General Motors Corp. (NYSE: GM) and Ford (NYSE: F) are going in front of Congress today to ask for $25 billion worth of taxpayer money. (It seems they won't be flying in separate private jets.) GM will announce a reopening of its UAW contract and the winding down of its Hummer, Pontiac, Saab and Saturn brands. Ford will try to sell Volvo to the Swedish government. What's lacking from both plans at this stage is enough detail about cost savings to know whether taxpayers will get their money back.

As I posted, there is a $16 billion (in cost savings) six point restructuring plan which GM could have used, but it chose a different path. The six-point plan involved closing or selling the four brands and their related dealerships. GM's plan proposes to slowly wind down these brands and keep the dealers. It has been trying to sell Saab but no takers have emerged.

Moreover, GM workers remain higher paid than workers of its Japanese competitors. For example, UAW workers make an average of $76 an hour, including the cost of retiree benefits. Toyota Motor Co. (NYSE: TM) workers cost, all in, about $18 an hour less. It is unclear how much GM plans to cut from UAW pay by reopening the contract. Absent more details, today's GM restructuring plan does not provide a clear path to profitability.

We are unfortunately not privy to the backroom deals and promises that are passing between Treasury Secretary Henry Paulson and the honchos who are benefiting from the government's massive bailout. However, two things are becoming increasingly clear: first, the financial industry has not gotten the memo about changing their business practices, and, second, the $700 billion in tax money that is keeping these companies afloat is not finding its way down to the average citizen. The big bailout was originally sold as a desperate maneuver to keep Wall Street afloat. Paulson has indicated that these funds would enable lending companies to service their toxic debt and, in turn, continue lending. In this way, America would be able to count on the credit that kept it running; businesses would be able to meet their payrolls, people would be able to buy houses, and the world would continue to turn.

Instead, some banks seem to be going on a buying spree, snatching up smaller, less successful institutions while prices are low and the getting is good. Citigroup (NYSE: C), for example, used the Wall Street fire sale to make a bid for Wachovia and pick up Forum Financial, shortly before asking for a second huge bailout. Similarly, Bank of America (NYSE: BAC) has decided to take over Merrill Lynch. A clever MBA could, undoubtedly, filter these purchases through a secret capitalism decoder ring and come up with a logical reason for them, but one wonders how gobbling up companies (and their toxic debt) is likely to help Bank of America and Citigroup to stay afloat, much less enable them to extend money to consumers. It is becoming clearer and clearer that the huge influx of taxpayer money is less about saving consumers than it is about enabling big companies to get even bigger.

Many investors are calling brokers or turning to blogs and asking, "Is it time to buy the financials? Aren't they all safe now? Aren't they cheap?"

The bounce started with the rescues of Citigroup (NYSE: C), so let me begin right there.

The recent bailout of Citigroup is deemed to be in the billions; but the future potential amount needed at Citi, and the other banks, is in the trillions. The difference can be seen in page 21 of Citigroup CEO Vikram Pandit's town hall presentation to employees on November 17. Page 21 is a perfect metaphor for all that has gone wrong and continues to be wrong in the financial system. The page is purposely obscure. I know of no journalist or published analyst who spent any serious time -- and that means more than five seconds -- considering the math presented on that page.

Using household terms such as "QSPEs" and "VIEs," Pandit revealed that Citi has more than $1.2 trillion dollars in off-balance sheet assets. These off-balance sheet entities are similar in structure to Enron's SPVs (special purpose vehicles) Citi and other banks created, and in the past backed, and they hold assets of unknown quality. I can only assume if their value was known, and anywhere near par, they would be on the balance sheet.

Page 21 has two graphs. One is a bar chart for QSPEs (qualifying special purpose entities, similar to Enron's SPVs) that describes in very succinct terms various chunks of assets. First: $667 billion in mortgage-backed securities, which has a tag "Citi does not bear credit risk. Unlikely that majority will come on balance sheet." If there is no credit risk, why not put them on the balance sheet or tell us what they are?

As President-elect Obama looks for ways to save our economy, I'd like to humbly suggest he consider taking a page out of Oprah Winfrey's play book by offering an 'Everybody Gets a Chevy!" economic stimulus plan.

The measure, which would put a new American-built car or truck in every American driveway, would put GM back on its feet, send thousands of GM employees back to work and free up consumer cash for other necessities such as conversion kits and spinner hubcaps. And the cost? What's a few trillion among friends?

I'm undecided about whether Americans should have the opportunity to pick out the model and accessory packages of their free car. Put me down for a 'Vette, though. A red one.

And yes, this is satire.

Even chief financial officers at public companies are concerned that TARP funds will be used for something other than stabilizing the economy.

A poll of CFOs conducted by CFO.com found that top financial officers are skeptical about how the funds will be used:

• 40% said that too much of the bailout funds will flow into the pockets of executives.
  
• 58% think that too much of the money will be used to finance acquisitions.
• 48% think that banks will use a larger than necessary chunk of the money to strengthen their reserves instead of lending it out.

