Bailouts & bankruptcies; A tale of socialism.

It seems as if the "chicken little" rantings of the Obama, administration may have been unwarranted. We heard the cry from the mountain tops that if automakers were allowed to fall into bankruptcy our already staggering economy would go down for the count. Not so much.

It was however that battle cry from Obama and his sycophants that drove legislators to dump billions of taxpayers, hard earned dollars into the failing industry. Bankruptcy must be averted at all costs, buyers will lose confidence, suppliers will crumble and jobs will be lost. The looming question is what changed why now is bankruptcy "okay"?

Much like the answer to the age-old question of "how many licks it takes to get to the center of a Tootsie Pop" the world may never know.

The following excepts (in bold) are from the MSNBC article titled: Clock ticks down on impending GM bankruptcy

DETROIT - With the clock ticking on a June 1 government deadline to restructure, General Motors Corp. worked feverishly Sunday to shore up its global businesses to clear the way for a speedy reorganization in bankruptcy court.

GM, part of American life for more than 100 years and once the country’s largest employer, is expected to file for Chapter 11 bankruptcy protection at 8 a.m. EDT Monday, according to people familiar with the company’s plans. They declined to be identified because the plans haven’t been officially announced.

Is anyone really surprised that a GM bankruptcy, is forthcoming? The failing company has done nothing to divest itself of its crippling legacy costs or to address its faltering sales. What is the definition of insanity again? Oh yeah, doing the same thing over and over again and expecting a different result. (We will get back to this point in a moment)

It would be the largest industrial bankruptcy in U.S. history, and the fourth-largest overall. In addition, a GM, bankruptcy would be unprecedented as the federal government, would pump billions more into the company, and take a 72.5 percent interest in the automaker.

This is where we again encounter insanity. We have already dumped $20 billion into a failing venture, now that it has slid even further into the red and consumed taxpayer’s money like Oprah on the rebound, additional taxpayer investments would fair no better than Michael Richards at the Apollo.

On Sunday a group of large, institutional bondholders, representing 54 percent of GM bondholders, agreed to exchange their unsecured bonds for a 10 percent stake in a newly restructured company, plus warrants to purchase a greater share later. They had balked at an earlier offer, that gave them 10 percent of the company without the warrants.

It is more than a little disconcerting to think that the federal government will hold a larger interest in a private company than the bondholders will. In fact the United States, Government will hold almost three-quarters interest in the company. Given the government’s track record I hold little hope that GM will emerge from this a stronger and more vital company.

The Treasury, which has been guiding the Detroit automaker, toward a rescue plan, notified the company Sunday the response was sufficient to move forward with a pre-packaged bankruptcy filing. In a previous exchange offer, the Treasury, demanded participation of 90 percent of bondholders, representing unsecured debt of $24 billion.

GM already has received about $20 billion in government loans and could get $30 billion more to make it through what is expected to be a 60- to 90-day reorganization in bankruptcy court.

Insanity. We are already on the hook for $20 billion and now they intend to dump as much as $30 billion more into GM. When does it stop? Or does it? With the federal government essentially owning Gm and to a similar extent Chrysler, we will be perpetually on the hook for their losses. With an unimpressive track record on Social Security, Medicare and welfare there is little hope that taxpayers will ever see a return on their coerced investments.

Beyond the bankruptcy announcement Monday, GM is expected to reveal 14 plants it intends to close and name the buyer of its Hummer division.

In Germany on Sunday, the government agreed to loan GM’s Opel unit $2.1 billion, a move necessary for Magna International Inc. to acquire the company.

The Canadian auto parts supplier Magna will take a 20 percent stake in Opel and Russian-owned Sberbank will take a 35 percent, giving the two businesses a majority. GM retains 35 percent of Opel, with the remaining 10 percent going to employees.

The German funds are available to Opel immediately, as it attempts to shield itself from cuts if GM files for bankruptcy protection. Opel employs 25,000 people in Germany, nearly half of GM Europe’s work force. Under the deal, four factories in Germany would stay open saving jobs.

But jobs in other European countries may not be safe, Lindland said.

It’s more than a little Ironic that more plants will close in the United States than abroad. It seems that despite the billions that have been bled from American taxpayers in the name of "jobs" it is the Germans who will fair better in this deal.

GM’s fate and the federal government’s intervention was scrutinized on several Sunday morning talk shows.

"I think the government auto bailout, was a big mistake," said Sen. Mitch McConnell, R-Ky., on CNN’s "State of the Union" program. "We could have let these companies go through the bankruptcy process much earlier...without all of the additional government money, and ended up in the same place."

Amen, Someone who gets it. The ending was the same; the only difference is taxpayers lost billions in the process. This is nothing less than malfeasance on the part of Obama and his administration. The addition of billions of taxpayer dollars changed nothing in the end so what was the point of it all?

If the point was to save the auto industry than the bailout was a miserable failure, and a costly one at that. But if the point was for the government to gain controlling interest in the auto industry…

I think the last line in the article sums up nicely the consolation prize awarded to taxpayers for their efforts:

GM’s stock tumbled to the lowest price in the company’s 100-year history on Friday, closing at just 75 cents after trading as low as 74 cents. In a Chapter 11 bankruptcy reorganization, the shares would become virtually worthless.

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