Just when you thought the bailouts couldn't be any more messed up...

WSJ posted this gem today. It’s absolutely mind-boggling. Here are a few samples.

Bankruptcy Funding Solicited for Car Makers

Outside advisers to the U.S. Treasury have started lining up the largest bankruptcy loan ever, talking with banks and other lenders about at least $40 billion in financing for General Motors Corp. and Chrysler LLC, in case the two auto makers need it, said several people familiar with the matter.

While acknowledging the grimness of the task, administration officials involved in the auto talks said they are trying to find a way to restructure the two companies without resorting to bankruptcy proceedings. They stressed the latest efforts were “due diligence” on the part of the government advisers, and that bankruptcy financing may not be necessary.

Still, people involved in talks with senior Obama administration officials said that the administration believes that the option of Chapter 11 filings by the two auto makers needs to be seriously considered.

So earlier he said we couldn’t afford to let them go bankrupt, but meanwhile his people are preparing for it. No wait, they’re preparing a separate round of bailouts that will be called bankruptcy loans. Or bankruptcy financing. Or bankruptcy avoidance stimulus. Or something – I’m sure they’ve got focus groups trying to find what name for it is least vomit-inducing.

“Everything is on the table right now,” one person involved in the matter said, adding that President Barack Obama doesn’t want to see more massive job losses in the auto industry. His administration also doesn’t want to anger the United Auto Workers by appearing to push for bankruptcy, this person added.

Yep – so long as we don’t make the UAW mad, who cares what it does to taxpayers?

The initial discussions call for private banks to provide the financing — known as a debtor-in-possession, or DIP, loan — with the government guaranteeing or backstopping the loan. In this scenario, some of the financing would be used to pay back the $17.4 billion the government lent GM and Chrysler late last year.

This is always a good cycle to be in. We’re going to guarantee money that will be loaned to them so they can repay us that other loan they got from us. Am I reading his correctly? Oh, but it gets worse…

Lenders are reluctant to commit funding to GM or Chrysler for several reasons — mostly concern they won’t get all their money back. Recently, the government advisers have begun aggressively courting big lenders Citigroup Inc. and J.P. Morgan Chase & Co. — themselves government-aid recipients — to participate in any bankruptcy financing, said people familiar with the matter.

So if I haven’t completely lost my mind, the bailout money we sent to banks is supposed to be used to set up loans to GM and Chrysler so that they can pay us back for the automaker bailout loans. And if anything in that circle je–oops I mean in that vicious cycle/death spiral falls through, we’ll guarantee the money that was loaned to pay back the loans that we loaned.

My head hurts.