Maybe a Good Call

Re: Don't you mean, "The propaganda"? .... LOL -- RichAndPretty
Posted by CPMariner , Wed, Nov 19, 2008, 07:05:47	Post Reply	Top of Thread	Reviews by CPMariner	First Amendment Message Board	Main BigDoggie.net site

The last two paragraphs of the linked article support your position that "Government should bail them out, but it should be AFTER they file for Chapter 11, and government should then become a PREFERRED creditor".

"One solution, Mr. LoPucki said, would be for the federal government to extend loans to an automaker after it filed for bankruptcy protection. In that way, under bankruptcy law the government would be first in line to be repaid, before other creditors. And vendors might be more willing to work with a company backed by a loan made or guaranteed by the government, he said."

It seems to me that with the government as the primary creditor (and/or guarantor), the argument that "people won't want to buy cars from a company in bankruptcy" might lose some traction.

As for the pension issue, that's a throat gagger (sorry, ladies :-) In magnitude, it's a major problem either way. If the pensions were/are largely unfunded (likely), major sums from any bailout loan/guarantee would be diverted from the central goal of restructuring. If pensions were funded (unlikely), it could be just as bad. No idea what a GM-managed fund might be invested in, but it's probable that large percentages were put out in mortgage-backed securities and derivatives. For instance, the State Board of Administration of Florida (funded retirement plan for teachers and other government employees) reported a +2 billion dollar loss for the first three quarters of 2008, mostly due to MBS hits on sale (not mark-to-market).

Yech. (Oy vey, too.)