Congress questions GM bankruptcy

Several members of the House and the Senate have asked a logical question. Why should the US government give car companies, General Motors (GM) in particular, money to close dealers and cut American jobs? Taxpayers are, in essence, spending their money to put other people on the unemployment lines.

According to the Financial Times, members of Congress have another concern. Creditors may be put in a position where they are up against the administration's power to put the company into Chapter 11 and cancel their rights. If the government were out of the picture, those debt holders would have more leverage. Some believe that if the Treasury, which has so much power in this deal, were out of the picture, creditors would not face being wiped out.

If there is a pitched battle between the Congress and the White House, the issue will come up about how GM will be funded if it does not go into Chapter 11. And will the administration let GM go into bankruptcy without its help? At some point, there may be no alternative.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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