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A Chance not to Run a Car Company

The GM bondholders are fighting back against the “offer” to become a minority stake holder in the Obama-UAW controlled GM. This is enlightening:

The bondholder committee, which represents about 20% of the debt outstanding, said its offer would save taxpayers $10 billion in cash. Under it, GM would issue new stock and give 41% of it to the UAW, 51% to the bondholders and 1% to common equity holders.

The counteroffer seeks to put bondholders on the same plane as the union, which is owed $7 billion less.

The government would not get equity under this scenario because it wouldn’t need to reduce any of GM’s loans. Unsecured bondholders would likely reduce their entire claim on the auto maker under this plan.

The counterproposal could meet stiff resistance from the Obama administration’s automotive task force, as administration officials have said the GM deal as proposed is more than fair, and have told bondholders they would likely see less under bankruptcy.

To be clear, the bondholders are proposing to save billions to the American taxpayers and to free Obama from the dreaded prospect of running a car company, something he swears he doesn’t want to do. The government is offering “stiff resistance.” Really, what could be the possible justification for insisting on spending billions in taxpayer money? Why, the UAW must be protected, of course. Without a majority stake in the new company the government couldn’t be there to rescue the UAW in the next round of needed contract adjustments. And then, despite the president’s repeated protestations, the temptation for the administration and its allies to run a new green, micro-car business must be great indeed.

It would be nice if, rather than inquiring about just how enchanted the president is, the media would begin to grill him on the disparity between his words (e.g., doesn’t like big government, running banks, or car companies) and his deeds. That, after all, is the heart of the matter — whether by clever misdirection and slick packaging the president is leading the country where it does not want to go, namely to a new sort of statism in which, by gosh, the government has no choice but to run everything.



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