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Econwatch

April 13, 2009 6:56 AM

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GM Told To Prepare For Bankruptcy

By: Sean Alfano
Topics: Automakers

General Motors has been told to prepare for bankruptcy by the U.S. Treasury Department, according to a report in Monday's New York Times.

The decision comes after President Obama's automotive task force spent last week in talks with the struggling automaker. "The goal is to prepare for a fast 'surgical' bankruptcy, the people who had been briefed on the plans said," the newspaper reported.

Treasury's decision is aimed at making sure GM's bankruptcy plan is in place should it fail in negotiations with bondholders over the company's $28 billion debt, the newspaper reported.

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by Onethinker April 16, 2009 8:39 AM EDT: GM failure is due to not selling it's cars. Toyota and Honda raised the bar on quality/MPG and GM kept selling the same old stuff. Well, buyer became wiser and purchased a better car. They are playing catch-up now but a little late. Just maybe, after the chapter 11, they will tool up to make a car better then Japan.; Reply to this comment


by sdemaggie April 13, 2009 10:54 PM EDT: What a bone head move by Wagonner to go hat in hand to the Fed. At least Ford recognized their mistake and ran for the door rather than accept Federal dollares. It's time for GM to tell the Treasury to get bent.; Reply to this comment


by sjc_1 April 13, 2009 5:10 PM EDT: This is the best option. GM got caught in a $4 per gallon world with a credit crunch and financial collapse to boot. Unlike Ford, GM did not take on massive debt 2 years ago, when financing was available.; Reply to this comment


by jamesguy April 13, 2009 4:57 PM EDT: New rule: Don't let companies get $28 billion in debt in the first place.; Reply to this comment


by mjvwsr April 13, 2009 4:45 PM EDT: "GM Told To Prepare For Bankruptcy"

bout time; Reply to this comment


by parisdakar April 13, 2009 4:10 PM EDT: How do you guys have time to write these long posts. Don't you have work to do?; Reply to this comment


by enriquecaliente April 13, 2009 2:05 PM EDT: the thebeotch speaks the truth. we need to re-peal the Gramm-Leach-Bliley Act and re-instate the Glass-Stegall Act. We also need to go after the CEO's, CFO's the members of Government that were the ones who allowed this to happen. Oh and lets not forget the Lobbyist.; Reply to this comment


by thebeotch April 13, 2009 2:04 PM EDT: Globalization dictates what affects (or afflicts) one economy affects (or infects) all others, as we are now finding out.; Reply to this comment


by thebeotch April 13, 2009 2:01 PM EDT: Well, thanks to all the stuff I just posted, the world economy will continue to shrink for quite a while, maybe for years before things turn around.; Reply to this comment


by thebeotch April 13, 2009 1:57 PM EDT: Okay, people...settle down. The bailouts of the auto industry have been quite ridiculous for a while now, but they serve a point. The bailouts of the banks are a whole 'nuther deal. Lets put all this into perspective though. Thanks to the globalization of economies around the world, our markets are so intrinsically linked nowadays, do we even dare ponder what would happen if these banks we allowed to fail, bankrupting not only themselves, their shareholders and investors, the folks who still work there, who would then be collecting unemployment, losing their health insurance (if they have any in the first place), and then this process spreading and repeating itself in thousands of banks around the world??? I think fugly would be the understatement of the millenium. The entire world would go to sh*t overnight, with civil unrest and violence spreading around the globe. And then who would be in a position to do anything about it? No one. I do not think we really ought to go there.

Lets look back to where this all began. Back in 1999, while the whole 'Monica" thing was in full swing in DC and with the White House rocked by scandal, the Republicans held veto-proof majorities in both the House and Senate that would be able to override any presidential veto. Two representatives of the Republican majorities of the House and Senate put forward a bill, introduced in the Senate by Phil Gramm (R -TX) and in the House by Jim Leach (R -IA), that would overturn portions of the Glass-Stegall Act (otherwise known as the Banking Act of 1933), which introduced the separation of bank types according to their business (commercial and investment banking). Provisions of the Glass Stegall Act prohibited a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm-Leach-Bliley Act. As a result, bank holding companies were able to act like a bank, but because they are classified as a holding company, they could escape regulation by the Fed. President Clinton signed the bill into law, likely considering the fact that the Republicans put forth this bill, and had the majorities to override his veto anyway and probably didn't want to expose himself (pardon the pun) to ever increasing criticism., The repulsion of the provisions of The Glass Stegal Act by the Republicans in 1999 set the stage, creating the environment for disaster by altering the regulations that were put in place in order to PREVENT ANOTHER GREAT DEPRESSION from occuring in the future.

The repeal of Glass Stegall enabled commercial lenders such as Citigroup, which was in 1999 the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations (credit default swaps, anyone?),and establish so-called structured investment vehicles, or SIVs, that bought those securities. It is believed by many economists around the world that the repeal of this act contributed tremendously to the Global financial crisis and Economic Meltdown that we continue to experience.

So, where do we go from here? Well, I personally believe that the people who created the environment for disaster should be held to full account for their actions in whatever ways, using whatever means necessary to show that we, The American people, are no longer kidding. Whether these fine folks are elected representatives, banking lobbyists, deregulation lovers, or Corporate CEO's, I frankly don't give a damn. The people who are TRULY responsible for this mess are out there live amongst us, and they should be brought up on Federal charges (which ones I do not know), held responsible for their actions, and punished, PEROID! Get the facts, and come to your own conclusion people. Banks did this, not Detroit. And spread this around, everyone should know what the facts are.; Reply to this comment

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