Could AIG Kill GM's Chances for a Bailout?

Wow, that first $350 billion went pretty quickly right?

According to the Wall Street Journal, after agreeing to expand AIG's (AIG) bailout by $40 billion or so the Treasury has just $60 billion left to lend of its initial $350 billion allocation under the terms of the government's approved bailout plan. Here's what it takes to get the rest:

To access the remaining $350 billion, Treasury officials would have to win over lawmakers on Capitol Hill. And given that the funds immediately available seem to be dwindling fast, they might have to turn to Congress before President-elect Barack Obama takes office on Jan. 20. In that case, President George W. Bush would need to send Congress a written report. Congress has 15 days to object.

Does that mean that Congress's return next week might be the last chance for General Motors (GM) to secure some form of bailout funds as it continues to burn through vast piles of cash? Time is of the essence. GM shares fell more than 30 percent during trading yesterday to a 62-year low after Deutsche Bank cut its price target on the automaker's shares to zero and worried it would be unable to fund operations past December.

Obviously, there are all sorts of options to grow or extend the bailout if Congress wants to act, but check the calendar. The question is whether legislators are still willing to (or even should) prop up non-financial companies whose problems stem more from poor management and a slow economy than the credit crisis itself at a time when the government is still being forced to shovel piles of money into companies like AIG.

Granted, so far Capitol Hill has been plenty eager to pony up cash and Democrats have made the auto sector a priority, but if troubles continue at banks and insurers will harder choices have to be made? If they do and GM's worst case scenario comes to pass, shareholders will probably be able to thank AIG for pounding one of the final nails in the automaker's coffin.

Comments

[Nikola:]

I think some year-end bonuses are in place for Wall St. folks. And GM CEO. AIG could also have its Christmas party for its execs in the Bahamas. After all, if the Lehman CEO walked away with all that money and his company went bankrupt, what about the rest of them.

Boy, $350 B's?! That's a lot of yachts.

2008 Nov 12 05:15 AM

[PeteK:]

There's a big difference helping AIG than helping GM or Ford.
AIG does not have UAW on its neck. And AIG has lots of assets
that really worth something. It's a complete different situation.

2008 Nov 12 07:35 AM

[secmaven:]

Got to bail out the retired auto workers health care!

2008 Nov 12 11:16 AM

[Mister Jimmy:]

Failing to provide federal help for the auto industry will ensure its collapse, and Great Depression-style consequences. That being said, any assistance should ensure painful concessions by all concerned, including the UAW, management, retirees, shareholders, and bondholders..

2008 Nov 12 12:31 PM

[who:]

Providing cash to the auto industry only prolongs the collapse. What has AIG done to change the situation since receiving the initial $80B - consume an additional $70B and now AIG is effectively nationalized/ privatized hence can not fail.

2008 Nov 12 12:54 PM