As first reported by the Detroit News this morning, the Treasury is plowing $7.5 billion more into auto lender GMAC, the Wall Street Journal now confirms.
Yep, after all that hardball about the auto bondholders and forcing them to take a haircut, the bondholders in GMAC are getting a straight up bailout.
Felix Salmon is miffed, and thinks they should force them to do the same kind of debt-for-equity swap that they’re pushing on the manufacturers, though he acknowledges that GMAC may straight-up need more cash now to keep operating. In an ideal world, yes, debt-for-equity would be better for taxpayers.
But if the administration is being hypocritical or whatnot, we think it’s because their philosophy basically comes down to this: Workers, not bondholders, create cars. Bondholders make loans.
So when it comes to the manufacturers, the administration is willing to stomp on the hedge funds to protect the UAW. But the administration is also pro-lending, as evidenced by the constant talk about how the ability to get loans is crucial for the recovery of the economy. So when we’ve got a bonafide lending institution, there’s no appetite to impose pain on the ones behind it.