Wednesday, May 6, 2009

Garrett Shows Hedge Fund Love

Representative Scott Garrett released a statement criticizing President Obama for pointing out that it was hedge funds holding the debt of Chrysler who wouldn't budge enough to prevent bankruptcy. I've put the whole statement below, but here's the kicker of Garrett's statement:
Many of those invested in these funds were seniors, school teachers, and others whose pension funds are an important component in maintaining a healthy standard of living throughout their retirement.
The line, although nicely dressed up, is pretty much pulled straight from the statement the hedge funds put out to defend themselves:
We have a fiduciary responsibility to all those teachers, pensioners, retirees and others who have entrusted their money to us.
If hedge funds actually had to file who was investing in them, it might be possible to prove their statement, but alas they don't and we can't. One can have a healthy amount of skepticism though, as hedge funds are limited in size by both number of investors (100) and net worth requirements (typically at least $5 million).

So it's interesting to see them spin this like they're some kind of social safety net, when they were given their privileged status because their investors are at less risk than most folks. The funds themselves are so unregulated, and charge so much in fees, states like New Jersey either won't allow or severely limit the amount of public pension that can be invested in them (you know, for teachers, etc.).

However, as long as they have people in Congress like Garrett to turn to, they'll have their champions.

Those that pay the AMT have to remember folks like Garrett voted against taxing hedge fund managers like normal people to patch the AMT. As I noted at the time, doing that would have provided a blue print for permanent repeal. Garrett put 5,000 of these fund managers above the millions who are subjected to the AMT. At least he's consistently supportive of the funds.

Here's Garrett's full statement:

“I am troubled by President Obama’s statements that single out a certain class of Chrysler’s creditors. The president’s comments display complete disregard for the rule of law, as well as the practices which govern our bankruptcy code.

“The actions of the hedge fund managers in exercising their fiduciary responsibilities to their investors is not the reason why Chrysler is in jeopardy, and their acceptance of the government’s offer would not have guaranteed the company’s success. I think the president should think about who he's attacking when he makes these statements. Many of those invested in these funds were seniors, school teachers, and others whose pension funds are an important component in maintaining a healthy standard of living throughout their retirement.

“This demonization of investors comes at the same time when the administration’s Treasury Department is begging for participation from the private sector in its Public-Private Investment Program. The president’s comments beg the question: why would private investors enter into a partnership with the government when there is the future possibility of being publicly scolded for making business decisions the government dislikes?

“It’s time for the government to stop interfering in the marketplace. It simply creates greater uncertainty, facilitates the choosing of winners and losers, and prevents private capital from entering the marketplace.”

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