As I
pointed out long ago, President Obama is easy to understand. He rewards those who helped him get elected. That's why Goldman gets to stand in front of the Treasury money spigot. And the GM bailout is about protecting the unions. Back in December, I
wrote:
I have said from the beginning, this talk of a bailout of the big three automakers is in significant part a bailout of the United Auto Workers (That's why the Democrats are behind it). The big three in bankruptcy would not stop producing cars, they would simply become more efficient, which would include lowering wages for auto workers, resulting in much less power for the UAW.That's why this bailout versus bankruptcy is so important to the UAW.
Larry Kudlow is shocked by all this, but he is one of the very few non-insiders that finally
understands:
What is going on in this country? The government is about to take over GM in a plan that completely screws private bondholders and favors the unions. Get this: The GM bondholders own $27 billion and they’re getting 10 percent of the common stock in an expected exchange. And the UAW owns $10 billion of the bonds and they’re getting 40 percent of the stock. Huh? Did I miss something here? And Uncle Sam will have a controlling share of the stock with something close to 50 percent ownership. And no bankruptcy judge. So this is a political restructuring run by the White House, not a rule-of-law bankruptcy-court reorganization.
Bottom line: Obama's dictator tendencies are showing.
Where do current shareholders end up?
ReplyDelete10% bondholders
40% union
50% government
totals 100%. Do current equity owners get zeroed out?
Chrysler's survival plan has 55% union ownership. 10% goes to the government and bondholders. Odd.
ReplyDeletehttp://www.washingtonpost.com/wp-dyn/content/article/2009/04/28/AR2009042803961.html?hpid=topnews
@PEU Report
ReplyDeleteI believe what is meant, though it is not clear in any of the reports, is that the 10-40-50 split is of newly issued stock. As to total outstanding, I am guessing that current shareholders end up with less than 5%.
But...why would anyone want GM or Chrysler shares? It's not like they are magically going to turn profitable? Isn't UAW the main reason that they have been leaking money for decades? What happens the next time they can't pay their debts? Who is going to buy GM or Chrysler debt? How can this possibly end in anything but a 10-feet wide tube to feed money directly from the Treasury to the UAW?
ReplyDeleteHas the world gone insane?