A US taxpayer

GM's Bond Restructing Plan

Bankruptcy without Govt intervention is a good option for bondholder.

Give away under-funded and poorly managed pension to PBGC, cancel Veba and strip out all assets and sell it off to foreign company, and I bet vulture funds make more than 25 bucks per bond. So there is a return potential. But all others are worse off;

Shareholders get $0, of course.
Workers do lose job next 2-3 years, and many lives will be ruined.
Likely this will extend recession much longer.
No bottom for Michigan housing.
Very high political cost to democrats

However, there is no upside for bondholders to give up their rights as lenders. If GM thinks the bond holders will take equal exchange with equity for 50%, they are sadly mistaken. No one believes that GM/F CHrysler is a going concern with or without Govt loans, not even UAW leader Gettelfinger, who avoded answering today whether UAW is willing to take GM equity for its member's 401 k. He sure made it sound like "we will take our free ride with govt money but are not willing/foolish enough to share the equity risk."

If anything, bondholders are likely to ask US Govt to guarantee the debt, not exchange it for equity share. I can see new addition to Barclay's agency debt index.

So you are looking at at least 16 billion more of the US Govt line of credit for GM/F/Chrysler, for total of what, 53 billion and more?

Let's review that planned bankruptcy option again.

The Tyranny of the Shareholders

If democratic senate/congress is foolish enough to waste our tax on bailing out dying an industry that is not competitive in US due to UAW and its hubrious managers, you can be sure that in 2 years there will be republican senate/congress. UAW is smaller than tax payer base, Pelosi. Govt should consider bailing broad US tax payers out instead of garnering favor of UAW. Taxpayer way or highway.

And Pelosi, don't waste your breath trying to explain something you have zero idea on. You can not afford to undermine incoming registration and yourself in this dire time.

Here are my suggestions.

1. Let PBGC take care of UAW members pension and healthcare. All other failed business do, and UAW members are just as guilty of failure as the managers.

2. Remove current managers with innovative/reputable outsiders who will in turn boost industry morale, develop better product/brand and keep parts manufacturers in shape (You know the part company managers are old line Big 3 managers. Some of them needs to go, also.)

3. Set up bankruptcy remote entity to service warantee, or let US Govt guarantee it. And let the news media repeat the mantra; "US Treasury guarantees your GM/Ford/Chrysler warantee for 10yr/120,000 miles."

After implementing these ideas, ever patriotic US customer base will buy from uncle Sam's GM and Chrysler (and I never bought a US car, yet if these changes come, I will to support my country by buying GM)

I bet if UAW members start to take GM and Ford equity as its 401 k and wasges, that would boost the stock and lower borrowing cost. UAW leader Gelfinwhatever guy avoided answering this question today. What a joke!

I really wish that new administration and regislative branch will be bold enough to do something for voters, out of line with their political interest. That is why we voted for Mr. Audacity of Hope, were it not?

Why $2?

The big difference between a guy with $250mm and JPM is that the guy do not have source of funding as a new BSC owner, where JPM as a bank has flooding liquidity available at its disposal thanks to Fed.

So Guy with $250mm is a non-start to buy the firm. He's got no credit line.

And Fed can not have someone with no liquidity access have the deal - imagne BSC fail, and hedges and CDO's fail due to derivatives contract that is no longer valid since BSC is gone, (although they are supposed to be trading out of AAA bankruptcy repote) and fear of other brokers faiing prevail - this will be the mass destruction as we have not seen before. Citi is in trouble, BoA bought countrywide - only obvious buyer left is JPM.