When CFOs are questioning the bailout just as much as Average Joe's, it's time for the federal government to rethink what it's doing. The New York Times reports that the first Government Accountability Office report on the implementation of the $700 billion bailout is "expected to be critical of the Treasury Department's failure to set up ways to track how its bailout money is being used in the marketplace."

Add the lack of oversight to the fact that the dispersal of being funds is being managed by a former CEO of Goldman Sachs (NYSE: GS) and others with strong ties to Wall Street, and it's amazing that there hasn't been even more outrage than there is.

As Peter Cohan noted earlier this week, the size of the corporate bailout in the U.S. is far larger than most reports would lead you to believe. While $700 billion is thrown around as shorthand for the bailout, the real figure is in the trillions. Peter cited a figure of $7.4 trillion, and today's New York Times goes even further with a total bailout cost estimated at $7.8 trillion.

The Times published a graphic today that helps explain the figure. It's well worth looking at for a few minutes. It takes a while for numbers this big -- and a problem so complex -- to sink in.

It's important to make a distinction between money spent and dollars committed to the bailout. So far, about $1.4 trillion has been spent -- already twice the level usually cited. But the dollars committed to the bailout are far larger, nearing $8 trillion, or five times the amount already spent and over 11 times the $700 billion figure.

To understand the bailout, you have to look at the various roles the federal government is playing. It is acting as an insurer, an investor and a lender, and in each of these roles it is making multi-trillion dollar commitments. Here's a quick summary:

Why should you care what's going on in China? It makes many of the products we buy -- particularly the ones sold at Wal-Mart Stores (NYSE: WMT). And it has been recycling the profits it makes due to its relatively low labor costs into buying American debt. In fact, without its willingness to purchase our Treasury bonds, we would probably not be able to afford the $8.2 trillion worth of bailout plans that we've created so far -- or the additional $20 trillion we might need in the future.

If we were in the ninth inning of this financial collapse, instead of the second, then China's slowdown would not matter so much to our future. But if we need an additional $20 trillion over the next several years to put a floor underneath this economic collapse, we are not going to be able to rely on China to help foot the bill as we have in the last year. That's because China is slowing down; it has been growing at 12% a year for several years in a row, but that rate is likely to slow to at least 5.5%.

That would be a great growth rate for the U.S., but it represents a huge slowdown for China. Forty five percent of China's GDP growth is due to fixed asset investment -- like construction of houses and manufacturing plants. And a big part of that business is steel -- whose prices have lost 36% of their value since the peak, dropping from $768 a ton in June to a low of $490 a ton this month. One steel plant is cutting production by 15%. This means that global suppliers of commodities -- such as iron ore, copper, and cement -- around the world are suffering. What does this have to do with U.S. debt?

AIG (NYSE: AIG) seems to be shifting money from one bucket to the other. The net effect is that it owes the government a huge sum, which is not dropping.

According to Reuters, "American International Group Inc says it has completed completed a $40 billion preferred stock sale to the U.S. Department of Treasury under TARP".

That money will only go to repay the money it owes to the Federal Reserve. At the end of the day, AIG has done nothing to help its own cause or the taxpayer's.

Now that Citigroup (NYSE: C) has access to Treasury money to the tune of a $25 billion initial investment and $27 more it got earlier this week, it raises the question of what it will do with any preferred shares it can sell using TARP backing. The answer is probably that it will be recycled back to the Treasury or the Fed because it has borrowed from both agencies.

It is a hell of a way to run a financial system.

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

We've been watching as banks continue to hoard the bailout funds, maybe buy up some other banks, but nothing has trickled down to Main Street. Well, the Federal Reserve announced today that it's committing up to $800 billion to make it easier for Main Street folks to borrow money for cars, tuition bills and new homes. The Treasury Department is giving up very little of its Congressional bailout funds -- just $20 billion -- to the Fed's consumer lending program.

Did Congress really intend for so little to go to Main Street? I doubt it and I hope that when Henry Paulson comes begging for the second half of the bailout he's told it's not his to spend. Congress might want to wait for the new administration because many are not happy with how Paulson is spending it.

I'm glad to see the Fed is moving in a much more appropriate direction to help get Main Street back on track. The Fed intends to provide up to $200 billion to investors who plan to put the money towards consumer loans, such as credit cards, auto loans and student loans, as well as some forms of small business loans. These will be in the form of one-year loans available only for newly-issued consumer debt. These type of loans totally dried up in October and are essential to get the economy moving again.

In a post last week I suggested that Citigroup (NYSE: C) was too big to fail. Knowing that the government was likely come to its rescue, I suggested that C was a buy.

However, I had no idea that the government would step in so quickly. And step in it did, letting the world know that Citigroup was indeed too big to fail.

Over the weekend, the government negotiated a deal with Citigroup that should go a long way in helping the company find its footing in this crazy market environment.

The deal announced on Monday provided a boost to C shares. The stock traded up between 50% and 60% throughout the day.

