The shares of E*Trade Financial Corp. (NASDAQ: ETFC) took a dive this morning after the online brokerage house announced plans to boost its balance sheet. The company will sell $400 million in common stock, and launch a debt exchange worth more than $1 billion. In a statement, E*Trade said its capital-raising initiatives "will significantly reduce the company's debt service burden."

Back in April, the cash-strapped brokerage was instructed by the Office of Thrift Supervision to quickly raise new capital and reduce its leverage. Today's newly announced share offering and debt swap are expected to bring in at least $1.2 billion, although the transactions are expected to dilute the investments of current ETFC shareholders by about 40%.

As General Motors (NYSE: GM) works overtime to create the illusion of progress that might lure in skeptical lawmakers, it's making its debt holders an offer that will probably be easy to refuse: Swap your debt in for equity.

If I'm a GM creditor I'm saying, "No deal, Howie!" By swapping their debt for equity, bondholders will position themselves to be completely wiped out in a bankruptcy filing. Even if the company avoids bankruptcy, that equity will represent a claim on the future cash flows of a company that is burning through billions of dollars each month.

The Wall Street Journal reports (subscription required) that "GM's debt load, estimated by J.P. Morgan to total $43.3 billion at an annual interest expense of about $2.9 billion, has been a primary culprit in the company's deterioration in recent years. Many analysts have suggested GM needs to file for Chapter 11 bankruptcy-court protection in order to force creditors to renegotiate."

That still seems like the most likely outcome for the company, and as long as bankruptcy remains a likely outcome, creditors are unlikely to swap senior debt for equity that will have last dibs in a Chapter 11 scenario.

And that's the ultimate catch-22 for GM: Congress is unlikely to provide the financing that would stave off a bankruptcy unless the company is able to restructure its debt to reduce its interest obligations. But that restructuring is unlikely to happen until GM can convince creditors that bankruptcy isn't a possibility.