May 2009

Vox clamantis in deserto is Latin for “the voice of one crying out in the wilderness”. The phrase denotes an unheeded warning, an opinion not in the mainstream of popular thought.

It is the title of John Gower’s 10,000 line poem in elegiac verse on the Peasant’s Rising of 1381 (Vox Clamantis). It is the motto of Dartmouth College, one of the nine Colonial Colleges founded before the American Revolution, and the name of a great blog by a good friend.

In the case of both Darthmouth College and my friend, the title is a Biblical reference to the Prophet Isaiah and the Gospel of Mark .

Today however, we’re not discussing Gower, The Bible, or even Richard II…but we may very well be discussing, like Gower’s poem, an uprising, the possibility of a future “vacant of law and education”, and acts of injustice committed by those who think themselves as secure in their own power.

Meet Clifford S. Asness, hedge fund manager, peasant in revolt, and unlikely Isaiah.

This is America. We have a free enterprise system that has worked spectacularly for us for two hundred plus years. When it fails it fixes itself. Most importantly, it is not an owned lackey of the oval office to be scolded for disobedience by the President.

Those are the closing lines, the throwing down of the gauntlet if you may, of Clifford Asness’ “Unafraid in Greenwich Connecticut”, a scorching denunciation of President Obama’s unlawful, thuggish handling of the Chrysler bankruptcy.

As you may have read, a group of Chrysler secured-lenders calling themselves the “Committee of Chrysler Non-TARP Creditors”, refused the government’s offer to settle on their portion of the Chrysler debt, choosing instead to take their chances in bankruptcy Court. This prompted some harsh words from President Obama:

“A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout.”

It also (allegedly) generated a threat from Steven Rattner, the White House’s auto task force chief.

“One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight.

Said Thomas Lauria, the head of White & Case’s bankruptcy practice. Not surprisingly, a White House spokesman denied the threat, claiming that there is “no evidence to suggest that this happened in any way.”

“No evidence…”?

Let’s consider the President’s words…”A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout.” Mr. Obama went on to describe the group as “speculators” who were “refusing to sacrifice like everyone else.”


Here’s Mr. Asness on the idea of this “unjustified taxpayer-funded bailout” and the refusal by these “speculators” to have their clients “sacrifice like everyone else”:

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. Clients of hedge funds include, among others, pension funds of all kinds of workers, unionized and not. The managers have a fiduciary obligation to look after their clients’ money as best they can, not to support the President, nor to oppose him, nor otherwise advance their personal political views. That’s how the system works. If you hired an investment professional and he could preserve more of your money in a financial disaster, but instead he decided to spend it on the UAW so you could “share in the sacrifice”, you would not be happy.

I would say that the President’s words are ample evidence of the White House using the press to destroy these people’s reputation.

How about this?

The rogue hedge funds that refused to agree to a fair offer to exchange debt for cash from the U.S. Treasury – firms I label as the “vultures” – will now be dealt with accordingly in court.

That is from a statement issued by Congressman John D. Dingell (D) Illinois.

Then there is this…from

Today, an anonymous group of 20 Chrysler lenders calling itself the “Committee of Chrysler Non-Tarp Lenders” said in a statement they’d been treated worse than junior creditors during negotiations in violation of “long-recognized legal and business principles.” They said they were owed $1 billion.

The dissidents included OppenheimerFunds Inc., Perella Weinberg Capital Management LP and Stairway Capital Advisors, a person representing the group said, asking not to be identified. Also in their camp is Group G Capital Partners LLC, said another person who declined to be named. After the president’s attack, Perella said it had agreed to the buyout offer.

The President’s attack?


Princeton defines a “dissident” as being “a person who dissents from some established policy.”

What established policy is this group dissenting from?

Here’s Mr. Asness again:

When hedge funds, pension funds, mutual funds, and individuals, including very sweet grandmothers, lend their money they expect to get it back. However, they know, or should know, they take the risk of not being paid back. But if such a bad event happens it usually does not result in a complete loss. A firm in bankruptcy still has assets. It’s not always a pretty process. Bankruptcy court is about figuring out how to most fairly divvy up the remaining assets based on who is owed what and whose contracts come first. The process already has built-in partial protections for employees and pensions, and can set lenders’ contracts aside in order to help the company survive, all of which are the rules of the game lenders know before they lend. But, without this recovery process nobody would lend to risky borrowers. Essentially, lenders accept less than shareholders (means bonds return less than stocks) in good times only because they get more than shareholders in bad times.

The above is how it works in America, or how it’s supposed to work. The President and his team sought to avoid having Chrysler go through this process, proposing their own plan for re-organizing the company and partially paying off Chrysler’s creditors. Some bond holders thought this plan unfair. Specifically, they thought it unfairly favored the United Auto Workers, and unfairly paid bondholders less than they would get in bankruptcy court. So, they said no to the plan and decided, as is their right, to take their chances in the bankruptcy process. But, as his quotes above show, the President thought they were being unpatriotic or worse.

The act of dissidence here, that is the person dissenting from some established policy, is Barack Obama; he is seeking to circumvent long-established bankruptcy laws. He is engaged in an unprecedented excess of the reach of the office of President of The United States, and in thuggery.

Where is the press?

