Both Obama and
Romney proposed taking GM through Chapter
11 bankruptcy.
GM went bankrupt.
Its shares became worthless and its assets were transferred to a new company, which was called General
Motors.
Obama used taxpayer
dollars to force through a political
bankruptcy that preserved union contracts and pensions, short changed
bondholders, and made the unions and the
federal government the new owners of GM.
Romney favored a regular
bankruptcy that would treat all GM stakeholders fairly. The government would be limited to providing bridge
financing backed by GM assets to limit
taxpayer exposure.
The federal government remains a major shareholder because it cannot sell its shares without
revealing the extent of the taxpayer
loss.
The old GM was an ideal
candidate for Chapter 11. It had an established brand name, billions of
dollars of revenues, and needed restructuring to lower its high labor and
pension costs. It would have attracted numerous bidders. It would have emerged
from bankruptcy with slightly fewer jobs,
lower wages, and less generous union pensions.
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