AOL Money & Finance

What would U.S. do with stock in The Big Three?

The proposals for a federal bailout of The Big Three get more madcap with every passing day. One of the latest plans would be for the U.S. government to own large pieces of the American car companies. What would it do with those equity positions? Sell them down the road? What if their value falls sharply because of foreign auto competition or a lengthy recession? Why not just put all of the assistance capital as debt senior to all other debt and equity?

According to The Wall Street Journal, "Under terms of the draft legislation, which continued to evolve Monday evening, the government would receive warrants for stock equivalent to at least 20% of the loans any company receives." Who needs warrants? Why not just charge a slightly higher interest rate on the money and get the yield out that way?

The idea is riddled with stupidity, but that has never stopped Congress from acting in the past. One of the major questions is how the government would eventually sell its interest in the firms without it being viewed as a vote of no confidence. The shares might be sold to a large financial firm that thinks Detroit's prospects have improved, but that is a long shot, especially based on where the industry sits today.

The plan seems like a risk of taxpayer money unless the government intends to send everyone in the U.S. one share in each car company. At least the average citizen would have something to hang on to.

Douglas A. McIntyre is an editor at 247wallst.com.

Get the latest on cars and trucks
from Ford and all brands at AOL Autos.
Symbol Lookup
IndexesChangePrice
DJIA-14.2810,318.16
NASDAQ-10.782,146.04
S&P 500-3.521,091.38

Last updated: November 23, 2009: 05:16 AM

BloggingStocks Exclusives

Hot Stocks

Learn More About Ford Cars

Find Your Next Car

AOL Autos New Cars and Used Cars

DailyFinance Headlines

Latest from BloggingBuyouts

TheFlyOnTheWall.com Headlines

    BioHealth Investor Headlines

    WalletPop Headlines

    My Portfolios

    Track your stocks here!

    Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

    BloggingStocks Partners

    More from AOL Money & Finance

    WalletPop Headlines