Obama's Frightening Fiduciary Follies

On April 30, President Barack Obama denounced "hedge funds" that he claimed ruined concession discussions that might have enabled Chrysler to avoid filing for bankruptcy.

Since then, most of the outrage in the establishment media has focused on these holdouts. Matt Goldstein of Business Week called them "cowards" for not revealing their names (remember the AIG bonuses, Matt?). No one in the establishment media leveled a similar charge at Team Obama when they similarly refused. When the holdouts issued a press release describing their legal rights and why they were asserting them, Jessica Pressler at NYMag.com disgracefully accused them of playing "the Obama-is-a-communist card."

First of all, these are not all presumably evil (unless you're John Edwards and happen to have worked for one) "hedge funds." As the lawyer representing these firms, Tom Lauria, told Frank Beckmann of WJR radio in Detroit last week:

What people really need to understand is that the people who bought this debt are pensioneers, teachers' credit unions, personal retiree accounts, retirement plans, college endowments. That's who my clients act as fiduciaries for.

Lauria was also saying in so many words, "We're just doing our job."

The Employee Retirement Income Security Act (ERISA), passed in 1974 with strong bipartisan support, subjects retirement plans to a very strict standard of fiduciary duty, specifically:

(1) ... a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and —

(A) for the exclusive purpose of:

(i) providing benefits to participants and their beneficiaries; and

(ii) defraying reasonable expenses of administering the plan

There is nothing ambiguous about this requirement and nothing about the word "solely" or the term "exclusive purpose" to misunderstand. The Wall Street Journal's Gregory Corcoran also pointed out on April 30 that hedge fund managers are subject to a nearly identical common-law standard, "to the exclusion of any contrary interest."