Even though this fits in with much of what we’ve been saying about the dangerous effects of Obama bullying the Chrysler hedge funds, we have to be sceptical about this story.
Pacific Investment Management Co., Barclays Capital and Fridson Investment Advisors have joined Schultze Asset Management LLC in saying lenders may be unwilling to back unionized companies with underfunded pension and medical obligations, such as airlines and auto-industry suppliers, because Chrysler’s creditors failed to block Obama’s move. The reluctance may put additional pressure on borrowers seeking capital in the worst financial crisis since the Great Depression.
Here’s the thing: Even without Obama’s intervention in the bankruptcy process, who really wants to lend to “unionized companies with underfunded pension and medical obligations” period? There’s a reason that it’s only the government, and not private investors putting money into these companies.
We certainly think Schultze’s concerns are valid, but at this point, he’s just trying to make some political points, while making out sound as if he’s actually passing on otherwise good investment opportunities. When that happens, we’d love to hear about it.
Update: We were pinged by Marty Fridson of Fridson Investment Advisors, who sought to clarify that while there are obviously risks with this kind of lending, he doesn’t feel as though Obama killed the credit markets with his actions.