THE STASH APRIL 13, 2009
One of the problems with a bad bank approach to GM--wherein we transfer its good assets to a new company and keep the bad assets parked in the old one--is that the "bad" GM could be very, very bad (for reasons I explain here). Today's Times begins to quantify how bad we're talking about:
Treasury officials are examining one potential outcome in which the “good G.M.” enters and exits bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing, a person who had been briefed on the prospect said last week.
The rest of G.M. may require as much as $70 billion in government financing, and possibly more to resolve the health care obligations and the liquidation of the factories, according to legal experts and federal officials.
Wow, that's bad.
On the other hand, it's not at all clear that there are better alternatives. You certaintly don't want all the bad assets polluting the good ones...