In a surprisingly frank statement this morning, General Motors CEO Fritz Henderson confirmed that the Treasury Department is calling the shots on the company’s on-going restructuring. As reported by the New York Times, Henderson stated that GM was told by the Treasury Department to offer bondholders only up to 10 percent of GM’s equity in return for $27 billion of debt. “They didn’t support us going above 10 percent,” Mr. Henderson said. “We went to the maximum that they permitted us.” Why 10 percent? According to Henderson, Treasury didn’t give …
Bankruptcy law is rich with colorful vernacular: cram-down, strip-down, haircut, matrix, etc. But until a few weeks ago, nobody had ever heard of a “surgical” bankruptcy, the Obama Administration’s preferred term for a very big business, like General Motors, whizzing through bankruptcy in just a few weeks flat, rather than the normal year or year-and-a-half for a speedy case. Whatever it means, most bankruptcy attorneys agreed that it couldn’t be done. After all, if a single party–creditor, unions, dealers–objected to anything at all, it could take months to reach a …
All bankruptcies are not created equal. For months, Heritage and other conservatives have counseled that the proper course for an ailing automaker is the same medicine as for any other sick company: the bankruptcy process. All along, industry shills and union activists have pooh-poohed that idea, claiming that bankruptcy filings would be the end of the industry—an argument that’s never made much sense. So it was a welcome surprise to many conservatives to see President Obama, no foe of big-government bailouts, speak in favor of automotive bankruptcies yesterday. The President’s …
On April 8, 1952, President Harry Truman ordered Commerce Secretary Charles Sawyer to seize and take over operation of most of the country’s steel mills. Truman cited no legislative authority for his actions. Instead, he cited the Korean War. Truman claimed there was a national emergency and his presidential war powers were all the authority he needed to nationalize the steel industry. The steel companies fought back, and in the landmark case Youngstown Sheet & Tube Co. v. Sawyer the Supreme Court found Truman’s actions to be unconstitutional. Justifying President …
But for handing over gobs of cash with no strings attached, it would be harder to imagine a more sweetheart deal for the auto industry: According to the Wall Street Journal, Congress is considering a proposal to pay consumers to buy new cars. It could wind up as part of the stimulus package now pending in the Senate. The program, dubbed “cash for clunkers,” would provide tax credits of up to $4,500 for trade-ins–especially those with poor fuel efficiency. With barely-running clunkers available in many areas for as little as …
