Government to Take Over GM?

The General Motors bond holders that had been offered a 10% stake in the company after recapitalization refused the offer.  The unsecured bond holders are owed about $27 billion and 10% of a recapitalized GM is likely to be worth substantially less.  It is possible that another deal could come together before the deadline of June 1.

The company has already taken $19.4 billion taxpayer dollars and looks to bankrupt in June anyway on the Treasury’s deadline for restructuring.  Under the current arrangements, government could take a 70% share of the company.

It will be interesting to see what they do with their new control over much of the American auto industry.  Russ Roberts over at CafeHayek points to Adam Smith in the Wealth of Nations:

What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. 


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