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Politics : The Obama - Clinton Disaster -- Ignore unavailable to you. Want to Upgrade?

To: RMF who wrote (3478)	12/20/2008 5:19:54 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 103300

Re: "I "think" these loans the government is giving will create a situation that essentially IS bankruptcy, but without using that WORD." I agree. The government is trying to 'knock heads' together and get all the interested parties (who would be required to take a haircut in any bankruptcy filing anyway) to realize that the haircut is inevitable... and just do it voluntarily, and faster then it would happen in chapter 11 bankruptcy reorganization. Faster is better. Re: The government loans will get "deferential" treatment, which will put all subordinate debt holders in pretty much the same spot they'd be in in actual bankruptcy. Their debt paper will be pretty much worthless. Yep. The current stock (already reduced by 99% in value as it trades today) will finish being wiped out. The unsecured subordinate debt (debentures, etc.) will also be nearly completely wiped. The remaining fights will be over how much the secured debt (senior & or secured notes, vendor financing, etc.) will be devalued. (Government is pushing for 2/3rds the face value of bonds to be force-converted into new equity.) That, and some of the bond owners are arguing that LONGER-TERM bonds should take a bigger haircut than short term notes.... Re: "The companies themselves will be scaled down...." Yeah. I imagine that is why Canada stepped up and gave the companies money as well --- they want some leverage over WHICH factories get closed. They don't want all the closed ones to be North of the border. Re: "and the Unions will have to accept major cuts in wages and benefits." Yep. But even more difficult then that (& more important economically) will be severing dealer franchise contracts without having to pay the dealers tens to hundreds of billions... and fight it out in courts for years. Re: "When the economy has stabilized the Government can just CALL all these loans if they want to and let these companies just sink or swim based on what they do in the next couple years." The government loans (that Bush just made, out of the TARP money) are already callable at the end of March. (If, in the opinion of the feds, sufficient progress has not been made toward 'commercial viability' then they can demand instant payment... which would, of course, trigger bankruptcy over-night.) The government also got warrants, but I suppose those would be wiped in a bankruptcy filing.

To: RMF who wrote (3478)	12/20/2008 5:24:21 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 103300

Bush's Plan Makes Auto Crisis Obama's Problem When the $17B Runs Out, Carmakers Will Still Need Help By JOHN HENDREN WASHINGTON, Dec. 20, 2008— abcnews.go.com President George W. Bush might have made the initial installment of the auto industry bailout, but ultimately it is President-elect Barack Obama who will be "the decider" on how big a hit labor takes and how big the final tally will be. In a sternly worded radio address today, President Bush issued a dire warning to the Big Three automakers: Restructure -- fast -- or you're on your own. "The time to make the hard decisions to become viable is now or the only option will be bankruptcy," Bush said. But he will be long gone before the March 31 deadline for General Motors and Chrysler to be in the black or pay back the $17 billion in loans, and it is Obama along with a new and more Democratic Congress who will have to make the decision about how to proceed then. "Bush is punting this problem to the next administration," said Peter Morici, a professor at the University of Maryland's Robert H. Smith School of Business. "Obama can catch it or let it bounce into the end zone and let the parties work it out." Many analysts say the initial loans will not be enough to sustain G-M and Chrysler beyond March, and that at least two of the Big Three Detroit automakers and possibly Ford as well will be back for more. With more than 1 million jobs directly at stake, and more than 1 million more ready to topple like dominoes if the industry falls, the next president could have few options if the auto industry's woes threaten to lengthen a broad recession. "This is just kicking the can down the road to next spring. Seventeen billion dollars isn't going to be enough after March, April to keep them out of bankruptcy court. So they will be back, asking for more. And in all likelihood, the next administration will have no choice but to give it to them," said Mark Zandi, chief economist and cofounder of Moody's Economy.com. "I think at the end of the day, when we look back two, three, four years from now, taxpayers will have committed over $100 billion to the automakers to get them to be viable, profitable companies," he said. GM chief executive officer Rick Wagoner says a March 31 deadline for the companies to be in the black or give the money back is a tight one. "I don't think it's impossible," he told reporters after the bailout was announced Friday. "We obviously have some big steps we have to take." One of those steps is dealing with auto workers' wages. The loans announced by President Bush includes a "target" of bringing the wages of Big Three auto workers down to the level of Japanese manufacturers operating in the United States. The United Auto Workers union is already asking the Obama administration to reverse planned pay cuts. But, in an interview with ABC's George Stephanopoulos to be broadcast on "This Week" on Sunday, Vice President-elect Joe Biden warned that union workers will have to make more concessions. "Labor isn't the reason why the automobile companies are in the trouble they're in," Biden told ABC. But, he added, "Labor, in order to save their own jobs, in order to save the prospect of an industry, is going to have to make some more sacrifices." That puts the Obama administration on a collision course with some of its most reliable supporters in one of the nation's largest labor unions. "Organized labor feels it's giving too much, but if Obama gives labor what it wants, they will have to subsidize the industry forever," Morici said. Copyright © 2008 ABC News Internet Ventures