I’m afraid that I can’t get behind the Obama administration and some Michigan politicians who blame a group of hedge funds for pushing Chrysler into bankruptcy court.

The Obama administration desperately wanted to keep Chrysler out of bankruptcy. It secured agreements from just about everybody (management, the union, banks that are major creditors – who, incidentally, received TARP funds). But a few smaller creditors wanted more money and ownership than the government was willing to offer. So, on it went to bankruptcy court, where anything could happen – including Chrysler being completely shut down and sold off for its parts.

In reponse, President Obama said:

“They were hoping that everybody else would make sacrifices, and they would have to make none. Some demanded twice the return that other lenders were getting. I don’t stand with them,” said President Barack Obama, adding that the holdouts threatened to “endanger Chrysler’s future.”

And from U.S. Representative John Dingell said:

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.

But, according to the New York Times, the group of hedge funds that was pushing for more said this:

The dissident creditors said they had a fiduciary responsibility to seek the best possible returns for their own investors — which, the group said, include teachers’ unions, pension funds and endowments.

“The government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades,” the group said in a statement Thursday. The creditors suggested banks that had received bailout money were being strong-armed by the administration, a view some of the bankers privately said they shared.

The second part sounds like a cover to me. I really doubt the hedge funds that were holding out would be that concerned about legal precedent if the deal were breaking their way.

But “fiduciary responsiblity” might be a real argument.

First of all, that responsibility is a legal issue. They could be sued by their investors if they didn’t fight hard enough to get everything they could. I have no idea whether their investors were really threatening them, but it’s a possibility.

Second, it is true that big insitutional investors – yes, representing pension funds for teachers and other average folks – use hedge funds. It is really the case that there could be a trade-off between the people who work at Chrysler and the people who have their retirement funds tied up in Chrysler’s debt. That’s one among many damnable positions our financial system has put the average American electorate in.

I’ll freely admit I could be wrong about this excuse of fiduciary responsibility. Maybe these guys really were just a bunch of greedy bastards. I want to believe that, in fact. But I’m leery of over-doing it. Yves Smith over at Naked Capitalism – whose opinions I follow and respect – seems convinced that’s the case:

But the banksters are eagerly, shamelessly, and openly harvesting their pound of flesh from financially stressed average taxpayers, and setting off a chain reaction in the auto industry which has the very real risk of creating even larger scale unemployment than the economy already faces. It’s reckless, utterly irresponsible, over-the-top greed.

She’s even concerned that this episode could lead to class violence against financial managers in the country. Yikes.

I’m absolutely convinced that the power of the financial elite must be broken in this country. But we better make sure we’re right and do it the right way.