Bloomberg – Ronald Reagan used to joke that the nine most terrifying words in the English language were “I’m from the government and I’m here to help.” Barack Obama is making those words welcome.

As he approaches his 100th day in office, Obama is rolling back the Reagan Revolution and restoring government to a central role in the economy. He has passed the biggest budget stimulus ever, prepared the way for an overhaul of the U.S. automobile and banking industries and proposed a $634 billion government- funded expansion of health-care benefits.

“It’s profound,” says presidential historian Richard Norton Smith of George Mason University in Fairfax, Virginia. “There are very clearly taking place some long-term, even transforming shifts in priorities and resources.”

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New York (HedgeCo.Net) – The Obama administration is considering a deal in which they would forgive part of the $13.4 billion owed to them from General Motors Corp. in exchange for an equity stake in the company, according to a report by Bloomberg News who citing people familiar with the matter.

The deal comes as GM approaches their June 1 deadline to show they can become viable, the sources said.  

GM is already considering breaking up the company into a sector comprised of only the profitable parts, such as Chevrolet and Cadillac, while the non-profitable entities, such as Hummer, can be liquidated.

GM still has major debt obligations to its bondholders, who are owed about $27.5 billion.  The company also owes its health care fund about $20 billion.  Retirees who are entitled to health care benefits would most likely get more equity in the new entity than the bondholders. 

Bondholders previously opposed a plan by GM that would give them 90 percent equity in the newly restructured company, though that would have required them to swap most of their stake at the time. 

President Obama has been vocal in his belief that bankruptcy is the best option for GM, though new CEO Fritz Henderson is doing everything he can to avoid that scenario.  GM continues to work with the U.S. Treasury and the Obama administration in hopes of achieving a new, reorganized business model.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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