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'General Motor' to Become 'Government Motor'

Don't worry, the auto workers union will be saved. Private investors, however, are wiped out.

GM's bankruptcy filing is the fourth-largest in U.S. history and the largest for an industrial company. The company said it has $172.81 billion in debt and $82.29 billion in assets.

As it reorganizes, the fallen icon of American industrial might will rely on $30 billion of additional financial assistance from the Treasury Department and $9.5 billion from Canada. That's on top of about $20 billion in taxpayer money GM already has received in the form of low-interest loans.

GM will follow a similar course taken by smaller rival Chrysler LLC, which filed for Chapter 11 protection in April. A judge gave Chrysler approval to sell most of its assets to Italy's Fiat, moving the U.S. automaker closer to a quick exit from court protection, possibly this week.

The plan is for the federal government to take a 60 percent ownership stake in the new GM. The Canadian government would take 12.5 percent, with the United Auto Workers getting a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

The American government should not be a majority stakeholder in a privately owned company of this size. All this means in the long-run is that unionized auto workers (who killed the company in the first place!) have their pensions protected, and that GM will now become 'too-big-to-fail'. Now that the government is the de facto owner of the company, GM is similar in nature to Fannie Mae and Freddie Mac, the mortgage lenders that were 'quasi-government entities. It should be noted that Fannie and Freddie were considered to be 'Patient Zero' in the plague of subprime mortgages that sent the economy reeling back in late 2008. Have we learned nothing since then?

Now that GM is 'too-big-to-fail', its problems will continue, but now whenever the company falters it will fall upon the American taxpayer to save the company. This hurts auto companies that are able to control their costs. How can they compete with a company like the 'new' GM, with the government at the helm, ensuring that their actual performance in the market won't matter? All this will accomplish is letting incompetence crowd out the competent.

I'd like to see St. Barack give the American people a plan on how he will divest this economic power over time. When will the government give up it's control of GM?

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