A committee of General Motors (NYSE: GM) bondholders hoping that the United States government will continue to bailout the company without wiping them out is pleading for mercy: "GM bondholders are not a collection of Wall Street banks," the committee wrote. "Many of these bonds are owned by average citizens, who purchased them to support their own retirement and college expenses and other critical needs."
About $6 billion of GM's $28 billion in unsecured bonds are held by individual investors. In what is sort of an absurd piece, CNNMoney examines the plight of retiree Harley VanDeloo who bought GM's bonds more than a year ago after they had been downgraded to junk status. Now the interest payments are for all intents and purposes being made by the United States taxpayer.
Does anyone else see something wrong with this? Buy something called a "JUNK bond" and get bailed out by the government?
It's not that I'm not sympathetic to people who are losing money on GM bonds. I am and I'm also sympathetic to the 99.99% of other people who bought investments that declined in value and didn't get bailed out by the United States government. The notion that GM's unsecured bondholders should receive some kind of handout because 20% of them fall into the "widows and orphans" category is absurd. They bought bonds in a public company, and there was no government guarantee associated with the investment. If they wanted that, they should have purchased T-bills.
Without the US government, GM would be in bankruptcy and those unsecured bondholders would in all probability be completely wiped out. They should keep that in mind as they negotiate for a restructuring, and be happy with whatever sliver of equity Obama and company want to toss their way.
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Reader Comments (Page 1 of 1)
4-15-2009 @ 9:19PM
TxdoHawk said...
On one hand, I agree. They knew the risk (or should have) and therefore they are held responsible.
That said, it's not surprising to see people try. How many CEO's of bailed-out institutions still have their jobs? How many bonus scandals have we gone through, and how many more will come to light?
These people don't deserve the money they're asking for, but they sure do deserve it more than the Wall Street slimeballs that are by and large still collecting paychecks.