Bailout Watch 114: GM to Ask Fed for $5b+ Loan
I know I said I’d be starting a Bailout Watch 2 series on Monday, but events have once again overtaken us. And to avoid confusion, I’ve decided to simply continue the orginal Bailout Watch series, as it’s all pretty much of a muchness: your tax money for GM, Ford and/or Chrysler. This morning, Barrons reports the inevitable: The General is looking to hit-up the U.S. Federal Reserve for a little walking around money. “How much the car producer would seek is unknown,” Barrons says. “but it needs $5 billion to meet its goal of completing a $15 billion liquidity program, much of which actually is coming from cost cuts.” So, can they do that? Of course they can! “Under the law, GM would pay a rate of interest that is higher than the top one charged to banks for cash advances. The Fed can lend to GM without demanding collateral if it gets the votes of five of its board members.” Check this from the Fed’s Discount Window Website: “In unusual and exigent circumstances, the Board of Governors may authorize a Reserve Bank to provide emergency credit to individuals, partnerships, and corporations that are not depository institutions.” Strangely, both this story and the GM Chrysler merger non-deal rely on “two persons with first-hand knowledge of the situation.” Same two? Never mind. This one we believe.
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