Daily Archives: January 17, 2009

Creditors Obstruct GM Rescue: Detroit Becomes Too Big To Fail

Old_carThe UAW and GM’s (GM) creditors are making the great auto company bailout a process that will funnel money into Detroit for years beyond the March 31 deadline which has been set for restructuring plans to be in place. Congress had assumed that GM and Chrysler would cut labor costs and debt enough to create viable companies, even with a domestic vehicle market which may only produce 12 million car sales this year.

The UAW has been dragging its feet, assuming that a Democrat-controlled federal government will not eat its own by abandoning labor. GM’s creditors are making sure that the restructuring of the auto companies will fail. They are doing so by ignoring the mandate from Congress to take less than $1-for-$1 on the debt obligations of The Big Three.

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Posted on: January 17, 2009 – 11:26 am in Autos, , , , ,

Building A $1 Trillion “Bad Bank” (C)(BAC)(WFC)(JPM)

EmpireThe federal government really does not want to build a "bad bank" to take toxic assets from America’s largest financial institutions. It has taken a number of measures to avoid it.

The Fed has passed tens of billions of dollars of loans to banks and brokerages through its emergency lending window. It has lowered interest rates to zero. Treasury has put $25 billion into each of the money center banks. It is now backing over $300 billion in bad assets held by CItigroup (C) through a loss-sharing agreement. Bank of America (BAC) is getting a similar deal. The programs to back bad assets is almost certainly going to spread.

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Posted on: January 17, 2009 – 8:08 am in Banking, , , ,