Automathic

Pontiac GTOIs it too much to say that I’m dumbfounded by the government’s proposed approach to GM’s financial woes?  Betsy Newmark takes it from the top:

The deal that is coming out of the government aid and deadline for GM is truly astounding. As the WSJ breaks down the numbers, private bondholders of GM securities would get 5 cents on the dollar for their investment and own 10% of the company; the government will own 50% of the company and a return of 87 cents on the dollar; and the UAW would own 40% of the company and have a return of 76 cents on the dollar. Now we know why Obama and the UAW have been fighting so hard to keep GM out of the bankruptcy court.

In a genuine Chapter 11 bankruptcy, these three groups of creditors would all be similarly situated — because all three are, for the most part, unsecured creditors of GM. And yet according to the formula presented Monday, those with the largest claim — the bondholders — get the smallest piece of the restructured company by a huge margin.

Private capital gets 5 cents on the dollar. Public capital gets 87 cents on the dollar. Funky capital gets 76 cents on the dollar. Please do not tell me that the outcome is not remarkably skewed in a socialist (or, if you please, Fastidious, statist) direction. After all, giving more (40%) to those who have less (UAW) while funding this giving by taking from those who have more (private bondholders) is straight up redistribution of wealth.

In the eyes of those doing it, they are takin’ it from the greedy and givin’ it to the needy.