The GM (GM) board is looking at a Chapter 11 as a way to get the car company out of its mess. Even if Congress approves funds for the car company, it might insist on a pre-packed bankruptcy to wipe out common shareholders, debt obligations, and significant parts of its liabilities for UAW retirement and health care programs.
In other words, the new VEBA fund may never get the cash due to it from GM, putting hundreds of thousands of current and former GM workers into the ranks of the uninsured.
The FDIC seized three more banks and sold their assets: Downey Savings and Loan, PFF Bank & Trust, and Community Bank of Loganville. The agency now has 117 banks on its list of endangered institutions.
Many experts think the FDIC list is much too short and that it is a form of "window dressing" to keep the public from getting panicky. That is almost certainly true. If residential and mortgage failures pick up and consumers default on more and more of their obligations, the actual number of banks which fail could rise sharply between now and the beginning of 2009. New York University Professor Nouriel Roubini predicts that the head count of banks taken over by the agency will go well into the hundreds.
It would make sense that Citigroup (C) has been talking to the Fed, FDIC, and Treasury over the last few days. Even if Vikram Pandit wanted to dodge those talks, the feds would knock down his door if necessary.
According to Reuters, the government is considering its options.
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