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by Vault Law Editors | December 17, 2008


To lift a line from Anu?s senior yearbook cover, So Much Has Happened since we last posted on the Big Three (Stooges). By the beginning of last week, Mssrs. Nardelli, Wagoner and Mulally?s original request for $34 billion in federal funds?ostensibly intended to tide them over till they manage to reverse 20 years of misguided innovation by next spring?had been whittled down to a measly $14 billion. Congress, however, declined to approve even that pittance (the Senate voted it down on Friday, two days after the House of Representatives gave it the go-ahead). So Detroit turned to Dubya and the Treasury Department, who hold the key to the $700 billion allocated for bank bailouts in October. Following an about-face by the Bush administration, this began to look promising: Both the White House and Treasury officials stated last week that they were willing to dip into the financial institutions? piggy bank for the Big Three.

This week?s question, therefore, is just how much? The first half of the fund has reportedly been drawn down to $15 billion (thanks, Citigroup), and the release of the second $350 billion requires congressional approval. Should Bush assuage the concerns of his own party (no way Nancy Pelosi & Co. are risking those blue-collar votes) and successfully shepherd such a bill through Capitol Hill this week, the Big Three could walk away with upwards of $40 billion (and there are always Federal Reserve loans if the votes prove scarce).

Nevertheless, Chapter 11 remains a looming possibility (or the proper outcome, as such disparate authorities as liberal Nobel laureate Joseph Stiglitz and libertarian law professor Todd Zywicki contend). In case the taxpayer dollars don?t come through (or if they?re just not enough?), at least two of The Three have retained bankruptcy specialists, with Chrysler hiring Jones Day and GM tapping Lehman pointman Harvey Miller of Weil Gotshal (Ford?s straits are apparently a tad less dire than those of its oily brethren). At the same time, GM has recruited former Weil partner Martin Bienenstock of Dewey & LeBoeuf to help it become a ?futuristic? automaker through restructuring. ?Futuristic,? you say? We assume GM?s vision of the future includes aut-o-matic bank machines and ovens that can reheat soup in less than 20 minutes. Rick Wagoner?s probably studying old Jetsons episodes as I type this.

- posted by ben fuchs


Filed Under: Law

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