents of the "hedge funds" sue the funds for abandoning their fiduciary duty after rolling over for The Masterful One?

  2. K:


    Your tongue-in-cheek comment explains why I think creditors should fight to the end in the Chrysler BK. If the government plan wins at Chrysler then GM will file with the same plan and players. And with the same winners and losers.

    I'm strictly an amateur about hedge fund law. But I think HF investors have few options about suing managers. The original idea was that these funds were open only to sophisticated investors who were willing and able to take big risks. And that management would have great freedom in running matters.

    Of course you can't sign away your protection against fraud. But a foolish legal tactic isn't fraud.

  3. rxc:

    "Comrades! The insurrection of five kulak districts should be pitilessly suppressed. The interests of the whole revolution require this because 'the last decisive battle' with the kulaks is now under way everywhere. An example must be demonstrated.

    1. Hang (and make sure that the hanging takes place in full view of the people) no fewer than one hundred known kulaks, rich men, bloodsuckers.
    2. Publish their names.
    3. Seize all their grain from them.
    4. Designate hostages in accordance with yesterday's telegram.
    Do it in such a fashion that for hundreds of kilometres around the people might see, tremble, know, shout: "they are strangling, and will strangle to death, the bloodsucking kulaks".
    Telegraph receipt and implementation.
    Yours, Lenin.
    Find some truly hard people"[

  4. Tribal Elder:

    Is there a BK lawyer out there ?

    BO is seeking to redirect assets in a BK case, for his political gain.

    Q- Is that conversion ? Is the BK case, in an adversary action, the place to bring this fight ?

  5. Methinks:

    rxc, there's nothing I love more than one of Obama's eloquent speeches. Oh, sorry, that was Lenin. Hard to tell them apart sometimes.

    K, hedge fund clients can sue hedge funds very easily and they do so with some frequency. It's very easy to get into court. Whether they will be able to recover anything is another story - likely not.

  6. Matt:

    Ironic that an article linked on a libertarian blog would have the CreditSights guy whose name is Glenn Reynolds. Lol.

  7. Ms. Ann Thrope:

    Actions have consequences.

    Friends of mine in a few of the remaining, financially solvent, non-tarp remnants of the commercial lending / joint venture business tell me that one of their new criteria for commercial/industrial loans is that neither the borrowers nor any significant tenants of a property are union businesses.

    It doesn't take a rocket scientist to figure out that if there isn't any real security in an investment, no smart investor will touch it.

    ...Good thing GM has the gubmint to bail them out. Once Obama's sweet little tit-for-tat deal transpires, no one else will lend to them.