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May 05, 2009

A "Speculator" Speaks Up Against Obama

Anti-Harkonen Freedom Fighter Geoff thinks Chrysler may turn into Obama's Waterloo.

He sends this, a hedge fund manager ripping the bark off Obama:

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. Clients of hedge funds include, among others, pension funds of all kinds of workers, unionized and not. The managers have a fiduciary obligation to look after their clients’ money as best they can, not to support the President, nor to oppose him, nor otherwise advance their personal political views. That’s how the system works. If you hired an investment professional and he could preserve more of your money in a financial disaster, but instead he decided to spend it on the UAW so you could “share in the sacrifice”, you would not be happy.

Let’s quickly review a few side issues.

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.

Let’s also mention only in passing the irony of this same President begging hedge funds to borrow more to purchase other troubled securities. That he expects them to do so when he has already shown what happens if they ask for their money to be repaid fairly would be amusing if not so dangerous. That hedge funds might not participate in these programs because of fear of getting sucked into some toxic demagoguery that ends in arbitrary punishment for trying to work with the Treasury is distressing. Some useful programs, like those designed to help finance consumer loans, won't work because of this irresponsible hectoring.

Last but not least, 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 hedge funds were singled out only because they are unpopular, not because they behaved any differently from any other ethical manager of other people's money. The President’s comments here are backwards and libelous. Yet, somehow I don’t think the hedge funds will be following ACORN’s lead and trucking in a bunch of paid professional protestors soon. Hedge funds really need a community organizer.

Megan McArdle also notes that it's going to be hard to repeat this trick:

The administration is beating up the creditors because a) it wants to give the UAW a much better deal than they'd get in liquidation and b) they'd like someone else to pay for it. I recognize that the law is always kind of messy, but as far as I know, this kind of blatant political intervention between debt claims is unprecedented, and worse, it's a dress rehearsal for doing the same thing at GM. I don't think this is good for the rule of law, I'm pretty sure it will be bad for capital markets, and I'm nearly positive it's going to make it hard for any heavily unionized company to get substantial capital for the next decade.

The media scoffed at the idea that Obama was a leftist more intent on wealth distribution than sound economic policy. How much harm could he do?, they seemed to think.

Well, here's the harm. Obama is so far to the left he needs to relearn South America banana-republics' unhappy lessons regarding nationalization.

Oh, it's fun to nationalize things at first. You get to seize money and assets from big, unpopular "speculators" and give them to your voters.

And then what? What do you do five years down the road, when you desperately need capital but no one wants to loan it to you, because they have the quite-reasonable suspicion you'll just end up taking their money again?

Non-leftists, including centrist liberals like Clinton, know this, of course. It's obvious -- except to starry-eyed True Believers in socialism, who just don't grasp the idea that socialism only works until you run out of other people's money.



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posted by Ace at 02:54 PM

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