In case you haven’t heard, General Motors has requested another $16.6 billion in federal “loans” taxpayer subsidies after burning through its initial $13.4 billion in bailout money. My math says that is $30 billion, which doesn’t include all the billions that GM got for “clean car” research, or its share of $15 billion given by the feds taxpayers to it and the other members of the not-so-Big 3 for plant modernization.
Why is that $30 billion significant? Dave Schuler over at The Glittering Eye (H/T – Doug Mataconis) points out that the value of GM’s assets is roughly $30 billion. That’s right, sports fans. when GM gets its additional bailout money, it will owe the federal government its gross liquidation value. That does not account for GM’s liabilities or the fact that, in a liquidation, the liquidated company does not get its full value.
Given the speed with which GM burned through its initial $13.4 billion from the feds the taxpayers, they’ll be through the next $16.4 billion by summer. Then what? At that point, they’ll owe more to just the feds taxpayers than they can get by going through Chapter 7 bankruptcy liquidation. Do we say at that time, “Okay, we’re in for a pound, we’re in for the ton?” GM won’t even begin to repay the loans until 2012.
Do we say at that time, “Enough! Sink or swim?” Since former Treasury Secretary Henry Paulson put the feds at the front of the line in the event of liquidation, and since I expect current Treasury Secretary and Paulson acolyte Timothy Geithner to do the same, that would mean none of GM’s other creditors would get paid. Care to guess what would happen to them?
As painful as it may seem, now is the perfect time to tell GM to sleep with the fishes. We don’t have the money to burn (thank you, Obama and the Spendocrats), and at least some of the GM liquidation would make it to its other creditors.
I still maintain that this can’t go forward without a bankruptcy. If more money is pumped in now we’ll be pumping more without end. Add to that the government telling GM how and what cars to make and they’ll never pay back a dime. I favor bankruptcy with DIP financing.