The Obama administration pressured bondholders of GM to take 10 cents on the dollar for their $27 billion in holdings in the troubled automaker, even while the same federal political appointees coddled the workers' union, increasing its shareholdings, and promising even more money for the workmen in the future, according to The Wall Street Journal.
Meanwhile, Team Obama is asking only one sacrifice of the United Auto Workers in the GM restructuring. "Retirees will have to give up prescription drug coverage for their Viagra and Cialis prescription drug coverage," the WSJ editorial page reports. "Seriously. Compared to other unsecured creditors, the unions were offered the equivalent of a Cadillac this week. Bondholders get a set of steak knives."
As a result of this deal, the U.S. government now owns 72.5 percent of GM, once the world's most powerful private sector firm.
The Obama administration is acting as if the bondholders are lucky to be getting even the pittance they are receiving.
"Treasury argues that bondholders, by rights, should get nothing because the money that GM owes to the government, or will soon owe to the government, eats up whatever value is left in the carmaker," the WSJ editorial page reports. "So even that 10 percent stake, Treasury officials argue, is a 'gift.'"
According to this kind of flawed reasoning, the WSJ editorial board opines, bondholders have no right to be upset, just because the UAW is getting a larger gift. "Treasury's calculation is fundamentally political, not financial," the editorial board opines.
The bondholders are not the only losers here, according to a report on Bloomberg Television. So are the taxpayers.
“The bill is now up to $50 billion or more, which is what was said would be needed,” said Edward Altman, a professor at New York University's Stern School of Business. “The government will now have stock in the company, more than 72 percent. It is a big uncertainty if the company will do well.”
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