That Bailout Still lives … Just

Senator Corker has floated an alternative plan to the one the House passed. The Democrats are in deep negotiation with him and other Republicans to see whether the Corker plan can be used as an effective base for a bill that will get enough votes to pass. Here’s the New York Times report: Auto Bailout Bill Appears Stalled in the Senate – NYTimes.com.

The new components that Corker is suggesting are a massive debt forgiveness program, and a big pay cut. These are two elements that are normally associated with a bankruptcy, so, in effect, the Corker plan is a government sponsored bankruptcy.

The bondholders of both GM and Chrysler are in for a nasty ‘haircut’, and the workers who not ‘restructured’ out of their jobs will all be earning a lot less. Critically the new plan insists that this is all done before the end of March next year. If either company fails to abide by the plan then a government overseer will push them into full bankruptcy.

This is tough medicine.

Stay tuned. the vote may not happen until the early hours of Friday.