What is going on here? Chrysler bondholders have $6.9 billion in claims. Forty hedge funds hold about 30 percent of that debt and four banks hold 70 percent of it. The four banks agreed to take $2 billion -- 29 cents on the dollar -- to settle their clams, but the hedge funds wanted more. Yesterday, the U.S. threw in another $250 million to the $2 billion that the banks had settled for and gave the hedge funds until 6 p.m. today to work it out. But that's all moot now.

Meanwhile, at GM, bondholders -- who hold $27 billion in obligations -- will reject GM's April 27 debt exchange offer to swap their claims for 10 percent of the reorganized automaker. The thousands of bondholders will counter with a proposal to give them 51 percent of the reorganized car-maker -- leaving the the worker health-care fund with 41 percent and common shareholders a mere one percent.

While I'm not sure what percentage of GM's claims are owned by hedge funds, we know that they were holding Chrysler hostage for a bit more profit on their bond trade. And based on their pay -- the top 25 hedge fund managers made an average pay check of $464 million in 2008 -- they are the most important people in the world.

That's why the U.S. is enticing them with taxpayer loans and loss protection so they'll buy bank toxic waste and make a risk-free profit doing so. And that's why the U.S. let hedge funds hold the auto industry hostage with a knife to its throat -- all for a few extra hundred million dollars to reward themselves for their clever trading schemes.

With Chrysler's bankruptcy filing, the hedge funds look more powerful than the U.S. government. Should we be surprised?

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.