Shed a Tear for Your Friendly Neighborhood Hedge Fund

It comes as no surprise that the hedge funds in control of Chrysler’s debt are lashing out at President Obama for fingering them yesterday as the primary reason a Chrysler bailout deal fell through. Indeed, The Washington Post has an eye-opening piece this morning about how those secretive funds feel like they’ve been asked to make greater sacrifices than the other players in the negotiations.

“Some of the characterizations that were used today to refer to us as speculators or to say we’re looking for a bailout is really unfair,” said one executive who spoke on condition of anonymity because of the sensitivity of the matter. “What we’re looking for is a reasonable payout on the value of the debt . . . more in line with what unions and Fiat were getting.”

George Schultze, the managing member of the hedge fund Schultze Asset Management, a Chrysler bondholder, said, “We are simply seeking to enforce our bargained-for rights under well-settled law.”

But wait — aren’t these the same private funds that have exploited tax law for years, with managers raking in billion-dollar annual salaries in some cases, all the while being taxed at lower rates than their Manhattan doormen?

Stephen Pearlstein, the Pulizer Prize-winning Post business columnist, takes this up today in a biting column, arguing that there’s “nothing more pathetic than a hedge-fund manager worked up in a moral lather, complaining that he hasn’t been treated fairly.”

Since when did any of these guys ever worry about fairness?

Certainly fairness was not an overriding concern of hedge-fund managers when they threatened to move even more of their operations to the Cayman Islands if forced to pay a regular tax rate on their exorbitant management fees.

Nor do I recall receiving even a single e-mail from a hedge-fund manager complaining about how unfair it was that the government stepped in to bail out creditors and counterparties of Citigroup, Bear Stearns and AIG.

But now that these hedgies are looking at the butt end of a government-imposed cramdown that would give them only 30 cents of each dollar owed by Chrysler, suddenly they’re all about fairness and the rule of law.

What you need to know about these vultures is that their idea of fairness is throwing 100,000 people out of work and denying retirees their pensions and their health benefits just so they can liquidate the company and maybe squeeze an extra 15 cents on the dollar from their Chrysler debt.

It’s worth reminding that the hedgies Pearlstein attacks here are historic donors to the Democratic Party, which is largely the reason private equity managers pay a 15 percent capital gains tax on their pay, rather than the 35 percent income tax they would pay otherwise. Obama went after them in this round, but whether they’ll win or lose is now for the courts to decide.

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