It has been a spectacular rally indeed, but at what cost?

Is government assistance really good for shareholders? The jury is still out, but there is one very compelling reason to believe that the end of the credit crisis may finally be near.

Specifically, the government is injecting $20 billion of capital, but it is also providing a backstop on up to $306 billion of risky loans on Citigroup's balance sheet. In return, taxpayers will receive $7 billion in preferred shares and warrants to buy up to $254 million shares of common stock at a price of $10.61.

You can be forgiven for thinking that the bailout of Wall Street was limited to the $700 billion plan passed in October. But you would be off by a factor of 10. The actual number is $7.4 trillion, according to Bloomberg News. With GDP at $14.3 trillion, that represents more than half of the sum total of all goods and services produced in the U.S.

Where are all these commitments coming from?

• 60%, or $4.4 trillion worth of pledges, comes from the Federal Reserve -- including $2.4 trillion to buy commercial paper,
• 20%, or $1.4 trillion, comes from the FDIC to guarantee bank-to-bank loans,
• 12%, or $892 billion, in Troubled Asset Recovery Plan (TARP) from Congress and the Treasury
• 4%, or $300 billion, from The Federal Housing Administration (FHA) to guarantee $300 billion of mortgages.

Will the U.S. ever get this money back or is it lost forever? Can the U.S. make the interest payments on all the debt issued to finance these commitments? Meanwhile, banks have taken $666 billion in losses since the beginning of 2007 and stock markets around the world are down 38%, destroying $23 trillion in investor value. Where is our bailout?

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book, You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing, will be published by Portfolio on December 26, 2008.

One of the many factors putting pressure on the housing market is a glut of inventory caused by extremely aggressive new construction in recent years. Rather than take responsibility for their own bad business decisions, the homebuilders are lobbying for a massive taxpayer-funded bailout to stimulate home sales. The National Association of Homebuilders is pushing for a $250 billion stimulus package called "Fix Housing First" that would subsidize the interest rates on government backed mortgages and offer people a tax credit of up to $22,000 for buying a home.

The Wall Street Journal points out (subscription required) that "any federal assistance would require policy makers to figure out how to stimulate demand for housing -- the problem at the root of the global financial meltdown -- without artificially propping up home values."

But that's the whole point! Any "stimulus package" will, by definition, artificially prop up homes. If it doesn't, what's the point?

Lawmakers need to stop kidding themselves and make a decision: Either they believe in free markets and the idea that the market is the best mechanism for sorting out problems, or they don't. But a massive bailout aimed at stimulating home buying is completely incompatible with the notion of not propping up home prices.

Regardless of whether you agree with the principle of bailing out companies that are the victim of their own poor risk management, you, as a taxpayer, can take some comfort in this: The money you're providing to Citigroup (NYSE: C) is making any Wall Street speculator who bought the stock late last week quite a bit wealthier.

In pre-market trading, the stock is nearly 40% from its closing price on Friday, adding something in the range of $8 billion to the company's market capitalization. [Editor's note: by 8:11 am, Citi's shares traded nearly 55% higher in pre-market action.]

We can debate the terms of the bailout all week, as many talking heads will. You can read the details in the press release here.

Just looking at the market reaction, this doesn't seem quite right to me. If bailing out Citi is a necessary evil to prevent further economic collapse, shouldn't the deal be engineered so that as much of the upside as possible flows to the taxpayers instead of the company's stockholders?

TheStreet.com's Jim Cramer says now let's see the next moves from JPMorgan and Wells, because they're at a disadvantage.

How about this: We are better than we were Friday. That's right. Friday we left here knowing we had an oil-led futures-derived rally that simply wasn't sustainable because of the possibility Citigroup (NYSE: C) (Cramer's Take) would fail.

Today, we know it won't.

That's better.

Of course, the question is why not have every major bank do this, have every major bank involved. The answer might be that there are no common stock dividends and we know that the government is basically nationalizing Citigroup, which makes it impossible to compete.

2008 will be the year of "too big to fail."

That ubiquitous phrase has captured the attention of Wall Street, Main Street and Washington, but what exactly does it mean?

Clearly, the market is grappling with that question, and therein lies a very big problem for investors. The lack of clarity on this issue has been stunning. As a result, volatility is off the charts and stock values are plummeting.

This week has been bizarre, to say the least. Early in the week, Treasury Secretary Hank Paulson let the markets and everyone else know that the original purpose of the Troubled Asset Recovery Program (TARP) was no longer a workable solution. In place of buying distressed assets, the Treasury is working to solidify the capital structure of the banking system. I won't criticize the government here, but the change of scope given the size and urgency of the original plan is a bit random.

It does not give comfort to the market.

Next we had the auto industry bailout hearings. With hats in hand, the leaders of the Big 3 automakers and their union bobo made an appearance in Washington. The highlight of the hearing had to be the acknowledgment that all arrived via private jet.

Talk about bad PR. It's like showing up to the soup kitchen in a limo. Good grief.