Making Obama Mad

Mr. Cool got mad when certain hedge fund managers and other Chrysler creditors refused to go along with his plan to turn Chrysler over to the unions and avoid bankrupcy. As it turns out those guys that made him mad probably saved their clients a billion or two in real money:

One rap against President Obama is that he never gets mad. The Chrysler bankruptcy may have proven otherwise.

When Obama singled out “investment firms and hedge funds” that wouldn’t agree to restructure Chrysler’s debt on the government’s terms, his scorn was palpable. “I don’t stand with them,” he said pointedly. “I don't stand with those who held out when everybody else is making sacrifices.”

The president was referring to a group of financial firms that hold a big chunk of Chrysler’s $6.9 billion in debt. Some of Chrysler’s creditors agreed to take 33 cents on the dollar and let Chrsyler off the hook. But other creditors said no to that deal, gambling that they’d get more from a bankruptcy judge. They may be right: Fitch Ratings estimates that bondholders could get 50 to 70 percent of their money back if Chrysler liquidates, and a bit less if Chrysler emerges as a going concern. In either case, that’s a better outcome for creditors than the 33 percent return they would have gotten under the government’s offer.

On $1 billion in debt, the difference between a 33 percent and a 50 percent redemption is $170 million. On the whole $6.9 billion in debt, the difference would be almost $2 billion. Sure, some of that accrues to rich investors who can probably afford the haircut, but much of the money is invested on behalf of pension funds, mutual funds, and the retirement accounts of ordinary Americans. Should they really accept a deeper loss because the government asked them to?

As one of millions who have seen their 401k funds savaged by the market collapse, I'm all for anybody who can retain some degree of shareholder value. Good work, evil hedge fund managers.