Obama Really Is Trying To Intimidate The Chrysler Hedge Fund Holdouts

Barack Obama’s fierce attack yesterday on the hedge funds and investment firms that refused to go along with the administration’s plan to rescue Chrysler was intended to intimidate those funds from resisting the plan in the bankruptcy proceedings.

“While many stakeholders made sacrifices and worked constructively, I have to tell you some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout,” Obama said. “I don’t stand with those who held out when everybody else is making sacrifices.”

Administration officials expect that this harsh rhetoric will discourage these hedge funds from arguing against the plan the government submitted to the bankruptcy court. They are not interested in auestions about whether it is appropriate for the president to use his office to prevent private actors from pursuing legal remedies.

The situation closely resembles the situation Ken Lewis described when NY Attorney General Andrew Cuomo questioned him about Bank of America’s acquisition of Merrill Lynch. He said that then-Treasury Secretary Hank Paulson forced his hand after it became apparent that Merrill had suffered losses much larger than expected.

So apparently our new national policy involves the executive branch bullying financial executives into accepting politically favoured corporate transactions.

 

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.