The Problem with Government Motors

Private Investors get screwed and that is wrong:

The deal that is coming out of the government aid and deadline for GM is truly astounding. As the WSJ breaks down the numbers, private bondholders of GM securities would get 5 cents on the dollar for their investment and own 10% of the company; the government will own 50% of the company and a return of 87 cents on the dollar; and the UAW would own 40% of the company and have a return of 76 cents on the dollar. Now we know why Obama and the UAW have been fighting so hard to keep GM out of the bankruptcy court.

In a genuine Chapter 11 bankruptcy, these three groups of creditors would all be similarly situated -- because all three are, for the most part, unsecured creditors of GM. And yet according to the formula presented Monday, those with the largest claim -- the bondholders -- get the smallest piece of the restructured company by a huge margin.

The goal seems to be to drive private investors away from the company and leave the UAW in control. What will the government's next action be if GM doesn't recover and people don't buy GM cars in the numbers that they need? Will the government pass laws to favor the car company that we and the unions hold such a large stake in? Will mandates go out to all government agencies that they can only buy GM cars?

That this is wrong on so many levels should be obvious. But really, is this anything more than nationalization/socialization by any other name.

It sucks and it stinks and more people need to be pissed off about it.