Reuters is reporting leaked details on the new GM bankruptcy plan, which is really no bankruptcy plan at all.  Typically bankruptcy law provides a way to divide up assets so that first secured creditors then unsecured creditors will get what they can from the assets of the business.  However, under the details of this plan, the unsecured creditors are going to be totally screwed, and the American taxpayers are going to be hosed.  The deal will involve all of the company’s “healthy” assets to be sold to some newly created company which will be owned by the U.S. government. The other assets would stay in bankruptcy in order to satisfy outstanding claims.  What I find strange is how any creditor is going to be satisfied if all the healthy assets are sold to the government? What is left to satisfy any outstanding claims?  The analogous situation in a personal bankruptcy would be for me to take all my assets, create a trust and then put all those assets in the trust so that my creditors cannot take them.  The only problem is, I don’t think you can actually do this (although I’m no bankruptcy expert). 

What I’m worried about is the fact that once again our government has mislead us and totally screwed us.  Supposedly this money lent to GM (to the tune of $15 billion) was going to be a great investment because we would get paid back and probably make some money.  The Reuters Story points out:

In addition, the government would extend a credit line to the new company and forgive the bulk of the $15.4 billion in emergency loans that the U.S. has already provided to GM, the source said.

Yeah, that’s about what I thought.  There was no way that we were ever going to see any of that money.  I didn’t believe Bush when he tried to tell us that and I didn’t believe Obama either.  This is why government should not be in the business of deciding who is too big to fail and bailing out companies.  In the end, its the tax payer who gets the short end of the stick.

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