The New York Times, in a report by Michael J. de la Merced and Jonathan D. Glater, covered the story last week, in it, we find this interesting paragraph:

When the debtholders, calling themselves the Committee of Non-Tarp Lenders, made its first public statement last Thursday, they said their group consisted of about 20 investment firms holding about $1 billion. According to Mr. Lauria’s motion to file under seal, the group now claims about $300 million in holdings.

The Wall Street Journal’s Tom Blumer saw what was NOT there:

de la Merced and Glater were apparently not curious about the possible reasons why the amount involved, and presumably the number of holders, is significantly lower than it was just a few days ago.

Maybe it’s because the threats are real, guys.

The threats may very well be real, and the might of the Executive something to be feared, but the power of one man crying out in the wilderness should never be underestimated.

Hat tip to Michelle Malkin.


Here\’s a shocking transcript from the Frank Beckman show, broadcast on Newstalk 760 WJR from Detriot. Frank Beckman is interviewing Tom Lauria, the attorney for most of Chrysler’s non-TARP creditors:

Beckmann: So what’s the matter with your vulture clients who are so greedy and selfish. Why won’t they go along with this?

Lauria: Well, they bought a contract that says that they get paid before anyone else does by Chrysler. And they have been told by the government who is in complete control of Chrysler, oddly enough, that despite their contractual right, they do not get paid before everyone else.

So they are standing on their rights, standing on the law, trying to defend in effect what is the Constitution of the United States, to make sure that they get what they’re entitled to for their investors.

Beckmann: Tom, let me make the argument against you in another way. We’ve heard the President say this, “I wouldn’t want to stand on their side.” Ron Gettelfinger says “Everyone else has made concessions. These people won’t; they’re greedy.” Why not take a concession that is being asked of everybody else and is being accepted by everybody else, including other hedge funds that had bought some of these bonds in Chrysler?

Lauria: Well that’s a great question, because let me tell you it’s no fund standing on this side of the fence opposing the President of the United States. In fact, let me just say, people have asked me who I represent, and that’s a moving target.

I can tell you for sure that I represent one less investor today than I represented yesterday. One of my clients was directly threatened by the White House, and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight. That’s how hard it is to stand on this side of the fence.

Beckmann: Was that Perella Weinberg?

Lauria: That was Perella Weinberg.

Audio here.

President Obama appears to be determined to follow through with his threat, as evidenced by his statement this past Thursday:

“A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout.”

So, what about this “unjustified taxpayer-funded bailout”??

BizziBlog posted a letter from a group of 20 Chrysler secured lenders calling themselves the “Committee of Chrysler Non-Tarp Lenders” who rejected the government’s offer of 33 cents on the dollar to settle on their portion of Chrysler’s $6.9 billion dollar debt:

NEW YORK, Apr 30, 2009 (BUSINESS WIRE) — As of last night’s deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country’s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money.

As much as anyone, we want to see Chrysler emerge from its current situation as a viable American company, and we are committed to doing what we can to help. Indeed, we have made significant concessions toward this end – although we have been systematically precluded from engaging in direct discussions or negotiations with the government; instead, we have been forced to communicate through an obviously conflicted intermediary: a group of banks that have received billions of TARP funds.

What created this much-publicized impasse? Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler’s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars. In contrast, over at General Motors, senior secured lenders are being left unimpaired with 100% recoveries, while even GM’s unsecured bondholders are receiving a far better recovery than we are as Chrysler’s first lien secured lenders.

Our offer has been flatly rejected or ignored. The fact is, in this process and in its earnest effort to ensure the survival of Chrysler and the well being of the company’s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.

We have a fiduciary responsibility to all those teachers, pensioners, retirees and others who have entrusted their money to us. We are legally bound to protect their interests.

Threatening people who simply wish that the rule of law be followed with the destruction of their reputation is classic thuggery.

The thing is…why would anyone expect any different from a Chicago politician?

For those who have ever wondered, this is what arrogance looks like:

Arrogance is wearing a $540 pair of Lanvin sneakers to a food bank where you will be participating in a photo shoot with some destitute people.

This is the woman whose husband, the President of The United States, spoke to American families on the subject of these hard economic times:

“All across America, families are making hard choices, and it’s time their government did the same.”

What exactly was the hard choice for Michelle Obama here, not wearing the Lanvin high tops instead?

The high tops go for $845 at Barney’s NY…she probably thought that wearing them would either:

    A. Be a bit over the top, or
    B. Ruin them if some of the slop being served got on them.

In that same speech, President Obama spoke of the “need to restore the American people’s confidence in their government.”

Is this how he plans on restoring that confidence?

Let’s put that $540 pair of sneakers into proper perspective…

According to the U.S. Census Bureau, the median income of each working member in a household is somewhere around $27,000 a year. For those among us who (like me) have forgotten how to do math sans a calculator, that’s about $520 a week…before taxes.

And $520 is not enough to buy a pair of sneakers for Michelle Obama to go dish out soup to the poor and destitute.

Don’t get me wrong here, I’m not begrudging the Obama’s ability to spend $540 on sneakers…God Bless America, but that the First Lady should wear them to a food bank is indicative of either a complete disconnect with those people her husband supposedly represents, or arrogance of astounding proportions.

Then again, perhaps I owe Mrs. Obama an apology…her hard choice may have been to NOT spend the additional $305 for the high tops, settling instead for the more sensible $540 pair.

Oh, the humanity…