December 19, 2008

Bridge Loan To Nowhere To Proceed

It's official: $17.4 billion of TARP money will be "loaned" to General Motors and Chrysler over the next three months, with the hope that these troubled corporations will restructure their debts and pull Nosferatu off their necks negotiate new deals with the UAW. If the companies cannot pull this off, the government will call its loans and effectively force the companies into bankrupty.

Somehow, this manages to capture the very worst of both options. It provides 1) insufficient time for the money to actually do any good, 2) more taxpayer money than was requested, 3) diversion of funds away from their Congressionally-mandated purpose, 4) prolonged deflation of stockholder value, and 5) merely delays the inevitable bankruptcies while 6) adding additional debt to be managed in them.

Brilliant.

2 comments:

bobvis said...

TL, I just posted about the possibility of suing to get the money back. Do you think that's a possibility?

Transplanted Lawyer said...

Not as taxypayers. Congress can stop the President from doing it, if it wants to, but probably not the courts. As I mentioned on your post, it might be possible to sue the big 3, but I'm not quite sure on what theory.