By Bloomberg News reported yesterday that General Motors (GM) will likely formally file for bankruptcy on June 1st. This despite $19.4 billion in government (read: taxpayer) loans that Americans were assured would enable the company to restructure without going to bankruptcy court. According to the report, the Treasury will now finance GM with another roughly $30 billion while in bankruptcy, which would last 60 to 90 days, bringing taxpayers’ burden to $50 billion to “save” the company.
And, of course, the Obama Administration will nationalize one-third of the “Big 3.”
From the report: “The filing shows the U.S. Treasury owning 72.5 percent of equity in the new GM, a union health-care trust with 17.5 percent and 10 percent going to the old GM to hand to creditors in the bankruptcy process.” This is only the beginning of the outrage, but it follows the same pattern of the Chrysler bankruptcy: Wealth redistribution.
According to CNBC, “General Motors bondholders felt they deserved something like a 58 percent stake in the company in exchange for their billions of dollars in debt. What they were offered wasn’t even close. GM bondholders are owed about $27 billion, the largest chunk of GM’s roughly $58 billion in debt.”
The major bondholders who agreed in committee to the prestructured bankruptcy only held 20 percent of the bonds worth $27 billion, and only 15 percent of those not represented by the committee agreed to the deal, as reported by CNN Money. In other words, most the debt holders are getting the shaft under the government’s most recent proposal, and a company that is rightly theirs is being handed to the United States Treasury and the United Autoworkers union.
Simply put: Retribution by what remains of the private sector should be swift and merciless. No right-minded—or fair-minded—investor should invest in GM ever again. The fact is, GM was failing just fine without government assistance. And left to tried and true free market devices, the problems between bondholders and GM brass could have been effectively resolved, without presenting taxpayers with the tab. But since bankruptcy was not averted—despite a $19.4 billion infusion of taxpayer capital—the only thing that has now been achieved is that GM is now a de facto agency of the federal government, just like Chrysler.
In short, both are now line items on the federal budget. All at taxpayer expense.
Moreover, investors should avoid companies out of principle that are tied to government bailouts. Why invest if the government will just force you out for mere pennies on the dollar for your own investment, and redistribute the rest to favored political interests? Banks should watch out. They’re probably next on the menu. And their bondholders are doubtlessly in for the same raw treatment.
There really is no description for what is taking place other than redistributionism. A new favored political class is being built under the guise of law, and it is all happening under the auspices of his imperial, impervious majesty, Barack Obama. So corrupt is this new system that even the courts are going along with it. Lawmakers speak nary a word against it. And the American people are left only to watch in horror as their own government turns against them, leaving them to wonder if they are next in line for wholesale asset confiscation.
The only silver lining of the government takeover of the auto industry is clarity. The Obama regime can no longer masquerade as a benevolent monarchy. Its intentions are malevolent: It is out to “spread the wealth around,” as one obscure plumber attempted to warn a nation some eight months ago. And now, there seems to be no one to staunch the flow as the wealth of a nation is flushed down the drain.
Robert Romano is the Senior Editor of ALG News Bureau.
