NYT Op-Ed: GM Plan Will Ruin Bond Market

Amb. James K. Glassman
June 01, 2009

Amb. James K. Glassman

Executive Director of The George W. Bush Institute and Expert on Issues Involving Economics, Technology and Financial Markets

Mere days before GM filed for bankruptcy, James K. Glassman, former under secretary of state for public diplomacy and public affairs in the George W. Bush administration, wrote an op-ed in The New York Times warning that President Obama's plan for the nation's largest auto company will destroy faith in the bond market. He explains why below:

General Motors bondholders have until 5 p.m. on Saturday to accept a parsimonious offer to exchange their loans for stock and warrants. Most likely, enough of the creditors will say no to force G.M. into bankruptcy. But there is no escaping the long-term damage that has been inflicted on credit markets by the Obama administration’s attempts to reward the United Auto Workers, one of the president’s strongest supporters in the last election, while trampling decades of legal precedent regarding owners of corporate debt.

The G.M. debacle is déjà vu all over again. In the Chrysler bankruptcy arranged by the government in April, bondholders also got short shrift, while the union, which might have received little or nothing in a normal bankruptcy, was awarded 55 percent of the company.

What’s my interest in this? I head a nonprofit group that encourages developing nations to adopt policies that will lead to prosperity — starting with transparency and the rule of law — and hold up America as a model. Yet in its high-handed dealings with Chrysler and G.M., the Obama administration reminds me of an irresponsible third-world regime, skirting the law and handing economic prizes to political cronies.

Under the complicated G.M. plan, bondholders — ranging from large institutions to low-income retirees — would receive just 10 percent of the reorganized company, plus warrants that would enable them to get 15 percent more should the company’s value reach certain levels, in return for their $27 billion in loans. The government, which could end up putting $70 billion into G.M., would initially get 72.5 percent of the company.

Read the entire article here.

James K. Glassman is the president of World Growth, a nonprofit economic-development group. For information on how to bring him to your next event, visit www.premierespeakers.com/james_glassman.

Amb. James K. Glassman

Want Amb. James K. Glassman for your next event?

Find out more information, including fees and availability.
Find Out More
Keep Reading
Town Hall Outrage: Populist Fury or Political Theater?
Amb. James K. Glassman
Amb. James K. Glassman
August 10, 2009
On his blog, James K. Glassman has offered his take on the recent town hall fiasco. ...
WSJ: The Cyber Way to Knowledge
Amb. James K. Glassman
Amb. James K. Glassman
July 06, 2009
James K. Glassman, former under secretary of state for public diplomacy and public affairs, recently wrote in the Wall Street Journal ...
NYT Op-Ed: GM Plan Will Ruin Bond Market
Amb. James K. Glassman
Amb. James K. Glassman
June 01, 2009
Mere days before GM filed for bankruptcy, James K. Glassman, former under secretary of state for ...
Town Hall Outrage: Populist Fury or Political Theater?
On his blog, James K. Glassman has offered his take on the recent town hall fiasco. Is the dustup sincere outrage or simply political theater? "Town halls have become town hells," says Mark McKinnon, a former adviser to President Bush who supported Barack Obama in the November election. He was referring, of course, to contentious meetings betwe...
Read More
WSJ: The Cyber Way to Knowledge
James K. Glassman, former under secretary of state for public diplomacy and public affairs, recently wrote in the Wall Street Journal about the next revolution in education. Here's an excerpt: Every three years, the Program for International Student Assessment ranks the education levels of 15-year-olds around the world. The most recent test, in...
Read More
NYT Op-Ed: GM Plan Will Ruin Bond Market
Mere days before GM filed for bankruptcy, James K. Glassman, former under secretary of state for public diplomacy and public affairs in the George W. Bush administration, wrote an op-ed in The New York Times warning that President Obama's plan for the nation's largest auto company will destroy faith in the bond market. He explains why below: Ge...
Read More
Forbes.com: TARP Is 'Becoming Roach Motel'
James K. Glassman has a strict warning about the Troubled Asset Relief Program (TARP). In his guest commentary on Forbes.com, Glassman, the president of the World Growth Institute and former undersecretary of state in the Bush Administration, wrote the TARP may soon be a failed system in which "you can get in, but you can't get out". Read an ex...
Read More