Commentary Magazine


Other People’s Money

Yesterday, Chrysler filed for Chapter 11 bankruptcy protection. And the representative of one major investor in Chrysler was not pleased with some other creditors. President Obama criticized hedge funds for their refusal to accept a debt settlement that had them writing off 80% of the money Chrysler owes them.

“A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout,” Obama said, clearly annoyed that his plans had been ruined. “I don’t stand with those who held out when everybody else is making sacrifices.”

The hedge funds were unrepentant about their move. They were unhappy with the Obama plan that artificially puts down them further down the food chain than they’d normally be. Their counter offer involved offering to write off 60% to 70% of the debt and taking 20 to 30 cents on the dollar — but that was rejected.

The hedge fund managers defended their decision with a simple explanation: the money they were being  asked to write off wasn’t their own money. They had obligations — legal and moral — to protect as much of their investors’ funds as they could, and they were worried about the consequences of accepting a worse deal than they could expect in any other case that didn’t involve the federal government horning in and trying to engineer the “perfect” solution.

President Obama, in this case, is exemplifying the present-day definition of a liberal: one who is exceptionally generous with other people’s money. He used our money — the American people’s money — to buy into Chrysler (as well as GM and many banks) and is now attempting to restructure those companies. In the process, he is trying to bully other companies and groups to play along with his plan for their money, as well.

This runs the risk of bringing a classic quote to life: Margaret Thatcher’s declaration that “the problem with socialism is that you eventually run out of other people’s money.”