This past week, while much the world focused on the terrorists in training euphemistically known as "pirates," and the more religious among us attended Holy Week services and celebrated the Resurrection, bean counters and government bureaucrats were trying to figure out just how much a bankruptcy at General Motors could cost the treasury .... Oh, I forgot, the treasury is empty. I should have said "how much future generations will pay for General Motors' current bankruptcy."
In a Sunday night/Monday morning story that 'skillfully' buried the lede, the New York Times's Micheline Maynard and Michael J. de la Merced misdirected readers with talk of a "surgical" bankruptcy, while saving for later paragraphs evidence they have indicating that, if it occurs, it won't be a bankruptcy as you or I understand it. Properly stated, it should be renamed "Operation Make UAW Members Nearly Whole at Taxpayers' Expense."
Meanwhile, the Detroit Free Press appears to be almost unique in reporting that, hard as it is to believe (kidding, of course), GM might not actually repay all of the monies "lent" by Uncle Sam.
But back at the Times, though they waited until Paragraph 10 to drop the big number on us, Maynard and de la Merced eventually made it clear that taking a bit of a principal hit on the government's loans might be the least of taxpayers' problems, given the skulduggery (and that is the right word) Barack Obama and Treasury Secretary Tim "Tax Cheat" Geithner have embarked upon:
'Surgical' Bankruptcy Possible for G.M.
The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite G.M.’s public contention that it could still reorganize outside court, people with knowledge of the plans said during the weekend.
Members of President Obama’s automotive task force spent last week in meetings and on conference calls with G.M. officials and its advisers in Detroit and Washington. Those talks are expected to continue this week.
The goal is to prepare for a fast “surgical” bankruptcy, the people who had been briefed on the plans said. G.M., which has been granted $13.4 billion in federal aid, insists that a quick restructuring is necessary so its image and sales are not damaged permanently.
..... One plan under consideration would create a new company that would buy the "good" assets of G.M. almost immediately after the carmaker files for bankruptcy.
Less desirable assets, including unwanted brands, factories and health care obligations, would be left in the old company, which could be liquidated over several years.
Treasury officials are examining one potential outcome in which the “good G.M.” enters and exits bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing, a person who had been briefed on the prospect said last week.
(Paragraph 10 -- Ed.) The rest of G.M. may require as much as $70 billion in government financing, and possibly more to resolve the health care obligations and the liquidation of the factories, according to legal experts and federal officials.
This is, of course, not how a normal bankruptcy works. But then, you didn't really think Barack Obama was going to be open to a normal bankruptcy that would leave the UAW holding its fair share of an empty bag, did you?
Though it's vague, I interpret the last excerpted sentence as $70 billion NOT INCLUDING the health care obligations, which I believe are in the tens of billions all by themselves.
The only tiny consolation: It looks like the people who warned that this whole thing was going to turn into a bottomless pit just four short months ago at least get the chance to say 'I told you so.'
Cross-posted at BizzyBlog.com.
