Hedge Funds, President Obama & the Rule of Law

via Greg Mankiw:

Let’s be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients’ money to share in the “sacrifice”, they are stealing.

The President screaming that the hedge funds are looking for an unjustified taxpayer-funded bailout is the big lie writ large. Find me a hedge fund that has been bailed out. Find me a hedge fund, even a failed one, that has asked for one. In fact, it was only because hedge funds have not taken government funds that they could stand up to this bullying. The TARP recipients had no choice but to go along."

The President's attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to "sacrifice" some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power.

That fund managers are fearful (BusinessInsider) at all in the first place of speaking out is rather problematic to what is considered one of the most mature democracies in the world. On the other hand, as Glenn Reynolds notes: "Why be afraid? You can tie this bailout up in legal knots if you’re willing to go to court. Obama needs it to succeed more than you do."