A handful of hedge funds is shoving the U.S. auto industry into bankruptcy. Perhaps they bought General Motors (GM) and Chrysler debt in the open market at 15 cents on the dollar and are now holding out for, say, an extra billion -- letting them triple their investment instead of merely doubling it. And the U.S. just blinked -- this morning's bankruptcy filling leaves Chrysler dead and GM next in line.
Hedge funds are lightly regulated so they don't have to disclose the information. But in the knife fight between the government, the auto industry, the unions and the banks, the hedge funds are proving to be the nastiest of throat slashers. And since they're at the heart of the $1 trillion public-private investment program plan to use taxpayer money and a bit of private cash to clean up bank toxic waste, hedge funds had the U.S. over a barrel in the Chrysler negotiations.