GM files for bankruptcy protection

General Motors filed for bankruptcy protection this morning and President Obama plans to give the bankrupt car maker another $30 billion bailout during and after the bankruptcy process. That will bring the bailout of General Motors to $50 billion.

The $50 billion bailout of General Motors is second only to the $150 billion AIG bailout.

According to the Washington Post, under the proposed restructuring of General Motors, about 60 percent will be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company’s current bondholders would get 10 percent.

The General Motors bankruptcy filing is long over due and should have occurred long ago and without the $50 billion bailout. The bankruptcy should also have happened without Obama’s interference in the process that favors the United Auto Workers, a political ally of President Obama, at the expense of General Motors investors:

The proposal seems to favor the rights and claims of the UAW, a political ally of the current administration and a powerful lobbying force in Washington, over the rights and claims of the company’s diverse group of bondholders, who collectively hold $7 billion more in General Motors debt than the UAW’s health trust and are equal members of the creditor class.

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Choosing sides between equal classes of creditors sets a terrible precedent – one that could cause serious long term challenges to the financing marketplace by eroding investor confidence at the worst time in our recessionary period. General Motor’s restructuring, in essence, has become an exercise in favoring one group of retirees over another. Simply put, the administration has overstepped its bounds and by doing so will chase jobs and capital overseas.

We shouldn’t expect any better when the guy Obama has in charge of remaking the American Auto industry in the image of Fiat is a law school drop out “who is neither a formally trained economist nor a business school graduate, and who never spent much time flipping through the endless studies about the future of the American and Japanese auto industries.”