Should Congress approve $15 billion GM/Chrysler bailout bill?

Filed under: General Motors (GM), International Business Machines (IBM), Tribune Co. (TRB)

General Motors (NYSE: GM) and Chrysler executives have managed to drive their business to the brink of bankruptcy. And the private sector appears reluctant to provide the financing they would need to restructure in bankruptcy. Yesterday, Tribune Co. (NYSE: TXA) went over that precipice without a penny of government money. But GM/Chrysler cannot be allowed to follow that natural path for a failed business -- they need government to save them from the free market.

And so this morning a plan to socialize their losses goes before Congress. It creates a car czar who will administer $15 billion worth of loans. The car czar can demand that GM/Chrysler pay back the loan by March 31, 2009 if they don't come up with a restructuring plan, throwing them into bankruptcy. If the car czar thinks they're negotiating in good faith, they get a 30-day extension. It's not clear what happens if they come up with a restructuring plan by the 31st. A restructuring won't pay back the $25 billion and will probably require even more taxpayer money.

But the plan also requires the car czar to approve transactions above $25 million; it limits executive compensation; demands the sale of their corporate jets; prohibits paying dividends and requires that the government share in future profits and taxpayers be repaid before any other shareholders. So should Congress approve this bill?

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Should Congress approve $15 billion GM/Chrysler bailout bill? originally appeared on BloggingStocks on Wed, 10 Dec 2008 08:48:00 EST. Please see our terms for use of feeds.

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