Alex_G

GM Secured Lenders to Get Full Repayment: Why Not Chrysler?

Most likely because the foreign operations (LatAm and China) are worth more than the secured lenders are owed.

GMAC, the Fed, and Moral Hazard

"Since GMAC now has access to Fed liquidity, there might be some way in which it can start buying up those bonds and cancelling them. But even that would consitute a rescue of holdouts who don't sell at these levels and just hold on to their bonds."

That's exactly what Morgan Stanley did, adding $2.5bln in capital by buying 12bln of their bonds back, using funds obtained by issuing FDIC backed bonds.

If GMAC can buy back their bonds at 50 cents on the dollar in the open market, management has a responsibility to do it. Every dollar of par value they buy back would add 50 cents to regulatory capital.

The more GMAC can buy back, the better chance they have at surviving, which helps everyone involved.

Why would this be a bailout of the people who don't sell their bonds at distressed levels? They have a choice to hold or to sell.