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May 13, 2009

ONCE AGAIN, I’M NO RELATION TO THIS GLENN REYNOLDS, but he does seem to be on-target:

The current deal “can be seen as one that serves up bondholders on the altar of political self-interest,” CreditSights Inc. analyst Glenn Reynolds wrote in a report last week titled, in part, “Waterboarding Bondholders.” “The powers that be will not face any major constituency risks by screwing some mutual funds, insurance companies, pension managers, and hedge funds (who often manage pension and endowment money etc.) out of their fair and equitable treatment,” Reynolds wrote. Not that you’ll hear much about the rights of these investors if and when the fur starts flying over a GM bankruptcy filing. Instead, we’ll again hear talk about the “money people” — the label President Barack Obama pinned on debt investors at Chrysler LLC who refused to swallow the terms foisted on them by the company and government officials.

Expect the fight at GM to be cast in similarly expedient terms of “working man vs. evil money people,” Reynolds’s report noted. And those who raise objections to the government’s plans “will be dubbed Wall Street holdouts and obstructionists.”

Hardly ‘Money People’

Yet the “money people” label will be particularly unfair at GM. Unlike Chrysler, whose debt was concentrated in the hands of a small group of institutions, GM’s bonds are held far and wide. The holders include Fidelity Management and Research, Franklin Advisers Inc., and Pacific Investment Management Co., which manage the retirement savings of millions of Americans.

The Polish Beneficial Association, the Knights of Columbus, and the Grand Lodge Sons of Hermann in Texas were also recent owners of GM bonds. Not your typical Masters of the Universe. Then there are mom-and-pop investors, who may not be happy with the terms on offer. Some of them have gone so far as to create a Web site to air their grievances.

Read the whole thing.

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