An article titled ‘In Chrysler Saga, Hedge Funds Cast As Prime Villain Firms Say They Were Right to Hold Out’ discusses various views on the pros and cons of President Obama’s ‘I stand with Chrysler, I stand with families, I stand with the dealers, I stand with the consumers, but I don’t stand with the hedge funds/speculators’ speech made Thursday just before Chrysler filed for Chapter 11. The President’s speech made for great rhetoric – but in my view that is about all it stood for. President Obama has a legal background. He and his advisers must understand the legal concept of ‘fiduciary responsibility’. Without knowing who the hedge ‘fund/speculators’ are, or who has invested in them, I expect the fund managers weigh their fiduciary responsibility to their investors heavily – and that their investors expect them to. It has been said that one or more of the funds who did not agree to the Chrysler deal terms had insurance on their Chrysler debt. If, for example, one assumes that insurance only was payable in the event of a Chrysler Chapter 11 filing, how could a hedge fund with such insurance not disagree with the Chrysler deal terms as presented and, in the context of what I expect would be its legal obligations to its investors, do everything it could to cause Chrysler to file for Chapter 11. I expect we will hear much more in the coming weeks. That said, I for one will be looking at the underlying facts as they come out before ‘leaping to judgment’ with respect to how the hedge funds conducted themselves based on rhetoric.

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